What advantages and creative investment opportunities can real estate offer retirees?
The need to find great investments doesn’t stop once you hit retirement. In fact, it normally becomes more important. Finding interesting and profitable investments is a top priority, even among those retiring with a substantial nest egg.
The latest data from Fox Business and Bankrate.com suggests that more Americans are saving for retirement than they have in 6 years. In fact, only 5% of workers say they haven’t contributed to a retirement plan over the last 2 years. However, most are still far, far behind in how much they are saving.
Bankrate says 28% of Americans save at least 10% of their income for expenses and retirement. Yet less than 30% of them have enough savings to cover 6 months of expenses. Other recent statistics show that the average retirement account balance has been edging up close to $100,000. Of course, that won’t get most very far into retirement. The extremely frugal may make that last a few years, but many Americans should now expect to live 30 or more years after retirement age.
Related: Want to Retire Early? Sorry, But Much of Your Net Worth May Not Help
So whether out of a need to grow your nest egg and finances or from a position of building wealth and wanting a more interesting and profitable portfolio, how can real estate help?
When it comes to investments, “interesting” doesn’t have to mean taking wild gambles. After all, you can go to Vegas and have a lot of fun with the hope of some big winnings. Real estate can be fun, offer the ability to flex your creative side, and still give financial security and sound investment choices. The great benefits include inflation protection, a tangible hard asset, and a performance often more reliable than stocks or bonds.
The number one financial need in retirement is passive income. Period. It doesn’t matter how big your nest egg is. It can disappear fast unless you have a steady stream of cash coming in.Thankfully, real estate offers a number of ways to generate cash flow passively while keeping your capital intact.
For those who don’t have a big enough nest egg to generate the yields and cash flow they need to support their desired lifestyle, real estate is a perfect fit. It can deliver capital growth and income simultaneously. This can be achieved both by value add opportunities and appreciation.
A few believe in depleting their retirement savings to the point where their last check bounces. After all, you can’t take it with you. Of course, timing that perfectly is easier said than done. Many also want to leave an inheritance or establish an ongoing legacy. Real estate offers many ways to do this. Choose from those investments that will keep on giving to individuals and causes you love for generations, or simply create a landmark that will be a fixture for decades.
Beyond the Basics
Becoming a DIY landlord or a weekend warrior fixing up and flipping houses is an option, especially if you are happy staying close to your properties and pitching in some manual labor. But there are more creative ways to invest profitably and create legacies, too. Consider using the three options below as alternatives to invest in real estate as a retiree.
Real estate crowdfunding has evolved to enable individual investors to profit from real estate right from the golf course, with just a few clicks. It allows you to find investments from organized sponsors, pick those that best fit your financial goals, and invest right from your phone or tablet. These are fully managed investments that put regular dividends back into your account on a regular basis, all without dealing with the hassles of hands on rehabbing or landlording.
Turnkey Rental Properties
Turnkey rental homes streamline the process of becoming a landlord. A firm sources the assets, improves them, places tenants, and handles all of the daily accounting and property management. You buy them and add them to your portfolio. Then simply have your net rents transferred to you on a monthly or quarterly basis.
Taking a page out of the banks’ playbook, more and more investors are engaging in private lending. This can be in the form of buying and trading existing mortgage notes or lending private capital directly to front line investors. You put up the money. Let someone else with more experience and time do the hard work, so you can receive attractive yields.
Are you using real estate to help fund your retirement? If so, how?
Let me know with a comment!
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.