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12 Real Estate Investment Strategies for Retirement Planning

November 29, 2023

Investing in real estate is a great way to generate income, whether you are one year away from retirement or just starting your career. Even when the market fluctuates, housing is usually always in demand. As with any investment, real estate does not guarantee a profit, but there are ways to minimize your risks and maximize your gains so you can have an extra source of income, now and during retirement. Here are 12 real estate investment strategies to consider.

1. Buy And Hold Residential Properties

The first strategy requires long-term planning, but it is the simplest way to slowly acquire generational wealth. Buy single-family homes, condos, multifamily residences, or apartment buildings to rent.

Many landlords use the equity in their residences to get started, but that may not be enough, depending on the investment and where you live. If that’s the case, find a lender who specializes in investment property loans to help you finance your first property.

The goal is to pay off the mortgages for these residential properties before retirement. That way, all the money you earn every month is profit.

2. Go Commercial

You may also consider investing in commercial properties, including retail spaces, offices, or industrial buildings. The benefit of these properties is that they provide longer, more stable tenants, but they can be tricky. COVID sent employees home to work, and many commercial buildings remain empty.

3. Real Estate Investment Trusts

Another way to plan for retirement is to invest in a real estate investment trust, which is like the stock market, but focused on real estate. Select a trust, and invest any amount you choose. The benefit of this investment is that you don’t have to manage any property. In addition, real estate investment trusts often pay dividends — passive income you can take straight to the bank.

4. Flip Houses

If you have time and cash to spare, flipping properties can jump-start a real estate investment portfolio. The process is straightforward: Buy undervalued properties, renovate them, and sell them. This isn’t a long-term strategy, but it’s an excellent way to get a foot in the door when planning for retirement.

If you, like many others working a full-time job, aren’t handy and are not looking to invest your time in home improvement, a flip is probably not for you.

5. Invest In Vacation Rentals

Some Americans move permanently when they retire, but others simply want a vacation home. In the latter case, consider investing in a vacation rental that can be used to generate retirement income when you’re not there.

This strategy is best if you live in, or plan to purchase a home in, a popular tourist destination. Vacation rentals can be listed on a variety of rental platforms, such as Airbnb or VRBO. However, this strategy does come with considerable property management, and you may have less access to your vacation home during prime rental periods.

6. Join Crowdfunded Real Estate Investments

Crowdfunding has been used to pay for everything from medical bills to college funds, so it makes sense that real estate investors are jumping on that bandwagon, too. The collective purchasing power increases when many people invest just a few dollars each. Like real estate investment trusts, crowdfunding is another way to invest in commercial property and larger residential projects without having to pay a lot of money upfront or take on a lot of management responsibilities.

7. Share A Multifamily Property

Sharing a multifamily property reduces living expenses and generates income. For example, if you buy a duplex and live on one side while renting the other, chances are good your renters will pay a significant chunk of the mortgage on that property.

This method can also be combined with other real estate investment strategies for retirement. If you purchase a multifamily property in a hot vacation area, you’ll have a vacation home and a profitable rental at the same time. Increase your return on investment by purchasing an undervalued property and renovating it, one unit at a time. These renovations can boost your monthly rental fee.

If your rentals aren’t generating as much money as you expected, you may want to consider selling. If you need to sell a property without hassle, companies that buy houses for cash are a great way to offload underperforming real estate quickly.

8. Invest In Raw Land

Investing in land is a unique long-term strategy that many people don’t consider, but the gains can be significant. Raw land is a finite resource, and as cities spread from their center, real estate developers will be looking for large tracts on the outskirts of town. Use a real estate investing app to find and manage potential properties.

9. Look At Lease Options

Leasing a property with the intention of buying it after a set period of time is another excellent strategy for investors starting with a small amount of money. It’s a good way to invest when you’re not quite ready for ownership, but the potential for appreciation exists.

10. Pay Off Tax Liens

Many cities send real estate to auction when an owner can’t pay a property’s overdue taxes. If you don’t want to manage a property, paying off a tax lien and holding the deed allows you to collect interest on the debt. This takes the burden off the local municipality but places it squarely on your shoulders. Investors who start with this option often end up owning the property. If you feel confident in your ability to manage a property, this might be a way to get started with real estate investing.

11. Become A Private Mortgage Lender

Private mortgage lenders offer funds to other real estate investors. Interest on the money you lend becomes a regular income stream, but only if the borrowers are reliable.

This is a risky strategy that should not be undertaken by people who have limited funds or are inexperienced with real estate investing. Americans who want to bolster their retirement income should have enough money saved before becoming private mortgage lenders.

12. Buy An Investment Property With Family Or Friends

Investing in a property with a family or friend might be a good strategy if you’ve sold a home and are looking for another investment. Paying capital gains tax on a home sale can be costly. If you invest those gains in another property following the rules of a 1031 exchange, those taxes can be deferred.

Investing in a property with a family member can benefit both parties. It allows you to invest in a property with less money upfront, but it can be risky relationally and financially if there are disagreements. Make sure a lawyer lays out the arrangement.

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