When most people think about supplementing their retirement, they look to traditional stocks and bonds. However, for those with a bit of related experience, Real Estate Income Properties can be an excellent alternative to the standard portfolio.
While it may not be for everyone, the 2015 market presents a unique opportunity for building long-term wealth. Here is why we believe real estate deserves a place in your retirement plan:
1. Higher Potential Returns
A sound real estate investment can produce significantly higher returns than many traditional paper assets. In today’s 2015 market, a well-located property in a good area should be able to return at least 8% on your investment. In fact, that number could be even higher if you have the skills to manage the property yourself.
2. The Power of "Depreciation"
One of the most significant advantages of investment property is a tax deduction called depreciation. This allows you to deduct the value of the building (though not the land) over 27.5 years on your Federal Tax return. This is a powerful "phantom expense" that lowers your taxable income—a benefit you won't find on your personal residence or a standard stock portfolio.
3. Consistent Cash Flow
The biggest advantage of real estate is cash flow. This is the amount of monthly rental income that remains after all your expenses (mortgage, insurance, taxes, and maintenance) are paid. Unlike waiting for a stock to appreciate, rental properties provide a steady stream of "liquid" income that can directly fund your retirement lifestyle.
4. Managing Your Investment
With the advancements in management software we are seeing in 2015, keeping track of your rentals is becoming much easier. However, without prior experience, I wouldn’t recommend jumping in without seeking sound advice from professionals who work in this market every day.
The Bottom Line
Real estate is a tangible asset that offers stability, tax breaks, and consistent income. It is certainly something every serious pre-retiree should look into and consider as a pillar of their financial future.
