People often associate the word ‘investing’ with terms like stocks, bonds, annuities, etc. Hardly, does the thought of owning a rental property ever come across their minds. However, when compared with other types of investments, investing in real estate, especially in your own income-producing rental properties, is a far better option in several ways. In this episode, Bill shares five reasons real estate investing is the best for generating cash flow in retirement.
People often associate the word ‘investing’ with other terms like stocks, bonds, annuities, etc. Hardly, does the thought of owning a rental property ever come across their minds. This is because it is rarely considered a “standard” investment by most people who are looking to invest their money because they think too much is required to find, purchase and maintain a real estate investment.
When compared with other types of investments, investing in real estate, especially in your own income-producing rental properties, is a far better option in several ways. Whether you are retired or about to retire, there are many reasons you should consider investing in real estate.
Unlike trading stocks and bonds, the act of investing in real estate is very easy to understand. It can be very tricky to play the stock market because the results happen as a result of factors outside your control. Most people do not fully understand much about how the stock market works and often have to rely on other so-called experts to decipher it for them. Real estate investing, however, is an investment you can directly control. It is something that most people, including seniors, find very easy to grasp thereby making them venture in and carry on with the investment process with ease.
The only work that needs to be done on your own rental property is management and maintenance. I recommend that you hire a property management to take those responsibilities off of you. For 10% of the rents, it is well worth the cost to free you up to truly enjoy the “passive” part of that income. To this end, it is imperative that make sure you carefully vet and select your property manager. This is your most critical team member. Also, it is important that you (or really your property manager) have a solid system in place to carefully screen potential tenants to alleviate the management and home maintenance issues. Outside of a phone meeting once a week or once a month with your property manager, a retiree can truly enjoy their retirement and the constant income.
As an impossible force to be reckoned with, inflation is something that remains constant in real estate and life in general. Although the fixed-rate-mortgage on your rental property will still remain the same, as time goes by, your rental income will increase as you adjust rents based on inflation because the cost of living will always continue to increase. Therefore, as your rental income pays down your debt, your income increases year-after-year. This helps to keep your expenses steady. In addition, as the property increases in value, so does your equity and you always have the option to tap into that if you want to expand your real estate portfolio.
As you pay down your mortgage and equity grows, your real estate investment becomes a valuable asset that is always available to you. As a senior, you never know when there may be a major medical expense or other emergency where a large cash amount may be required. This is when your rental property becomes an asset. As you rent it out, it will begin to generate monthly income for you. But if there is an emergency, your property is like this huge emergency savings super-fund that is always available if you need it. In other words, if there is need to sell for one reason or the other, you can always cash out on your asset.
Real estate is an investment that can be passed down as a tangible asset to the next generation in your family. As a great source of cash flow, it helps to provide income for your retirement today, but it can also generate income for your heirs once you’re gone. And it can help supplement their income, emergency medical expenses, college funds, and more. One of the most wonderful parts of having real estate is that It can become part of your legacy that you pass down to bless your children, grandchildren and beyond.
If you look at the investment portfolios of some of the world’s wealthiest individuals, you’ll see that real estate is a dominant investment asset. The reason for this is because real estate is a tangible asset, which means it always holds and increases in value over time and is relatively easy to acquire. Whether you are looking for an investment with high returns, a source of additional income in your retirement years or an asset to grow over time and pass down as part of your legacy, real estate in the ideal vehicle for retirees moving into that next season of their lives.
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