Real Estate (MP) With rising inflation, declining social benefits and an ever-increasing need to have a relaxed retirement, investors are now searching for new ways to invest and grow their funds to ensure a stress-free, financially secure future. Despite the popularity of stocks and shares, real estate investment properties are becoming the preferred mode of investment for many to secure their retirement future.
Top reasons why real estate investment is safe for retirement
- Safe and High Return Investment
Stocks, bonds and shares are no longer doing what they used to do earlier for investors. How they succumbed during the 2008-2009 financial crisis and eroded the wealth of many is still fresh in most investors’ memory. No wonder that several investors are now looking for better investment opportunities in the real estate, which is considered to be one of the oldest types of investment in the history. Compared to stock investing, real estate, which is a form of tangible asset, is usually a more secure investment option. Since many of your traditional assets and investments may stop growing, decline, or even disappear due to inflation, it pays to own real estate investment properties that can give you higher returns from mortgage notes or rental properties even when inflation is on the rise.
- Tax Benefits of real estate investment
Investors in real estate properties in the US can enjoy several tax benefits offered by the government. This includes mortgage interest deduction, $250,000 and $500,000 tax-free gain for singles and married couples respectively, and the 1031 exchange program to postpone taxes.
- Easier to Manage and Understand
Compared to understanding the labyrinth of share markets and how the prices of stocks and shares fluctuate, real estate is much easier to understand and manage. According to leading investment real estate companies, all it takes for a good real estate investment is a favorable place, manageable maintenance, good tenants and rental growth. On the other hand, owning stocks would mean dealing with several variables such as industry growth, management credibility, tax policies, politics, competition, regulation, margin analysis, inventory turns and operating profit growth, to name just a few.
- Liquidity is the first issue to consider
Due to high selling commissions, the temptation to sell out the property too soon is less as compared to stocks and shares that you can sell easily when the market takes a beating. Whether you have made real estate investment in Atlanta or anywhere else in the US, perhaps you know how the entire process of marketing a property, finding buyers willing to pay you the desired rates, showing them the property, dealing with the legal procedure etc. is a lengthy process that takes a lot of time and effort. Thus, if you have enough liquid cash reserves, you can easily opt for investment in real estate for sale and get a good return after a few years by selling the property when its price has definitely appreciated.
- Personal Use of House
Real estate investment properties that you plan to live in can help you avoid paying rent and also experience gain on the property through appreciation. However, you won’t be able to enjoy this appreciation in the property without selling the home and losing your place to live in. Renting may seem like a favorable choice when you compare it with the initial cost of buying, since a property would need investment with respect to cost of mortgage, insurance, maintenance and taxes. Still, that the principal and interest part of your mortgage will remain fixed (unlike rising rent) and over time, you can pay it off, thus having a rent-free place to live in, is a big reason to invest in the real estate. You may even plan your mortgage payment so that you pay off the mortgage right when you retire. This way, just as your incomes decreases, your expenses too will reduce.
- Passive Income Machine
Though investors in real estate properties have to spend money for the maintenance of their properties, they can offset it with a regular passive income via rent. In fact, rental income is considered to be one of the best sources of passive income, which is even partly or completely safeguarded by non-cash depreciation expenditure.
- A Leveraged Play
In a bull market, assets – including real estate properties, are likely to inflate fast due to increasing wages, better employment and growing corporate profits. Thus, you can earn a fantastic return on your real estate investment (property) if you leverage the bull market.
- Paying Back Debt
People with fixed rate mortgages have to go on paying a fixed amount. Thus, even after 10 years, they’ll be paying off the same amount of debt that won’t be worth as much as when they took the mortgage in the first place. However, with real estate investment properties, your mortgage liability reduces over time and eventually becomes a smaller part of your overall net worth. Thus, you won’t get stressed paying off your debt.
- Staying safe against conflict
Whenever a major natural catastrophe, a geopolitical risk, or a terrorist attack occurs, the US Treasury yields plummet owing to a flight to safer assets. Real estate is a direct beneficiary of lower interest rates as it’s a common practice among people to borrow money so that they can eventually own their property. When interest rates take a beating, refinancing activity picks up, thus boosting the cash flow of homeowners.
All these factors make real estate investment properties the right basket for your retirement eggs.
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