If you are considering funding your retirement with investment properties, there are a lot of questions you need to ask yourself: Is it right for you? Will it be your only source of income? What types of properties will you consider? These are just a few to get you started. Your retirement is important. Investment properties are often the perfect solution as long as you are well-informed and prepared for every possible downside.
Is Real Estate Property Investment Right for You?
This can be a tough question to answer if you are not sure yet. Let’s look at the pros and cons to get you started in the right direction.
Investing in real estate can be a great way to diversify your portfolio. You may be more comfortable looking at it this way, knowing you can invest in real estate but also invest elsewhere to have plenty of options. Diversifying allows room for some investments to fail without causing you to lose everything.
If you have no other options and intend to invest in properties only, you’ll need to be prepared to take a greater chance. There isn’t necessarily anything wrong with that as long as you are prepared and understand what you are getting into. Putting all your eggs in one basket can be lucrative but also risky.
Unlike investments that just sit there and collect money for you, real estate will at times need your attention; that may not be appealing to you in your retirement years. On the other hand, many people enjoy this aspect of real estate investing as it gives them somewhat of a side business which they might otherwise miss.
Weighing some of the pros and cons will help you to decide if funding your retirement with investment properties is right for you. Also, keep in mind the many choices between commercial and residential investing.
Commercial Investment Properties
Investing in a commercial property is one of the best paths to building wealth. It takes money to make money and purchasing commercial real estate will require deep pockets. If the money is there, investing on your own is a great way to go. If not, there are other opportunities to help you invest without draining your accounts.
Commercial real estate consists of offices, multi-family units, retail, industrial, and special purpose buildings. Income is generated by businesses or tenants paying rent.
A real estate investment trust (REIT) allows investors to buy shares in commercial buildings, often offices. These stocks are bought, sold, and traded in the stock market. Since REITs are required to pay at least 90% of the taxable income to shareholders, it is a simple, low risk opportunity to invest in commercial real estate properties to help fund your retirement.
A crowdfunded real estate investment opportunity is simple. Several people pool their money to invest. When a profit is seen, it is divided amongst the investors. Each crowdfunded investment is different depending on the requirements and what is being invested in. How much you choose to invest will affect how much you see in return.
Invest on Your Own
If you have the means, investing in commercial real estate property on your own will be a worthwhile investment in retirement. Just be sure to work with a knowledgeable commercial real estate agent and understand the market you are considering.
No matter which way you choose to invest in commercial properties, the benefits are long-term leases with tenants who tend to stick around, bringing in a great source of steady income for you.
Residential Investment Properties
Residential property investment consists of purchasing homes which will then be leased to renters. This is simpler than commercial investing because it is often more reasonable to do on your own without getting involved with trusts or a group of investors.
Often times, once one property is paid off, another is purchased and an investor can continue to build from there. As long as they are filled, a mortgage on a residential property will be covered by the rent being paid. If you are just beginning to invest at retirement age, it is best to pay for the rental unit in full so you will see immediate income.
One of the downsides to owning residential properties is the responsibility to maintain them. During retirement, you’ll have to decide if you want that responsibility or if you will hire a property management company.
Another downside is short-term leases. Unlike commercial properties which are often occupied for years, residential properties tend to fill with people who will continue to move. This isn’t always a negative as long as the property is in an area that keeps the home filled for you.
Flipping houses is a unique way to invest in property for a retirement income. The process consists of buying homes that need work, improving them, then selling them for a profit. Many choose to share this investment opportunity with others which helps in sharing the burden, especially if the actual flipping can be done without hiring a contractor.
Flipping is worth looking into when the market is hot and if the costs to flip won’t cause you to receive little to no return on investment. When done right, every profit can be turned into a greater one.
After deciding to invest in a property, the next decision is how to handle the care and upkeep along with tenants’ needs. At retirement age you most likely will not want to deal with those issues on your own.
Property managers offer several helpful services such as advertising the rental, collecting rent, leasing, and the maintenance of a building.
Excalibur Homes offers property management services in the Metro Atlanta area, including Roswell property management and other surrounding areas. We understand your desire to invest in real estate without being tied to managing all your properties. Excalibur Homes will do the work for you so you can enjoy your retirement years with little to no worry.