Retirement is something many of us think about, and many of us fail to prepare for. Most of us need the capital we have accumulated over our lifetime to fund our golden years. So, how can real estate help you prepare for retirement?
Let’s take a look at 3 ways to invest in real estate for retirement:
- Real Estate Investment Trusts
- Long Term Rentals
- Buy a Vacation Home and Rent It
1. Real Estate Investment Trusts (REITs)
A real estate investment trust (REIT) is an investment in a collection of properties or other real estate assets. They are similar to a mutual fund, but instead of a collection of company stocks, it is a collection of properties. REITs have a special tax status that requires them to pay out at least 90% of their income as dividends.
2. Purchase Residential Property and Rent it Out to Long Term Renters
This is what most people think of when they think of real estate investing — buying a property and renting it out. The trick is that you need to consistently have tenants who are willing to pay enough for you to cover any mortgage you have on the property plus: insurance, taxes, and maintenance. Rental property investing often gives the opportunity for above-average returns and provide a regular cash flow.
3. Buy a Vacation Home and Rent it Out Part-Time
Owning a vacation property as an investment usually means that you rent it out to tenants for shorter time periods. If you have the right house in a desirable location, you might be able to make as much money from a few vacation renters as you could from a year-round tenant elsewhere. Furthermore, maybe you can enjoy some time there yourself!
Overall, Real Estate is a Good Source of Passive Income
In conclusion, the key to a comfortable retirement is having enough passive income to support your needs. Investing in real estate early can supercharge your retirement. However, it’s important to analyze the risks associated with real estate investing by doing your due diligence.