8 Ways to Invest in Real Estate for Retirement

Real estate is one of the soundest investments you can make, and it is nonetheless one of the most lucrative. Those entering retirement can use real estate in a variety of ways to preserve and build upon their wealth, with opportunities to generate cash income as well. Read on to learn more if you’re considering real estate as an investment for your retirement.

Strictly speaking, your primary residence isn’t an investment, as its main purpose is to provide you with a comfortable place to live. Nevertheless, if you’re deciding between renting or leasing for the foreseeable future versus owning your own home, this decision will have a significant impact on your finances. Owning a home allows you to put your income into equity in your own property, as opposed to just paying rent to someone else. From there, your home is an asset that you can sell, rent out, or borrow against as needed. Home prices tend to appreciate over the long term, allowing many homeowners to grow their wealth passively over time. If you’re looking at homes for sale in Gloucester, MA, or other popular cities, the prestigious location will be a boon to your home’s value and allure.

Beyond owning one’s residence, owning a rental property is one of the most common tactics for building wealth through real estate. A rental property can provide you with regular monthly income, and it also serves as a long-term store of value that can be liquidated later on.

You can manage a rental property yourself or work with a property management company to handle the logistics of management and upkeep. If you own multiple rentals or you purchase a multi-unit property, coordinating with a property management company will provide more effective service to your tenants while not filling your own schedule with these responsibilities.

In order to diversify their portfolios and achieve more considerable gains, many real estate investors favor commercial properties as a way to generate income. Commercial properties vary widely, from small storefronts to spacious office buildings and residential developments. Whatever the type, owning commercial property offers many benefits, as you can earn a regular, steady, and predictable cash income while the value of your property appreciates over time.

Second homes and vacation homes are another way of approaching real estate as an investment strategy. You may own a second home or vacation home that you use for some part of the year and rent out for other portions of the year to generate passive income. According to the IRS, a vacation home can be rented out for a maximum of 14 nights in a year and still be classed as a personal residence. Alternatively, you may own a second home strictly as a rental property.

Short-term rentals are another way of renting out your residential property, second home, or vacation home. Whereas you may rent out a residential property on a yearly lease or rent out your vacation home for up to 14 days, short-term rentals may be rented out for as little as a single overnight stay. While this approach to investment requires much more active engagement than most other approaches to real estate, it is also highly lucrative. As an example, the same property that could be rented out for $1,000 per month on a long-term basis might be rented out for $100 per night (roughly $3,000 per month) on a short-term rental platform.

A variety of short-term rental platforms are available in order to facilitate real estate owners finding short-term tenants. In addition to renting out entire properties, homeowners will sometimes rent out only a portion of their property, such as a backhouse or a mother-in-law suite. Some short-term rental platforms also allow you to rent out a campsite or a plot of land.

Real estate investment trusts (REITs) allow you to gain regular dividends from real estate without having to physically own and manage the properties yourself. While REITs can be a great way to diversify your portfolio, owning physical homes is still one of the most lucrative ways to engage with the market.

The idea of digitally investing in a tangible, physical asset will undoubtedly raise some questions, but this is certainly a solid option in the Information Age. In addition to REITs, there are a variety of products, platforms, and financial instruments that investors use to trade real estate digitally. Some are better than others, so do your homework before putting any serious money into a digital investing platform.

One good thing about digitally investing in real estate is that it opens up the possibility of fractional real estate ownership. Just as you could own a fraction of a share in a company on some stock investing platforms, it is possible to own a fraction of a real estate investment. As you might imagine, this can be a fitting option for those without the financial resources to purchase property by the traditional means. However, if you want great returns on your investments while maintaining a high degree of control over them, you will likely get more out of owning physical properties as opposed to digital investing.

Flipping, the act of buying and reselling a home, is a popular real estate income strategy. However, this is also a highly active tactic in which you must become involved in the renovation planning and implementation, so this approach may not be ideal for many retirement planning purposes. If you are interested, however, you could potentially get involved by buying homes and reselling them after renovations and repairs are completed by a team you hire. If you go this route, be sure to focus on renovation projects that are likely to have a strong return on investment when it comes time to sell.

If you’re serious about investing in your future, you’ll want to have the best guidance and representation on your side. Louise Touchette is a high-performing Realtor® who works with buyers, sellers, and investors throughout the most alluring cities in Massachusetts, including Gloucester, MA, real estate. Contact Louise Touchette today to successfully plan for your future and reach your goals.

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