As baby boomers approach retirement, it can become readily apparent if they’re falling short of having the necessary investments to secure their future. Perhaps their 401(k)s have taken some large hits over the past several years. Or those investments that were supposed to carry them into retirement bliss turned out to be incredible failures.
Whatever the situation, a secure retirement still could be possible for those who carefully structure real estate investments to meet future needs.
Different types of real estate and various real estate holdings could have a purpose in your portfolio. Land could be held for future expansion of a business or simply because it lies in the path of growth for the community. Many of us live in a home that’s served us well for raising a family, but also serves as a store of value. Commercial real estate houses a business or businesses that pay monthly rent. Commercial real estate also serves as a store of value. Great fortunes have been amassed by holding commercial and industrial real estate investments that bring in steady income month after month.
Even if your real estate portfolio doesn’t contain millions of dollars of investment properties that pay like clockwork, you still can position holdings to provide a cash stream for your later years.
Start by asking yourself a few questions. Are you living in a house that’s too large for your present needs? Could it be time to sell the house and move into a smaller property? Do you have enough equity in your present home to buy a small home to live in and a rental property for income? Is the land you’ve owned for years providing you with a regular cash flow? If not, is it possible to sell the land and purchase a residential rental property or two? Does your life insurance have enough cash value to pay for the purchase of a rental house? What do you plan to do with the proceeds from the sale of the family business? Where will you live in your retirement years? How will you pay for it?
If you’re still working for a living, you might be able to muster a down payment on a rental property. Remember, it’s much easier to buy real estate while you’re still working if a loan is involved. It could make sense to develop your knowledge of real estate values, find a good broker and buy properties with only positive cash flows after all expenses. Mortgage interest rates have never been lower, and now could be the best time in years to acquire properties that will pay and pay and pay, right through retirement.
If the property you’re considering won’t reasonably provide a positive cash flow at market rents, pass on that property. Sure, we could see further appreciation in property values over the years. But if the property doesn’t pay you monthly, how long will you carry it before it begins to pay you back? It’s far easier to pass on a purchase before you make it.
The greatest benefit of owning investment real estate, besides certain tax advantages, is that your tenant or tenants help you pay off the loan on the property.
Having a selection of cash-flowing properties that you own free and clear is a wonderful way to provide the cash flow to retire and leave substantial wealth to your heirs. Retirement can offer a tremendous reward for your years of hard work. Plan early enough to develop multiple cash flows and that retirement could begin sooner than you think.