Saving for retirement can be stressful, especially considering the current economic situation. Experts recommend diversifying your savings across different types of accounts, but there are other ways to create additional security when you retire through real estate investments. With lower mortgage rates and legislature passed in the CARES Act, now might even be a great time time to start diversifying your retirement plans. Today we are going to examine the ways that real estate investment can help you in retirement.
What does a real estate investment do?
Real estate investments create passive income, which can help stretch out your retirement savings, and even create more security if economic situations change. Some people who create enough passive income streams can rely solely on that for the majority of their monthly income and save their retirement savings for emergencies or other purposes. Being savvy about creating passive income through real estate can help you utilize additional property you may already own.
Types of real estate investments
Most people may think of renting out a traditional single-family residence for creating passive income, but there are multiple types of rentals. You can create more stable, long-term rental passive income through commercial buildings, retail properties, multi-family units, and apartment complexes. You may also be able to utilize smaller properties or pieces of land in prime vacation areas to create passive income through short-term rentals, although keep in mind that this income tends to be higher risk (although high reward), seasonal, and more involved unless you use a property management company.
Creating two or more streams of rental units through passive income helps mitigate missed income from repairs, renovations, and vacant properties between renters. As you can imagine, the more streams, the more stability comes with your passive income. While apartment complexes and multi-family units might offer you the best stability, you can still look at ways of converting larger single family residences into multiple units following local guidelines. You may also want to keep in mind the cost of utilizing a property management company, especially so that you can enjoy the best years.
Current mortgage rates and the CARES Act
Right now, mortgage rates are the lowest they have ever been, which may make buying a multi-family building more reasonable. Especially if you are willing to live in one unit and rent out the rest, this could be an opportunity for first-time homeowners to step into retirement diversification and passive income streams early on.
The CARES act also gives provisions to allow people to withdraw money from their 401(k) or IRA’s before the appointed age with the traditional 10% penalty being waived for the rest of 2020. In addition, you have three years to pay income taxes on your distributions. In addition, you can also take a loan out of these accounts, allowing you to borrow 100% of your account up to $100,000 vs the usual 50% up to $50,000. While normally touching the money available in your 401(k) or IRA is considered a poor financial choice due to the restrictions in place, this temporary loosening could be a potentially smart decision if utilized towards creating a means of passive income.
Where do I get started?
Interested in learning more about diversifying your retirement investments through real estate? Talk to your local Real Estate Agent about your goals and needs. They can help you find the best properties, connect you with property management companies, and aid in calculate best mortgage plans. Your local real estate agents can also help you navigate the new laws in place to figure out what works best for your situation.
Live in the Southern Maine area? You can always each out to the experts at the Real Estate Store to find out more!