The IRS reports that 10.6 million Americans claimed rental property income on their 2020 taxes. People purchase rental properties to make money. However, some people buy them as a retirement investment.
Is investing in real estate a good retirement plan? The answer is yes. Of course, every financial planner also suggests diversification.
Are you looking for an effective retirement investment? Then, check out this guide, which explains the benefits of investing in real estate for retirement.
Real Estate Appreciates in Value
Investing is a significant part of planning for retirement. However, the best investments appreciate in value. In other words, if you invest $100 today, an excellent investment will give you much more than that in 10 or 20 years.
Real estate has this quality. It appreciates in value with time. For example, a property you buy for $200,000 today might be worth $300,000 in 20 years.
Investing in real estate has minimal risks in terms of value. It almost always increases in value with time. Thus, it's an ideal retirement investment.
It Provides a Passive Income
You can make money from real estate in several ways. The primary method is rent payments.
The downside to owning rental properties is the landlord responsibilities you assume. Fortunately, you can hire a property manager to manage it. Then, you'll earn passive income.
Passive income lets you earn money without doing any work.
It Pays for Itself
The best type of investment is one that pays for itself. A real estate investment meets this quality. You must borrow money to buy rental properties, but your tenants pay you to live there.
If you can find long-term tenants, you'll have a guaranteed cash flow. As a result, the cash coming in pays the bills, including the mortgage.
Once you pay off the mortgage, you'll get to keep much of the cash you receive.
Real Estate Is Liquid
Financial planners recommend investing in multiple ways. They call this concept diversification, and planners often discuss an investment's liquidity.
Liquidity tells you how difficult it is to turn an investment into cash. Real estate isn't the most liquid investment you can buy. However, it's semi-liquid.
You can turn real estate into cash by selling it. The downside is that finding a buyer might take a few months.
You Get Tax Benefits With Real Estate
Owning a rental property business also provides tax benefits. For example, you can write off the expenses you pay for your rental units. Then, the expenses reduce your taxable income.
Financial retirement planning requires finding ways to reduce your taxes. Fortunately, real estate investments provide this opportunity.
Invest in Real Estate for Your Retirement
Imagine if you bought real estate today for your retirement. Depending on your age, you might pay off the properties by the time you retire. Then, you'll have a steady income stream of cash.
Contact us if you're considering buying property in Las Vegas. We offer property management services and can help you earn a passive income from your properties.
Bonnie is the visionary that has driven the company and culture of Avalon since 1993. Her passion is improving procedures and practices; incorporating technology and value added services for both our clients and tenants.