Most retirees live off a combination of Social Security payments and their own retirement savings. However, the problem with living on a fixed income is that inflation can reduce your purchasing power.
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To mitigate this risk, most retirees can benefit from generating some kind of passive income as a side business. Real estate investment is a good example. However, there are many types of real estate investments, and the one that is most suitable for you depends on your own needs, financial situation, and ability to handle risk.
Here’s a look at some of the most popular real estate investments you can pay off in retirement.
your personal residence
Your own home is the most accessible and understandable real estate investment. By the time you retire, there’s a good chance you’ll have paid off your mortgage on your primary residence. This puts you in a great position to leverage your home equity for additional income.
For some retirees, a reverse mortgage is a way to generate income in retirement, while others may prefer to keep their homes smaller and take out stock for living expenses or investment purposes.
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Properties that can be inverted
If you’re a more active investor, you can buy Fixer Upper properties after retirement and resell them for a profit. risk of For starters, you’ll need to pay maintenance costs such as a mortgage while you try to improve and sell your property. However, it is possible that the property cannot be sold at a high enough price to generate a profit.
On the other hand, property repairs and resales, if done properly, can provide immediate income after retirement. But you need to understand your market and the true costs involved in renovating your property to maximize your chances of success.
Villas that can be rented out
Buying a vacation home in a hot resort area can generate a lot of short-term rental income if you buy it in a good location. There is a possibility. But if you don’t want to be your own onsite manager, you’ll need to consider the costs of maintaining and marketing short-term rental units, as well as the costs of a property management company. You should also make sure you buy your vacation home in an area that shows regular and consistent demand.
Rental housing for long-term residents
If managing short-term rentals seems too time consuming or uncertain, another option is to purchase residential properties that can be leased to tenants for the long term. This usually reduces your monthly income. However, the trade-off is that it’s typically a lot less hassle than overnight property handover and provides consistent long-term income. For many retirees, this certainty outweighs the potential for higher nightly earnings.
Lots that can be sold to developers
A vacant lot is a real estate investment with both higher risk and higher reward potential. Vacant lots are notoriously difficult to sell. But if you can buy in the right location and catch the developer’s eye, you may be able to get a great return on your investment. It can change to anything, even retail stores, and both are very lucrative. The risk is that you can’t take down the vacant lot and are stuck paying mortgages on non-income-generating properties.
Commercial properties available for rent to name brand tenants
Beyond residential property and vacant lots, commercial real estate offers another way to generate additional income after retirement. Commercial properties typically require long-term leases, and attractive locations often attract name-brand tenants. These types of tenants can provide consistent long-term revenue streams, and well-located commercial properties often increase in value.
Real estate investment trust (REIT)
A real estate investment trust is a listed investment company that can own a wide variety of properties. Some of his REITs are equity-oriented and aimed at generating capital gains, while others serve primarily as a revenue vehicle. There are many different types of REITs, and you can own dozens of properties, from storage units to office buildings and everything in between. The most liquid way to invest in real estate as he can sell his REIT shares at any time on the open market.
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This article originally appeared on GOBankingRates.com: 7 Real Estate Investments That Will Pay You Back in Retirement
The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.
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