Real Estate To Retirement
Thinking of investing in real estate for your retirement? Like in any investment, there are some downfalls to buying real estate for investment. If you are not investing in the stock markets or mutual fund market as some traditional retirement portfolios like many people do, you’re probably not ready for a rental property. But there are still ways to make real estate a part of your investment strategy.
Diversity Is Your Friend
The more diversified you are in a few types of investments you, the better off you are.
Diversification is important, especially when you’re saving for retirement. You invest in a variety of long term stocks and mutual funds because when one sector falls, others hopefully don’t such as buying energy stocks as well as tech stocks. And you invest in bonds because they aren’t as volatile as stocks but usually a better investment for people when they get closer to retirement, often some stocks will tend to move in the opposite direction as bonds. Diversifying reduces the risk of losing a large portion of your investment and retirement savings all at once.
Buying Real estate is great way for adding diversification and residual income to your portfolio while acquiring properties. We always talk about the real estate market as a separate market but it is correlated with other markets such as stock and bond markets.
One of the best investment on any market is real estate due to the multiple platforms and ways it can be used when deciding whether to jump in to the real estate rental market.
You must prepare for these types of investments making sure your credit is in good shape and that you able to obtain a mortgage. After you have applied for your mortgage and found your home you should do some research of areas where rentals are in high demand so you can get top dollar for your rent. After you purchase the home you have to find decent renters too many new landlords rush to get anyone in a house so they can cover their mortgage payments. Take your time find the right renters and check out their credit and possibly a background check these days you can never be too safe. Then you need to think of other cost associated with home ownership such as homeowners insurance, taxes and HOA fees if any and make sure they are able to be covered by your renters.
It’s a good idea to put some rent away for home repairs that always tend to pop up. It is also a good idea to take out a 15-year mortgage since this is a rental so the property can be paid off sooner and you can think about acquiring your second rental in a few years.
Prepare For The Long Haul
As a realtor, myself I always urge investors to obtain insurance for those unexpected major costs such as air conditioning refrigerator and other major repairs that can pop up over a few years. It will save you money in the long run.
Being a landlord can be a lot of work if you’re doing it on your own but today there are so many management companies out there which are decent price who can do everything for you from collecting rent doing background checks on potential renters having problems corrected and finding new renters to replace old renters.
You could hire a management company to do all that work and a very low cost I have heard of some which run about $80.00 a month some are 10% make sure you interview your management company as well to keep cost down.
Buying real estate as an investment and buying rentals is not like buying stocks or bonds, real estate is not a liquid asset that you can sell in one day especially in a down market so as I say hang on to your jeans and have patience.
It is a good idea to always put a little money away for those emergencies that always seem to happen when you least expect them.
Like any investment research, research and research like any investment never take it lightly.
If you feel like you do not have the patience to wait to acquire more properties and you want to get in and out of the investment is a few months or so there is always flipping. As this is more of a job and profession it can be very rewarding if your able to find the right houses.
Today with so many TV shows out there for flipping home and rehabbing homes its not hard to learn a bit and like most jobs we ever do we learn by failing and we learn by doing, don’t expect to make a million dollars on your first flip. I believe I have read that the average flip in California profits around $58,000 but that does not include the homes that have been flipped but have not sold for a while. I have been in many investors clubs myself who are mainly lenders looking to do loans for flippers just need a decent credit score and a little money or even no money down be careful though if you can’t evaluate a home and the cost of repairs properly you could be losing a ton of money so again research, research and research some more and make sure your ready it could be and probably will be a bumpy ride in the beginning.
Maybe buy rentals is a bit too time consuming for you and you already have a great job so not time for flipping homes there are other type of real estate investments out there such as REITS or now we have EREITS. A REIT’s is a real estate investment trust usually with what we call qualified investors which you can read in my other blogs to come but a REIT’s pools money from usually 100 although EREITS can run with few and also with unqualified investors just a little FYI.
REITS pulls money for projects such as apartments or housing complex or commercial properties we are talking large projects. It is a good idea to check out the REIT and see whom is invested any notable name in there or check to see if it is an exchange traded REIT meaning it is traded on an exchange.
A REIT can be invested in many projects as an former investment banker we had all kinds of investors buy certain stocks for some of the craziest reason even the color of a logo of a company so be careful when you choose a REIT and make sure they have quality investment within the REIT I like commercial and mortgage REITS myself but you decide what you feel good with. that invest in variety of real estate, including residential and commercial, or mortgages. When you’re looking at exchange REITS one big benefit is you can usually invest your IRA into REITS unlike buying rentals or flipping homes. Remember all investments have risk so talk to your advisor before buying any investment and please make sure your advisor has your best interest at heart.