Planning Your Retirement Through Real Estate Investments

Planning Your Retirement Through Real Estate Investments

Whether you plan to flip it or use it as a rental property, real estate investment is a great tool to use when planning for retirement. Not only can it help to increase your retirement dollars, but it can also provide you with passive income to help you enjoy your retirement years to their fullest. If you have an IRA or 401(k), here are some additional tips you can use to increase your retirement dollars.

Retiring with a Real Estate IRA

With the help of a real estate IRA, which is just an IRA that invests in real estate, you can purchase real estate in order to increase your IRA’s income. Whether you purchase the property to flip and then put the profits back into your IRA or you purchase a property to rent, the money you earn from your real estate investment goes right back into your IRA. Not only does this build the nest egg that you have in your RIA, but it is also tax-free or tax-deferred as part of your IRA account.

As an example, if you purchase a distressed property for $40,000 and spend another $10,000 in renovations, you may be able to turn around and sell it for $110,000. When all of the money from the sale of the house is put back into your IRA, you will have more than doubled the initial investment. As another option, you may choose to rent the house for a period of time in order to generate passive income for your IRA. Then, if you decide to sell the property at a later date, you can still cash in on that great investment.

The Benefits of Real Estate Investing for Retirement

One of the great benefits of investing in real estate for retirement is the fact that it provides a more stable and reliable source of income than the stock market. Real estate investment also gives you more control over where and how your money is used. As an added bonus, you can write off mortgage interest as well as some property taxes and non-cash expenses such as depreciation costs. Stocks and bonds do not offer these tax advantages. Of course, whether you are flipping the property or renting the property, the majority of the cost of your investment is ultimately paid with other people’s money while still putting more cash into your retirement savings.

Getting Started with Real Estate Investment for Retirement

While you can start real estate investing at any time, you should ideally be 10 to 20 years away from retirement when you begin the investment process. This will allow you to have ample time to allow the investment to work for you. You will also need to have a solid credit score as well as enough cash on hand to put about 20 percent down on your investment. If you meet these criteria, it may be time for you to seriously start looking at real estate investment as your best retirement option.

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