Buying real estate as a retirement investment can be a good decision when you follow a few simple rules. Being retired or about to retire is not the time to be looking for get rich quick schemes. Actually, there's never a good time for that but retirement time is when you need to be looking for solid income producing investments.
Here are six rules for buying real estate when you are close to or in your retirement years:
- Is the investment almost guaranteed to retain its value?
- Is it likely to appreciate in value?
- Does it provide reliable income?
- Does it provide passive income?
- Is it a good hedge against inflation?
- Is it reasonably liquid?
Buying Real Estate for Passive Income
After seeing real estate values tumble as much as 30% during the recession, many people wonder if buying real estate still meets the criteria of rule one. On the other hand, many see the drop in values as temporary, making now a great time for buying real estate. The S&P/Case-Shiller Home Price Index shows national residential prices up 12.1% year on year. Most investing experts believe buying real estate now is the way to get in while the market is down but recovering. That answers the two questions about retaining and appreciating values.
Low mortgages combined with low purchase prices and rising rents easily answers the question about buying real estate for reliable income. However, passive income is another question. Once in your retirement years, you don't want to be bothered with renter problems and leaky plumbing. A property management company turns buying real estate into a truly passive income.
Buying real estate vs. another popular investment:
Buying real estate as opposed to investing in gold.
Buying Real Estate as an Inflation Hedge and for Liquidity
Some people favor gold as a hedge against inflation over buying real estate. The chart above makes somewhat of a case for investing in gold as a hedge against inflation. However, take into consideration that gold doesn't pay a monthly rent or a dividend of any kind. Buying real estate is both a hedge against inflation and a monthly income stream.
The final question about buying real estate as a retirement investment is asking how easy it is to sell.
Cold hard cash is the most liquid investment of all. However, with interest rates hovering around 1%, cash certainly isn't keeping up with inflation. Buying real estate may not be a very liquid investment but seriously consider how much liquidity you need. Do you have cash in a savings account? Do you have money in the stock market that you can get at in a day or two? Maybe all of your investments don't need to be fully liquid. The fact is you can always sell an investment house. How fast depends on if you want full retail value or you're willing to sell at wholesale.
As 10,000 baby boomers retire every day, now is the time for those in their retirement years to take a close look at buying real estate as an investment. There will never be a better opportunity for buying real estate than today!
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