Are you looking for ways to retire early or simply looking for a retirement plan? Well, you’ve made it to the right place! Many people enter the real estate investing business for the sole purpose of making money. Other property investors, on the other hand, view real estate investing as a secure retirement plan. You might be asking: is real estate a good investment for retirement? The short answer – definitely!
Property investors retire with the help of investment properties all the time. However, achieving this goal is not an easy task and will take time. So, how do they do it? Continue reading to understand the reasons why is real estate a good investment for retirement, and what steps you need to take in order to achieve this.
Why Is Real Estate a Good Investment for Retirement? – Passive Income
The first and most basic answer to why is real estate a good investment for retirement is that it allows you to generate a steady passive income for your golden years. Property investors receive passive income in the form of monthly rent which they collect from tenants renting their investment property.
This steady rental income is a real estate investor’s best friend when it comes to retirement plans; not only does it help in paying mortgage payment and becoming debt-free, but it also makes life much more lucrative. If a real estate investor makes smart investment decisions, he/she can live on this rental income and retire completely, which is why is real estate a good investment.
Keep in mind, however, that at the beginning of your real estate investing career, you won’t be seeing a lot of this money. When you buy the rental property, you’ll have to finance it with a mortgage (unless you have enough money to pay fully in cash). Therefore, part of your monthly rental income will have to cover your mortgage payments. In addition, a real estate investor has to pay for things like property taxes and insurance, not to mention other expenses such as costs of repairs and maintenance.
By the time they retire, property investors will have paid off their mortgage, and they’ll start getting the rewards they’ve been waiting for. They can choose to further continue renting out their investment property and make a stream of income, sell the rental property for a profit, or just live in it.
Therefore, passive income is a huge incentive and part of why is real estate a good investment for retirement, but a real estate investor has to be patient with the process.
Why Is Real Estate a Good Investment for Retirement? – Tax Benefits
Making money in real estate investing is great, but what’s even greater is having tax deductions! Property investors will have to pay property taxes, but there are certain tax benefits and mortgage interest deductions provided to them. For example, the rental income which the rental property generates is tax-free. Furthermore, besides mortgage interests, the investment property taxes, operation expenses, and insurance are all tax deductible as well.
Exactly how much a real estate investor can deduct depends on his/her rental income. Regardless, no one can deny the positive impact that tax deductions will ultimately have on a real estate investor’s wealth and the amount of money he/she will save, whether for retirement or career purposes, which is another reason for why is real estate a good investment for retirement.
Why Is Real Estate a Good Investment for Retirement? – Leverage to Create Wealth
The final reason why is real estate a good investment for retirement is that it gives property investors the leverage to build their portfolio of investment properties. What does this mean? When a real estate investor takes a mortgage to finance buying the investment property, he/she will have the ability to invest in other investment properties with less money down. Let’s give an example to further elaborate:
Most mortgage loans require 20% of the property’s purchase price as down payment. Let’s assume you put 20% down for the purchase of a rental property worth $100,000. This means you’ll only have to pay $20,000 now, and pay the remaining $80,000 (plus interest) during the next 15-20 (or even more) years.
When financing the rental property in this way, a smart real estate investor will pay off the mortgage and save the rest of his rental income as a down payment to buy another investment property! Repeating this process to buy and own multiple investment properties will lead to increasing the real estate investor’s rental income, which pays the mortgage, taxes, maintenance, management, etc. By the time they retire, they’ll have enough money saved and a steady source of passive income to make them set for life!
We think these reasons are enough to explain why is real estate a good investment for retirement. Now, let’s move on to clarify what property investors need to do in order to secure retirement through real estate.
Is Real Estate a Good Investment for Retirement? – What You Need
How can you excel in something you don’t understand? Real estate investing is just like other types of investments in which you should not enter unless you have sufficient knowledge of the market. Before you ask yourself is real estate a good investment for retirement, you should first be familiar with every important aspect of the industry such as what makes certain locations good places to invest and other ones not so good? Which types of investment properties yield the highest return on investment and how to find them? Which investing and financing strategies work best for the rental property and help you achieve your goal of retirement through real estate?
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Having the knowledge makes property investors more aware of the risks of real estate investing and how to reduce them. Visit Mashvisor’s knowledge center to access thousands of blogs, guides, and tips on everything real estate!
Diverse Your Portfolio
When it comes to real estate investing, the more investment properties you own, the better! Having a diverse real estate investment portfolio not only means more sources of passive income, but it also helps reduce the risks associated with the investment. Property investors can grow and diversify their investment portfolios by investing in different types of investment properties, following different investing strategies, and investing in different locations.
Is real estate a good investment for retirement? Yes, especially for a real estate investor owning multiple investment properties.
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Invest for the Long Term
The best way to secure retirement through real estate is by investing in long-term investment properties as they generate passive income for a longer time. The best and most popular long-term strategy is the buy-and-hold.
The main point of buy-and-hold is to buy the investment property and hold it for a period of time while it appreciates in value. Property investors make money from buy-and-holds by renting them out while waiting for the best time to sell them. Thus, this strategy benefits property investors in two ways: the rental income collected from monthly rent, and the profit made after selling the rental property. This strategy is the best for retiring through real estate investing, and further elaborates on why is real estate a good investment.
Is Real Estate a Good Investment for Retirement? – The Bottom Line
Real estate investing generates passive income, provides tax benefits, and allows for leverage to create wealth. This explains why is real estate a good investment for retirement. However, as rewarding as this strategy is, it takes effort and planning. The best way to secure retirement through real estate investing is by gaining enough knowledge and experience in the market.
We hope this answers your question of is real estate a good investment for retirement. At Mashvisor, we’re more than happy to provide property investors with all their real estate needs. To start planning for retirement through real estate investing, visit Mashvisor’s knowledge center to learn everything about the market, and don’t forget to sign up to find the best investment properties in the United States!