To say retirement planning has been an issue for Americans is a huge understatement. According to a study by GOBankingRates.com, 1 in 3 Americans has saved nothing for retirement. Unfortunately, this trend has increased throughout recent years. Back in 2014, the number was closer to 1 in 4 Americans. That number has now grown to about 33%. Why has retirement planning been so difficult for millions of Americans?
Some of the main reasons so many have been held back from saving for retirement have been student loan debt, low wages, and credit card debt.
It is apparent that retirement planning needs a totally new option. What could this much-needed option be? Real estate investing!
Real Estate Investing vs. Other Retirement Planning Options
So, why choose real estate investing as a retirement planning option ahead of other common options, like stocks? There are two main reasons why investing in real estate is a better investment for retirement planning than investing in stocks. For starters, real estate provides investors with more control over their investment, which would be an investment property in this case. The real estate property is a physical asset, which allows for more control than a stock in the stock market. You are the one who decides who the tenants will be, what the rent amount will be, and when it’s time to sell. The second reason is that real estate has less risk as a retirement option than stocks. You want to minimize risk when investing for retirement, and real estate does just that.
Benefits of Real Estate for Retirement Planning
The best part about real estate investing are its profits, which generally break down in three forms. Not only are these profits fit for a comfortable livelihood, they are perfect for retirement planning!
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Cash Flow
The most basic, yet most beneficial, form of profit in real estate investing is consistent cash flow. Cash flow is essentially the difference between your rental income and rental expenses. Therefore, it only makes sense to strive for positive cash flow when investing in real estate.
Positive cash flow is your best friend when it comes to retirement planning. It helps real estate investors become debt free in no time! It also provides high wages for real estate investors, making life much more lucrative.
Related: 5 Ways to Create a Positive Cash Flow Income Property
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Tax Benefits
Earning money is cool, but having tax deductions is probably cooler. By owning rental properties, real estate investors become eligible for different tax deductions. Most of these tax deductions deal with expenses associated with the rental property and its functions. Whatever the case may be, there’s no denying the positive impact that tax deductions have on a real estate investor’s wealth, whether it’s for retirement or career purposes.
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Equity and Appreciation
Tax deductions and cash flow are typically short-term benefits, but can act as long-term ones when saved over time, like for retirement purposes. Real estate investing also provides long-term benefits, which are excellent for retirement planning.
Equity and appreciation are the dynamic duo of long-term profits in real estate investing. Both deal with an increase in value, but in different ways. Real estate appreciation is an increase in the fair market value of an investment property over time. Equity is an increase in a real estate property’s FMV due to mortgage payments (which, intrinsically, factors in time). These increases in value are perfect for retirement planning for young-to-middle-aged real estate investors. If you buy an investment property early on, not only will you profit in the short term through cash flow and tax deductions, you will also benefit through long-term real estate appreciation and equity! With an increase in value, you can sell the investment property for double, or even more, its original cost!
Tips to Invest in Real Estate for Retirement Planning
Investing in real estate is an excellent choice for retirement planning. While it is doable and incentivizing, it is not a walk in the park. Here are some important tips for investing for retirement purposes.
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Set a Plan
Real estate investing is a business that anyone can participate in. Of course, you can’t just enter it head-on, you’ll need an investment plan. Set your budget within a reasonable range. Ask yourself how much you are able or willing to spend on an investment property. How long do you want to invest for? Is there a certain amount you would like to aim for? When financing the investment property, should you use cash or a mortgage? These real estate questions are great guidelines for setting up your investment plan.
Related: Buying an Investment Property: Cash or Mortgage?
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Do Your Research
Real estate investing is a business that requires quite a bit of research. Looking for the best investment property, for instance, is probably what needs the most research. If you’re investing locally, word-of-mouth or common advertisements can reveal just enough information to set things in motion. If you aren’t familiar with an area though, you’ll need a reliable source. Once again, Mashvisor is here to help. Using predictive analytics to help find rental properties and analyze their investment capabilities, Mashvisor helps potential real estate investors find the right properties to invest in in no time. It doesn’t matter if you’re looking for an investment property for retirement planning or not, Mashvisor will match you with the ideal property.
Related: The Use of Predictive Analytics in Real Estate Investing
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Expect the Unexpected
No matter what, there is always some sort of risk in real estate investing. You need to expect the unexpected. Sometimes, a pipe may burst without any previous symptom of malfunction. A tenant may leave abruptly, or cause damage to the rental property. Regardless of the situation, prepare yourself, especially financially, against any potential detriments to your investment property.
Real estate investing is the ultimate option for retirement planning. It generates a lot of profit, provides tax deductions, and has great resalablity. As lucrative as this method is, it requires effort. You must plan properly, research meticulously, and prepare wisely for an investment property. To get your real estate retirement planning started, begin your trial with Mashvisor and search for the ideal investment property for you!