Is retirement with real estate a viable option for those who get a late start?
Real estate investing is a wonderful asset as an investor. Not only does it hold the power to provide financial freedom during the first phase of your life, but it can also be used as a late-stage recourse for retirement savings as well. Retirement with real estate offers a magnitude of strategies for those with insufficient retirement savings, including the ability to provide future retirees with short and long-term advantages, whether approaching retirement age, behind on savings or looking to retire early. The following highlights a combination of late-stage saving tactics, including passive income investments for retirement:
Retirement With Real Estate: The Road To Success
Compared to those who’ve saved since a young age, people approaching retirement without significant savings have a bumpy road ahead of them. Retirement with real estate, on the other hand, has the power to resolve many of those issues, especially when it comes to saving for retirement. However, the first aspect investors need to consider — whether starting early or late — is a retirement strategy.
For most, a retirement strategy is the ignition switch to the retiring process. This predefined course of action will not only showcase how you intend to spend the latter days of your life, but how you plan to fund it. Although this strategy is a business plan for future retirees, it can also serve as a roadmap for those getting a late start on retirement savings, with particular focus on passive income opportunities. These potential revenue streams can be an excellent resource for those behind the eight-ball, as this form of residual income aims to replace employment income during retirement and assist in satisfying financial obligations during the golden years of one’s life.
Whether a beginner or seasoned investor, the real estate market is locked, stocked and loaded with passive income opportunities. However, the answer to unlocking those possibilities is due diligence. This intangible component is a necessary trait in real estate investing, as it will not only ensure investors have the ability to recognize quality deals, but the know how to close them. That said, retirement with real estate can apply to almost anyone, especially those considering a backup plan to catch up with sufficient savings.
5 Late-Stage Saving Strategies For Retirement
For those looking to salvage their retirement, the following breaks down five late-stage real estate saving strategies:
1. Single-Family/Multifamily Rental Property: In terms of retirement with real estate, one of the more popular options for late savers is single-family and/or multifamily rental properties. This lucrative strategy has the ability to not only assist future retirees in catching up with their nest egg in the form of home appreciation and equity, but the possibility of including an additional revenue source on top of it. Done correctly, a rental property has the potential to pay the monthly mortgage of the property, as well as provide a bonus income stream, commonly known as cash flow or passive income. For retirees, this source of income earned with little-to-no work can be invaluable during retirement. With the right number of single and multifamily rental properties, this investment approach can create quite the comfortable retirement.
2. Raw Land: Investors slow to save for retirement can make a quick turnaround with a raw land investment. This passive income opportunity offers future retirees a slew of options in terms of saving for retirement, as it can be subdivided and sold, developed in rental properties and even leased. In addition, raw land investing has the flexibility for a buy and hold option, which can be useful for retirees. The benefits of investing in raw land include:
- Easy to acquire with little-to-no competition
- Affordable to own and maintain
- Potential for passive income, including build and hold option
- Potential for short-and-long-term profit
A raw land investment can provide future retirees with upfront profits and long-term dividends, making it an excellent choice for late-stage retirement savings.
3. Commercial Rental Property: While it may seem intimidating from the outside, another form of retirement with real estate is investing in commercial properties. This type of rental investment, which generally includes a large building with several different business units, offers instant equity and increased cash flow compared to residential investments, which is beneficial for retirees. In comparison to residential, a commercial property will earn higher income and more cash flow, while presenting less competition and longer leases, which also curbs vacancy concerns for investors.
4. REITs: Although the IRS doesn’t define Real Estate Investment Trusts (REITs) as a form of passive income, the definition can be interpreted many ways. A REIT is generally defined as a company–or companies–that owns or finances income producing real estate. In the same fashion one would invest in stock options, investors can invest in REITs to earn all types of income, diversification and long-term capital appreciation. In fact, REITs have grown to become a lucrative option when diversifying one’s real estate portfolio.
5. Vacation Rental Property: While the real estate market continues to heat up, one of the more distinguished ideas, especially for retirement, has to do with investing in vacation rentals. This retirement strategy is excellent for passive income opportunities, as it offers future retirees a higher-rate of income from rentals. In addition, retirees can enjoy an array of tax deductions while earning equity in a property as someone else pays the mortgage.
For those considering making the plunge into vacation rentals, it’s imperative I mention the importance of vacation rental insurance. Generally speaking, the type of insurance your property needs will pertain to whether it’s a short-term or long-term rental. A standard homeowner insurance policy will not provide coverage for business activities, which is essentially what a vacation property entails. When it comes to vacation rental insurance, investors should pay particular attention to liability, building and contents, and building income.
Retirement with real estate continues to be a viable choice for anyone — no matter what stage of retirement they’re in. Done right, these passive income opportunities can provide retirees with the funding for the best years of their life.
