Last Updated on Nov 17, 2022 by James W
Is real estate a good investment for retirees in their golden years? Absolutely. With a real estate investment, you gain financial security. They take the least effort, yet still allow you to earn passive income for the rest of your life.
Here’s why you should use real estate to secure your retirement:
- Real estate’s cash flow is predictable.
Cash flow is what remains after you’ve deducted mortgage payments and all operating expenses. One of the biggest benefits of real estate investment is its ability to provide steady passive income and positive cash flow.
Experts say a wise investment in real estate should be able to provide you at least six percent in cash flow. In addition, you can increase the cash flow if you invest in real estate using Self directed IRAs. Also, it opens the horizons for you to invest in different places and even fund startups to increase your income.
2. Real estate investment gives you more control.
With a real estate investment, you are your own boss. You choose which renters to rent out to and how much rent to charge them. The real estate property has many factors affecting it externally. But at the end of the day, you still call the shots.
3. There are numerous tax benefits.
There are numerous tax benefits that come with real estate investing. The IRS allows you to deduct expenses you spent for the care and maintenance of your property. Here are some of the rental property tax deductions:
- Insurance: You can deduct the premiums you paid for almost any insurance associated with your rental property.
- Casualties, loss, and theft: You can obtain a rental property tax deduction in case your rental property is damaged or destroyed.
- Homeowner association/condo dues: Although overlooked, it could save you money during tax season.
- Rental property supplies: The expenses you incur to keep your property clean for your tenants are tax deductible.
- Repairs: Examples of tax deductible repairs include: replacing broken windows, fixing leaks, fixing gutters or the roof, and repainting.
- Depreciation: You can get back the cost of real estate through depreciation.
4. It acts as a hedge against inflation.
Inflation refers to a decrease in monetary value. Prices of property and rents are greatly influenced by inflation. Thus, you buy less when inflation rises. An inflation hedge – in terms of investing – protects you from the inflation impact.
A real estate investment is considered an inflation hedge because rents usually rise during times of inflation. This isn’t the case with other investments such as stock investments.
5. Real estate appreciates its value over time
This is one of the top reasons why real estate is a good investment strategy. Although vastly dependent on your investment plans, you can invest for cash flow in the short run and appreciation in the long run.
Every year, prices of real estate properties keep increasing. Scarcity of land, supply shortages, and change in demographics are all reasons why prices are on the rise. It’s guaranteed that today’s properties will increase their value in the next decade.
6. You are able to enjoy a high degree of leverage.
According to Derek Dawson, owner of Dawson Property Management, one of the greatest benefits of real estate investing is its high leveraging potential. In the broadest sense, financial leverage refers to the use of debt to acquire assets. You’ll enjoy a high degree of leverage if you buy an investment property using a bank loan.
Once your equity position in an investment property is built up, you can leverage that investment for cash in one of two ways: refinance the original loan amounts plus the increased equity or secure a second loan against the increased equity.
7. You can give your loved ones a solid investment.
Worried about leaving your loved ones in a precarious situation? Evidence from the National Association of Realtors show that from 1968 to 2004 property, values follow a general trend of rising over time.
As such, real estate could be a great inheritance to leave your loved ones.
8. Anyone can be a local expert on real estate.
With a little bit of research, you can become an expert about real estate in your local market. You will need to know market conditions and rents, value of homes and economic conditions that exist in communities.
Having an income stream that is reasonably steady and predictable is a smart plan for retirees. It’s for this reason that investors love this type of investment.