subject: Retirees Should Consider Investing More In Real Estate [print this page] If you're starting your retirement, consider your portfolio allocation strategy - i.e. how to split your money among different asset categories. You'll want investment income to cover living expenses but you'll also need long term investments to maintain your portfolio's value against inflation damage. Here's why real estate investments can deliver both of these.
As a retiree, you're not worried about job loss. Your pension and Social Security income is pretty well assured. And you've created a nice nest egg by your savings efforts over the years. This makes for stable and assured future income - the basis for real estate investing.
It's no secret that the real estate market has been declining steadily. This trend may well continue. But investors know that while real estate goes through peaks and valleys its value has always gone up in the long run - and substantially so.
Depressed housing prices make for a buyer's market. A depressed economy turns 'would be' home owners into renters. To take advantage of this scenario, you need to do some thinking and homework on getting real estate to work for you.
First, realize the opportunities that investing in real estate now may bring you:
* Historically, real estate values appreciate over the long term
* Good deals are easier to find when real estate sales are slow than when markets start to take off
* Buyers in slow markets have more clout to obtain concessions in price, upgrades, and repairs from sellers
* You can put your purchased property to work as a rental to earn you money now
* Mortgage rates are low and you can choose how much leverage you're comfortable with.
* Real estate carries significant tax-advantages both as homes and as rentals
Buyers' markets come around only once every 15 years, but interest rates are usually much higher when they do. In fact, low interest rates present a great opportunity during this type of market for those with money.
Although taking risks on the stock exchange may yield higher returns, investment property can provide you with a stable, steady income and a relatively secured level of return on investment.
When looked at with a long-term view, real estate investment property is unlikely ever to lose money. You may have to pick the right time to sell a property but as long as you keep looking at real estate investing with a long-term view you'll be hard pressed to go wrong. Put simply, property is historically stable; and if you are prepared to wait it out, you can make money on it.
If you do your homework when looking for a property to buy, you can not only capitalize on a good long term gain but create some rental income for the present. Depending on how much you invest in the property, you can rent it out to cover your mortgage expense only, or put more down to produce current income for your living expenses.
If you're near or in your 60's you know that real estate has increased enormously over the years. All you need to do is be able to maintain the payments on it. In recessionary times, people who would normally buy a home are forced to rent. Finding renters is never a problem - if you're willing to offer a good rental price.
With that in mind and the fact that many about-to-retirees have substantial savings they need to invest, a retiree should consider buying real estate and renting it out. By carrying only a small mortgage, they needn't worry about defaulting, but in fact can look forward to some current income and sitting back with confidence about reaping a substantial long term appreciation in its value.
by: Shane Flait
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