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3 Tips for Investing in Real Estate for Retirement Income (2019 Update)

Whether you’re planning on retiring in a year, five years, or twenty years, you’re probably not looking forward to living on meager checks from the Social Security administration. Your job’s retirement plan may be good, but it’s likely not going to leave you living in the lap of luxury, either. That’s why it’s important to make the right investments now so that you can gain passive income and continue making money well after you’ve retired.

Real estate investments make sense for this because real estate is a brilliant hedge against inflation, and it’s a great source of passive income, as well. If you want to gain the most income with the least amount of effort, though, you’ll want to follow a few simple tips.

Find Truly Passive Income Streams

First of all, you may think that you want to buy, renovate, and flip houses to make more money and work on your own schedule. However, unless you put a lot of that money away and/or invest it in other areas, this is not a great way to create passive income, as you’ll need to continue flipping to keep making more money.

You may think, then, that fix-and-hold properties are the way to go because you can get great deals on distressed properties, renovate them on a budget, and then rent them out to tenants for monthly income. This is still a fairly active means of making income, at least at the beginning, but once you’ve established a relationship with a good property management firm, you can begin to relax and enjoy your monthly cash flow. A better method for a lot of people is to choose turnkey properties that require no work, often come with tenant acquisition and property management, and allow you to start collecting income from the beginning. Other good options include investing with REITs (real estate investment trusts) and/or crowdfunded real estate platforms.

Don’t Forget About Taxes

Now, whenever you sell a property at a profit, you will owe a substantial capital gains tax on that property. However, if you sell the property in order to buy another investment property, you can use a 1031 exchange to defer paying your capital gains tax indefinitely. This is something to consider when creating retirement income through real estate investments, as you cannot apply a 1031 exchange to REIT investments and some other equity investments. If you’re concerned about taxes – and you should be – talk with your financial advisors about the best options for your portfolio.

Work With Real Estate Experts and Financial Advisors

Finally, don’t try to do all of your investing on your own without any expert help or advice. First of all, you want to make sure that you’re investing in properties that have low risk levels and the kinds of rewards that will yield good monthly or quarterly cash flow now and into your retirement. This is harder than you might think if you’re new to investing and/or you don’t have a lot of experience in real estate. Plus, it’s sometimes difficult to determine how much of your assets to invest in one or more real estate developments to get the most from your capital.

When you work with a qualified real estate investing firm, you’ll have access to real estate brokers and agents, as well as financial and investment advisors who will take the time to understand your portfolio and your needs. With their help, you’ll have the best chance of making the right investments to continue making money long after you’ve retired.