7 Retirement Real Estate Investing FAQs by Shelton & Tiffany Brown

We’ve all heard the worst-case scenarios: pensions and Social Security benefits are on less-than-solid financial footing, and they may not provide the steady retirement income needed for your golden years.

You might even be considering an alternative approach to retirement income and thinking about devising a retirement real estate investing strategy to give you solid streams of passive income — and avoid the roller-coaster of 401(k) plans which may or may not provide the financial foundation you need later in life.

You might also be wondering what exactly retirement real estate investing looks like. What are the pros and cons? And how can investors develop an effective strategy to prepare for retirement, especially when it comes to finances?

Here are four retirement real estate investing strategies to consider in this often lucrative (though somewhat intimidating) form of passive income generation.

Retirement Real Estate Investing Made Simple

What the heck is retirement real estate investing?

Retirement real estate investing is simply the process by which you accumulate real estate assets for the purpose of providing streams of passive income before or during your retirement years.

How does this approach differ from typical real estate investing?

While real estate investing as a wealth-building strategy on the whole focuses on different areas of cash generation — such as wholesaling, rehabbing, and the acquisition of rental properties — real estate investing in a retirement context usually is centered on just one branch of this technique: the accumulation of buy-andhold rental properties that bring in consistent cash flow (without having to expend any additional effort).

Which types of real estate investments are available to supplement your retirement income?

We are glad you asked! Contrary to what many people think, retirement investing with real estate is not limited to acquiring single-family homes. There are other options used to build passive income wealth for retirement. Other types of real estate such as commercial properties, multi-family units, apartments as well as real estate investment trusts make for an awesome addition to your portfolio. The key, as with all areas of investing, is to diversify your assets and ensure you keep an eye on all the areas of your financial operations. With any of these options, you should work with a trusted real estate professional.

Let’s talk about the most popular one first, single-family homes. You can reap the benefits of owning a home in two ways:

• Fix and Flip: This is a very popular method to quickly collect funds for your retirement. It involves the purchase of a home, making repairs and updates, then selling it for a profit. Repairs may take several months to complete, but once your sale is done, the proceeds are paid to you in one lump sum. You can save the money or reinvest it into another deal to grow your retirement nest egg.

• Rental Property: It’s no secret that real estate continues to appreciate or increase in value over time. That means that what you buy today should be worth more tomorrow. If you choose to buy property and lease it out, you can price it to cover the mortgage expenses plus an additional income for yourself. Instead of receiving one big payout, you would be receiving monthly payments from your tenant(s).

Commercial property is also becoming a popular tool in real estate investments. Acquisition of the property can be similar to residential, but there are some differences.

What makes real estate investing such a powerful retirement strategy?

Aside from the expected passive income cashflow — which we will tackle in just a moment — there are three key advantages that retirement real estate investing has over other investing strategies, such as investing in the stock market or building up the coffers of your 401(k).

• There are huge tax advantages with owning rental properties, including the cost of repairs, depreciation, interest and travel. If set up properly, your real estate investing business can help reduce your tax liability in the form of write-offs and can save you from many of the needless fees that accompany many other forms of generating income for retirement, such as investing in the stock market or contributing to a 401(k).

• Pay off the mortgage of your rental property — with other people’s money! Namely the rent paid by a tenant. The patient real estate investor realizes if they plan accordingly, and let simple compound interest take over, that they can (over the course of a few years) acquire a powerful passive income stream, with little or no money out-of-pocket.

• Real estate appreciates in value. It is not 100% guaranteed due to unpredictable fluctuations in market value, but if you choose a suitable, and invest in a solid property with potential, then you are more than likely to not only see an increase in cash flow, but also, net worth.

How is somebody supposed to live in retirement on $200/month?

There are two key things to keep in mind about passive income retirement investing from a real estate perspective:

• That $400/month approximation is based on a per rental unit basis, not per property. Meaning if you have a commercial property or apartment complex you own, with multiple units, then you have potential for much more than $400/month in passive income.

• The goal is to acquire a portfolio of rental properties that provide retirement income that in the aggregate will help you reach your retirement income goals. This not only keeps you diversified financially, but helps make the goal much more attainable.

What is the best way to get started with retirement investing in real estate?

There is a simple answer: Prepare yourself. Develop your knowledge and skill set as a real estate investing entrepreneur. Make sure you have access to the funds that you will need to get started. Talk to a lender and find out what their requirements are before you retire if you plan to finance the deal. You may need to show a solid employment history and proof of income to qualify for a loan. When you are ready, and you feel you have the requisite resources, dip your toe in the water. While there is no guarantee of return with any type of investing, but if you stick with it — and remain patient until your abilities match your ambition — realizing your dream of steady, predictable income might be closer than you think.

Written by Shelton & Tiffany Brown ACTHR, Inc. The Legacy Resource Group sheltonbrown@acthrinc.com