It is critical to diversify your investment portfolio. If you put all your eggs in one basket, you could lose everything in an instant. You can boost your chances of better earnings and lower losses by investing some funds in the stock market, other funds in bonds or ETFs, and other funds in real estate. Many people are hesitant to engage in real estate because they believe it is risky or requires a large sum of money. Neither of these statements is correct, and to comfort you, here are 4 reasons why real estate is a good investment mostly for retirement income.
If you’re considering real estate investment, you’re about to embark on one of the most rewarding investment experiences of your life. Even if you’ve never invested in real estate before, here are the 4 reasons why real estate is a good investment mostly for retirement income;
1. You Have the Option to Leverage Your Investment
There aren’t many other investments that allow you to put your money into assets that are worth substantially more than you put in. If you have $10,000 to invest in the stock market, for example, you can typically buy only $10,000 worth of stock. The only exception is if you invest on margin (borrow), which requires you to be an accredited investor with a high net worth. You can invest in real estate by putting down a fraction of the home’s cost. Let’s assume you found a home for $100,000 and put down $10,000. If you have decent credit and a steady salary, you should be able to get a loan to cover the remainder of the cost.
2. There is room to force appreciation
Unlike stocks and bonds, real estate may be forced to appreciate. It may sound strange, but it is possible. First and foremost, understand that real estate appreciates over time. Real estate appreciates at a rate of 3% to 5% each year on average. You don’t have to do anything but maintain it. Renovations or repairs, on the other hand, might accelerate the rate of appreciation. Because not all improvements increase a home’s value, consult a certified assessor or real estate agent to determine the best renovations to do.
3. You Can Obtain Consistent Cash Flow
You can generate monthly cash flow by renting out real estate if you buy and hold it. This boosts the benefits from owning real estate because you aren’t dependent solely on appreciation but also on monthly rental revenue. Buying investment real estate, finding suitable tenants, and managing the property may be daunting. But there are numerous resources available to assist you. Of course, there’s always the possibility of tenants defaulting or abandoning the property early. But remember, any investment comes with a risk. There can be no profit if there is no risk.
4. Having a feeling of being financially secure.
When it comes to investing in the stock market, there isn’t much to be confident about. However, as the year 2020 shown, everything may change in the blink of an eye. You have a substantial investment one minute and then lose it all the next. When you invest in real estate for the long run, you know you’re getting a valuable asset. The housing may go through ups and downs, losing some value along the way, but if you hang on to it long enough, it usually recovers.
Many people buy real estate to supplement their income in retirement. You’ll improve your retirement income whether you own the property while you’re retired and use the monthly rental cash flow to supplement your income. On the other hand, you can sell the property you have held for many years and profit.
Real estate is a fantastic opportunity to broaden your investment horizons. You can reduce the risk of high-risk investments, such as stock market investing. Furthermore, if you invest in rental properties, you can benefit from the income flow while the property appreciates, providing big capital gains when you need it most in retirement. If you need it to be, real estate is a liquid asset.