There was a time when retirement took a familiar form for most people. Until relatively recently, most retirees were expected to stop work altogether and slow down the pace of life. But this doesn’t really reflect the current reality. Only around 38% of Boomers expect to receive a pension and even with a Social Security check, most don’t have enough income to be comfortable.
Many women of retirement age and close to it are considering alternative options. Among these is real estate investment. Whether as a fix-it and flip-it project or as part of a rental portfolio, property investment can make for a fascinating and lucrative prospect.
Let’s take a look at a few of the ways you can get off to a positive start in this field.
At some point, everyone is new to real estate. This isn’t a barrier to you making lucrative investments. However, this is not to say you should just dive in. Take the time to educate yourself in a few key areas. This empowers you to make more informed decisions about the properties you invest in and your path moving forward.
Some of the key aspects include:
Much like when you’re buying a home to live in, you need to be cognizant of how the condition of the property can impact your investment. This isn’t just about the big, obvious structural elements or the updates you’ll need to make. You also need to become familiar with the early warning signs of issues that could become expensive or hazardous problems down the line.
Mold can be particularly difficult to pinpoint and without knowing the signs this could lead to health issues for tenants and expensive structural repairs. Take the time to learn about the sights, sounds, and even smells of various potential problem areas. This not only helps you avoid disaster, but it can also inform negotiations during purchasing so you get the most out of your investment.
If you’re planning to invest in real estate as rental properties, it is not enough to educate yourself on the best approach to property purchase or the fine points of practical renovation. You will have distinct responsibilities to your tenants. For the most part, this will involve keeping the property in good order and committing to certain types of maintenance, like pest control.
You’ll also have financial responsibilities for reporting to the Internal Revenue Service (IRS). This will vary from state to state, so it’s important to look into the most relevant regulations for your area.
Any investment requires focus on the flow of your finances. Building an appropriate budget may seem like a basic step, but mistakes here can result in more than you making up the shortfall. It could result in you losing the money you rely on to get you through your retirement years. You need to start thinking of your property investments as though you’re operating a small business.
This begins with a projection of profits and expenses. Look at how much you can realistically afford to invest in your property. Think about how much profit you would need to make on the investment in order for it to return sufficient retirement funds. Though it may take longer to build up a significant return, it’s generally wiser to start small with your first investment property.
This is particularly true if you’re planning to renovate it and flip it for profit. If you have several years before you plan to retire, you can build up gradually. Roll the profit from smaller sales into larger properties.
An important part of making an effective budget for your real estate investment is recognizing where there can be hidden costs. For instance, if you’re taking out a mortgage, the down payment required for an investment property is usually much higher than for a house you plan to live in.
However, it’s important to remember the costs you may face go beyond those related to the price of the house or loans. Take the time to review resources on practical ways to address less obvious elements like escrow payments, closing costs, and property taxes. These can be easily overlooked but can trip up new property investors and decimate your budget.
One element of investing in real estate that can be both positive and challenging is the need to be cognizant of the housing market. It can certainly take a significant amount of research to keep on top of — and understand — the fluctuations. But it is also one of your most important tools to have control over your investment. As such, to kickstart your real estate investing effectively, you need to establish a habit of monitoring the market.
There will certainly be elements that affect the nationwide market. This could be supply chain issues or general inventory shortages. But your best approach is to pay the closest attention to the local markets. Keep an eye on the sale and rental prices of similar properties. Review news sites for where attractive amenities are being developed. This can indicate good geographical focuses for expanding your investment portfolio or even selling at the peak time.
As with any retirement investment, it can be useful to get advice from experts. You may be able to do this by engaging with a local real estate business specializing in handling investment properties. Although, it is often more meaningful to become an active participant in your local real estate landscape. Attend city development meetings and do some networking. Developing meaningful relationships can be your best route to understanding and following the market.
Real estate investment can both be a good source of retirement funding and an interesting post-work focus. It’s certainly not easy, though, and it’s worth taking the time to educate yourself on key areas. Building a budget and being cognizant of your local housing market are key tools in your initial and ongoing success. As with any investment, it can be risky. But these steps can help give you a chance for a positive experience.