Is Real Estate a Sound Investment Vehicle for Retirees?

Retirement is a word that is often received with mixed feelings in the society. Some wish that it could come earlier while others do not want to retire at all. Such is the contrasting perception of life after retirement as many are caught up with it unawares, or simply, unprepared.

Yet, when you search for the phrase ‘planning for retirement’ on Google, millions of results will be listed. Isn’t that enough advice already? Unfortunately, it looks as if there is a class of people out there who still cannot get the hang of it.

Nonetheless, whether or not you get to enjoy your retirement, it all comes down to one thing. Planning for your retirement in advance and sticking to the plan. One of the best ways of planning for retirement is by investing in real estate products, which include buildings, rental offices, and stores, as well as, Trusts (REITs).

Why real estate works for retirees

When you are preparing for your retirement, you would like to invest in minimal risk assets while still protecting your principle. Real estate certainly presents that option, especially when you think of the possibility of generating passive income.

However, in order to automate those monthly checks, you will need to establish a real estate investment fund, and then open a retirement savings account. Most people choose to keep their real estate investments as individual investment vehicles. This can be tricky at times especially when it comes to keeping track of all of them as well as keeping the assets in good conditions.

As such, the smart retiree would establish a private real estate investment fund, which manages the whole portfolio of real estate assets as one. Whether you have a couple of rental stores, a few rental offices, and some residential houses, it becomes easier when incomes are lumped together and the assets’ expenses are managed as one.

After securing the revenue generation stream, then next thing would be to open a retirement savings account. If you are yet to max out your 401K, you can do that as well by directing some of the income from your retirement savings account to your 401k account.

Before you know it, you could even become a part of that class of people who seek early retirement. It is recommended that you hold your real estate assets for a significant period in order to establish a clear picture of what you should expect in the long-term. After this period, you can also decide on which ones to cash out on and the ones to keep, given your target monthly passive income and acceptable risk levels.

Most real estate investors retire before their retirement age and this gives them the freedom to do other things in life that would have been impossible if employed for 35-40 years.

Risks associated with real estate as a retirement vehicle

While real estate investments certainly guarantee a continuous flow of passive income, it would be unwise to ignore the risks that come with investing in the sector.

First, unless you are investing via a collective Real Estate Investment Trust (REIT), there is always the risk of losing your investment via natural disasters like a hurricane or fire upon which you would have to rely on your insurance provider to compensate you.

Now, we all know that when it comes to compensation, it is never a straightforward exercise as is the case of paying premiums. So it could take a while before you finally receive your compensation.

Again, while real estate income is considered passive on many grounds, this may not always be the case. At times, managing your real estate assets can be equivalent to a full-time job depending on the nature of investments.

For instance, if you have invested in managing rental houses, offices, and stores, you could only be a call away to dealing with blocked drainage systems, broken windows, and faulty electrical wirings, among other incidences. On the other hand, collecting rental payments could also be another task as some of your tenants could delay payments by as much as a couple of weeks if you are not ruthless enough.

However, in order to avoid such circumstances, it is always advisable to hire a property manager to manage your investments. This ensures that your real estate income is as passive as it should be thereby setting you for a happy retirement.

In summary, real estate is a sound investment vehicle for retirees; in fact, it is one of the best. When you compare real estate vs stocks, you would be safer opting for real estate assets as compared to the risky and highly unpredictable stock market.


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