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Some retirees dream of a home on a sunny part of the beach, while some want a multifamily building for investment purposes.
Unlike younger investors, retirees don't have time to waste in turning around a failed investment. Maintenance and repair of properties and unforeseen incidents like fires and hurricanes mean money out of pocket for retirees, as do unexpected vacancies and delinquent renters. In addition, real estate cannot be easily liquidated.
However, real estate investments provide monthly income from rent and dividends and can help retirees fund their lifestyles. Rents increase over time and offer tax advantages that can be a proportionate source of relief to the property owner.
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Real estate as an asset class is a good diversifier that effectively mitigates risk in well-rounded investment portfolios. Compared to company stocks that lose their value if the company files for bankruptcy, a property or real estate investment is a safer choice and has the potential to generate higher returns than the stock market.
When looking for a property to invest in, retirees should choose one that is likely to retain or increase its value, provide reliable income, and function as a good hedge against inflation.
Retirement isn't the time to actively seek get-rich schemes, so real estate investors at this age should tread carefully. Retirees interested in investing in real estate should research thoroughly and consult a financial advisor before making a commitment.
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Steve Liefschultz of Equity Bank is a seasoned real estate investor and banker. For related articles, subscribe to this blog.