Theme: Retirement Planning and Investment Properties: The Perfect Match?
September 13, 2008Donald Trump and countless other billionaires made their fortune starting in real estate investment properties. They buy in strategic areas when the market’s low and resell when the market inflates. Sometimes these transactions happen fast, like with special offers on condos that haven’t been built yet but will soon be worth double or even triple the pre-sale price. Property investments can be a practical supplemental retirement plan.
Pros of owning investment properties are obvious. Hypothetically speaking, envision owning a six-plex in a slow-changing, yet prosperous part of Atlanta where you charged each tenant $1,000. Your monthly mortgage for the building might be $3,000 but you’ll still have that extra $3,000 cushion each month. Another benefit of property investments is the generous tax kickback you may receive. If you delight in getting your lump sum tax return at the end of the year, then perhaps investing and selling properties when you need that quick chunk of cash is right for you. Also, there’s no penalty for opting out early or age regulations regarding when you can start using your earnings. You do not have to be rich or super business savvy to add property ownership into your retirement planning agenda. It’s been dubbed “the equal opportunity wealth builder.”
Cons of investment properties include the no guarantee risk. It’s also not a feasible option for everyone because of high transaction prices. Not everyone has thousands of dollars saved to make a substantial down payment. Vacancies, bad tenants, maintenance costs and property oversupply are a few of the disadvantages. Like any investment, there are lots of factors beyond your control that could affect your income. For superior guarantees, 401ks or IRAs should be included in your financial retirement planning.
Your success in real estate investment properties will depend largely on when and where you purchase. Money Magazine reported the most growth in Panama City, Florida and Washington state — cities like Olympia, Spokane and Mount Vernon. Slow-changing but profitable markets exist in Atlanta, Providence and Albuquerque. First time investors will want to avoid ex-boomtowns like Los Angeles, Santa Barbara and Las Vegas, where exorbitantly high prices make the market unsustainable. While downtown real estate can be profitable, it’s not advised for people who are simply retirement planning for some supplemental income.
Donald Trump once stated, “If you take care of the downside, the upside will take care of itself,” meaning that if you have a backup plan for anything that can go wrong, you’ll undoubtedly succeed with your real estate investment. While there are several variables, you might find investment properties to be a lucrative retirement planning idea, in addition to your 401k, pension and stocks.