If you’re about to retire and you’re trying to find a good source of investment that could be lucrative, then you should probably consider real estate investments. You’re likely to get more returns than you would find in any other business due to real estate not having sufficient investors, which makes it the best type of business to be involved in after retirement. It is also your way to go if you don’t feel financially stable with social security benefits and pensions.
So, if you’re interested in knowing more about retirement real estate investment, here’s how you can start.
Set up a Self-Directed IRA
A self-directed IRA (Individual Retirement Account) means that there are alternative investments that are offered or can be accepted by an IRA custodian, or, in other words, a financial institution. Being self-directed means that you have to make an annual evaluation of your investment and report the value back to your IRA custodian. In order to set up your first self directed IRA, you can contact one of the multiple companies that aid individual investors in setting up their own IRA. This can also be useful in the future, especially if you’re not familiar with how real estate investment with self-directed IRA works. You can also find more info here on these strategies and decide which one you can apply for in the future. However, keep in mind that custodians operate differently and will have different fee structures. So, before you choose one, make sure that you do your research and understand the number of fees that can affect your returns. It is also important that you have an entity, such as an LLC (Limited Liability Company), to hold your assets.
Try Real Estate Investment Trusts (REITs)
REITs are the companies that own or finance a collection of income-generating real estate. It is basically an investment in real estate assets or properties. Because they are designed like mutual funds, the REITs will collect the capital of multiple investors into a common fund, thus allowing investors to get dividends from their real estate investments without them having to manage these properties themselves. REITs are also required by their tax status to pay 90% of their income as dividends, but while most REITs are stable, like equity REITs, there are also those that come with high risks, like mortgage REITs.
The main thing that investors like about REITs investment is that dividends can provide them with a stable income, you will have the option to diversify your investments and reduce the risk involved, it is easy to buy a REIT investment, and liquidate your investment right after if you need to; however, you’ll be heavily taxed, as those dividends will be treated as normal income, and your profits won’t boom over time or remain stable since your money is not being reinvested over time.
Work with Long-Term Renters
Working with long-term renters seems to be the traditional type of investment for anyone who thinks of real estate investment in any stage of their lives, and they’re probably right, but it only works if you find renters whose payments can cover the mortgage, maintenance costs, taxes, insurance, etc. But keep in mind that the location of your property and the average market rates will also affect how much your tenants are going to pay. If you compare investing in the stock market and rental property investment, you’ll find that the latter is far more lucrative and will provide you with excellent returns. In addition to this, your returns will be in the form of cash or monthly rent, which further proves that a rental property is a hard asset with tangible value.
Managing rental property as an investment can be tiring and time-consuming, especially for a post-retirement investment. So, you’ll have to deal with your tenants on a monthly basis and deal with any sudden vacancies. You’ll also need a good amount of capital to buy a rental property if you don’t already have one.
Rent out Your Vacation House
Don’t worry, renting out your vacation doesn’t mean that you won’t get to use it anymore, as you can rent it out part-time whenever it’s not in use. If you have a spacious vacation house with all the desirable features of a vacation house and also a good location, then you might just be able to make decent money out of renting that house part-time. Renting your vacation house still falls into the rental property category, though, so you’ll still face the same difficulties mentioned above, but it’s a better option since you’ll still be able to enjoy your property as well.
Getting into real estate requires a decent amount of research and understanding the different options that you’ll have to get your desirable investment, so make sure to evaluate your resources and review your options in order to get the most lucrative deal. Note that there’s a risk involved in any type of investment, so understanding the risk you might face will help you mitigate it in the future.