How Property Investments Can Help Your Retirement Funds

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Figuring out how to have enough money to see you through retirement isn't an easy task. A lot of people fall short when it comes to retirement funds due to longer life expectancy and low savings rates. Experts predict that by 2050, retirement savings will be short about $400 trillion globally among the eight strongest economies.

There are many ways not to get caught in the shortfall and prepare for a comfortable retirement. Investing in property is one key way you can supplement your retirement income and keep money coming in even after you retire from your full-time job. Real estate is a fairly safe investment as it never goes to a zero valuation as stocks can. More than likely, your investment will appreciate.

Investing in property isn't just buying a complex and renting out apartments. There are a number of ways you can get involved in property investments.

Buy a Duplex

One easy way to set yourself up for retirement income is to buy a duplex. You live on one side and rent out the other. If you invest smart, you may even be able to completely pay your mortgage from the rental income, freeing up your preretirement income for additional investing. You can either throw all the money at that property until it's paid off or use the extra funds to invest in more real estate.

Rent Out Rooms

If you're ready to retire but find your funds are a bit short, you can always rent out extra rooms in your home. You may find that large suburban home you raised your family in isn't worth as much as you thought, and you need some extra income if you wish to remain there. Renting unused space is a great option. Make sure you understand how to draft a lease agreement you and the tenant will both sign and conduct credit and criminal background checks before letting someone into your home.

Lease Land

More people are moving to urban areas, so it might be a good idea to purchase some raw land and lease it out for farming or other undeveloped uses. You can purchase the land via your IRA fund for the most tax protection. However, there are a lot of rules surrounding this type of purchase. For example, if you need to do any work to prep the land, you will not be able to it yourself or pay for it with personal funds. Talk to a tax professional about the rules, so you don't find yourself in a pinch.

Hire a Property Manager

If you plan to invest in property and rent out units, then you may worry that will take over your free time you've so looked forward to. After all, you must maintain a rental property, seek new tenants and collect rent. There is a lot of effort in running rental properties. However, you don't have to be tied down to rental units. Instead, hire a property manager to maintain all your rentals. You'll pay them a percentage of your profits, but they will vet tenants for you and collect money automatically. There are many advantages to hiring a property manager, especially for retirees.

Invest in Real Estate Without Becoming a Landlord

You don't have to be a landlord to invest in real estate. You can invest your IRA into real estate investment companies, or you can become a silent investor for someone else wanting to become a landlord and share in their profits. Invest in REITs or crowdfunding for diversification and to get into real estate at a low price point. Group investing is attractive for someone who wants to invest in real estate but doesn't have a huge chunk of cash to buy a property, upgrade it and then rent it out.

Prepare to Weather Storms

Although real estate traditionally is a safe investment, there are housing bubbles that come into play, changes in the market and unexpected events. Understand that while real estate helps flesh out your portfolio, it shouldn't be the only source of income for your retirement. However, it's a great option if you're fully prepared before going in.

 

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Holly Welles is the editor behind The Estate Update, where she shares real estate tips and ideas for home fixes.