Retirement Investing

Real Estate Retirement Investment Essentials

Investing in real estate for retirement is one approach that has historically proven to be an effective wealth generation strategy. In fact, the annual BRW top 500 wealth list indicates that more millionaires have been created through property investment than any other form of investment strategy. Building a retirement real estate portfolio affords an individual the opportunity to invest for capital appreciation, taxation benefits and cash flow income generation.

The general approach to real estate retirement investing is to purchase a property and use the rental income to finance the loan. Initially, unless the property is cash flow positive, the investor is required to meet the loan repayment shortfall by subsidizing through income or savings repayments. Over time, the repayments constitute equity in the home. Inflation and capital growth have historically contributed to rising property values. After several years, the purchaser has acquired equity in the property. Rent increase to coincide with market fair value can produce positive cash flow above the mortgage commitments. This equity and the positive cash flow contributes to total investor returns. Enthusiastic property investors then use the additional funds and property equity to purchase additional properties for their portfolio.

When retirement approaches, individuals have accumulated a property portfolio that can potentially provide a nice steady cash flow to meet retirement expenses. This is known as the income approach for real estate investment. The option to sell existing property also provides the potential to realize lump sum capital gains. The full extent of retirement real estate investing depends on taxation and property laws which vary from jurisdiction and country. The basic mechanics of real estate investing remain the same. To be fully knowledgeable, the individual has to be aware of property and taxation laws at the local level.

Active real estate retirement investing can also provide the opportunity to purchase run down properties at reduced market rates. The prevailing theory is that by making cosmetic and structural improvements, a higher rental return above initial financing costs can produce a potential cash flow positive return. This is just one approach to residential investment for retirement (real estate investment investing).

Real estate investment funds and mutual funds are also a way to gain exposure to the property market. These funds acquire steady property portfolios that provide investor upside to market growth with the potential for dividend payout. Property professionals manage these funds and they diversify on a domestic and international scale. Investors can purchase units in these funds without the need to understand property investment mechanics. The units can be bought and sold and are considered more liquid than the bricks and mortar counterpart.

Knowledge about real estate retirement investing can be attained by attending seminars and reading books. There are many good introductory sources to real estate investing.

Contact Us | Privacy Policy