Especially if you have multiple properties to be concerned with, retirement may be the time to consolidate. Read on to learn about the financial burden and risk
Truthfully, real estate investment and owning multiple properties are really popular as investing tools. As of 2018, the main motivations for investing in real estate are asset class diversification, higher income than other asset classes, and higher yield relative to other assets.
However, once you hit retirement time, it could be more of a burden than an asset. Especially if you have multiple properties that you regularly concern yourself with, retirement may be the opportunity to consolidate.
If you want to know the truth about the financial burden and risk of real estate and retirement, you’ve come to the right place.
Use Real Estate to Supplement Retirement Income
Even with its ups and downs, the real estate market is a tremendous way to invest your money. In early years, you use rental income to put back into the property itself, in the form of mortgage payments, upkeep, and renovations.
Once you get to retirement age, most – if not all – of your properties will be owned outright. This means, other than general maintenance, the majority of your income is pure profit. Cha-ching!
The only hassle is dealing with tenants. If you have awesome, longstanding people staying in your properties, this shouldn’t be a big deal. In contrast, if you continue to play the tenant Merry-Go-Round you’ll end up getting sick (something you don’t want to be in retirement).
Of course, you kept these investments because you were playing the long run. You wanted to reap the benefits of owning various pieces of property to cash in on them in the future. Retirement is here, which means the future is here – you expect to get paid for your efforts.
There are numerous ways to bank on your high-reward investment. Some of the options will cause you unnecessary stress and unwarranted grief. Other choices actually ease your situation completely, making retirement a breeze.
You baby boomers were smart: You knew your retirement income wouldn’t be enough on its own. So you used real estate to eliminate the financial burden of affording retirement. Now its time to get rid of the mental burden and risk of owning multiple properties.
Simplify Your Real Estate Strategy to Avoid a Headache
With many houses or apartments or condos comes much responsibility. Making sure tenants pay, maintaining all of the establishments, keeping up with code…it’s quite the task sheet, especially in retirement.
Simplification is the answer. Reduce or consolidate the number of properties you manage. You get to sell some of your investments for a lucrative profit while keeping those that have sentimental value or amazing tenants.
You can also transfer deeds to children, create LLCs for each of the properties, or put them in a revocable trust. Whatever you decide, make sure it makes the most sense for your estate and retirement situation. Plan it out with a wealth advisor and an attorney for the best possible strategy.
Sometimes It’s Easier to Sell
If it gets to be too daunting of a task, there’s no problem in liquidating your assets. The important thing is, once you do, to put those assets into another investment vehicle.
As a result of multiple properties, the financial burden then becomes deciding what else to put your money into. Trusts, wills, and other investment accounts are available to most everyone. This simplifies your retirement income and also helps you accurately depict your risk aversion.
When in doubt – and if the market is right – sell your physical properties and plan for a new chapter in your investment career.
Downsizing Your Own Living Situation as an Asset
Sometimes it makes sense to change your own living scenario. You can do this by moving into an apartment, condo, or other living situation and renting out your previous residence. This adds another property (while also adding another expense: Your own rent).
You don’t want to cause yourself extra stress by staying in a house or living situation where it’s too big to keep clean. That’s where downsizing offers a solution and another real estate asset if you want. Of course, you can always sell your current residence and use the money to fund your new residence and other investments.
Commercial real estate has become a great choice for investment. Many financial experts actually claim these opportunities to be better than residential real estate.
This type of investment provides you with additional cash flow, economies of scale, and an overall bigger payoff. Plus, it helps reduce the financial burden of owning multiple real estate properties.
A decent investment avenue to look into would be selling all of your residential properties in exchange for commercial real estate properties. The open playing field and more trustworthy businesses who will use your property make for a less-stressful relationship.
Use a Property Management Service
For commercial real estate especially, and sometimes residential, property management services do all of the heavy lifting while you sit back and profit in your later years.
They manage the day-to-day management of real estate properties. The wonderful aspect of these services is that they’re tax deductible against the income gained from your properties that are managed. The common kinds of real estate property management services help in operating are apartment complexes, office buildings, and retail malls.
When you aren’t close to your properties and tired of dealing with tenants and building maintenance, property management services come in. So kick back and relax – your investments are taken care of.
Reduce the Financial Burden Real Estate Could Have on Your Retirement
While it will continue to be a lucrative endeavor in your later years, the cons start to outweigh the pros with real estate. Set a plan for your retirement years to consolidate, downsize, and even sell your properties. Sentimental feelings aside, you’ll be better off with an easier approach to retirement investing.
And retirement should be about taking a load off and relaxing, right? Don’t give yourself this financial burden. Simplify and live your best life in retirement.
For more information and help on everything real estate, from showing your property to qualifying tenants, take a look at Grand Living Realty’s management services.
Article by Multiple Media Marketing