Real estate is likely missing from your investment portfolio. It is not your fault the deck is stacked against you. From many investment advisors not having any desire to give advice for investments they do not earn a commission on, to the horror stories of turning into a landlord and dealing with stopped up toilets and irate tenants, investing in real estate gets pushed to the side. Though at the same time, we all know about real estate’s cash generating potential and we naturally need a piece of it.
Particularly for those nearing or in retirement, real estate can be a fantastic method to produce stable income while preserving their nest egg. It is no secret that interest rates are at historical lows. This makes the typical retirement portfolio, which is generally realigned far from value and into fixed income, not feasible unless you are comfortable with seeing your principal balance decline over time or you are willing to significantly change your lifestyle. You should not have to make that choice when real estate can help you achieve your retirement goals.
There are many ways to invest in real estate from purchasing REIT stocks to investing in Real Estate Limited Partnerships to purchasing a duplex on individually. In all occurrences, you are looking stable, tax-advantaged income with the possibility for long term thankfulness without the volatility found in the stock market. That is real enhancement that our portfolios need. Additionally, real estate can be a hedge against inflation as the Federal Reserve moves us out of this low-rate condition. Since rents rise during inflationary periods, so does the property’s income. Security yields are secured in when you buy it and the value of your money declines.
However, unlike stock investing, where being inactive and discovering low cost mutual assets or ETFs is the best way to generate the highest returns, real estate requires you to be proactive. You should be ardent in your desire to add real estate to your portfolio because no one else will tell you it is a good thought. You should figure out how to evaluate a real estate transaction yourself, but you already know how to do it. And you must decide which type of real estate investment matches your personality and how you will invest to capture the unique tax advantages afforded in real estate. Once you conclude real estate meets your need for reliable cash flow with the opportunity for appreciation, invest in it.
Below are just a few of the many tips that we have picked up during our years of investing in real estate that can help you take ownership of your portfolio and demystify real estate investing
1. Defeat your allies: In many cases, your trusted and paid advisors may recommend you maintain real estate in your portfolio altogether. They for the most part give the same tired reasons that it’s “illiquid” or “too management intensive.” Those can be valid arguments based on your specific situation, however that is not the real reason they need you to avoid real estate.
Stockbrokers do not get paid for you to invest in real estate. There’s nothing in it for them, no commissions and nothing to do. That is, unless they need you to buy a high cost non-traded REIT, however now you will know their actual motivation. You have to do your own homework to choose if the potential income from real estate is ideal for you.
2. Elementary school arithmetic: We all realize that real estate is a numbers amusement, however you might be amazed to know that you learned all of the skills necessary in primary school. To choose whether or not to pursue a potential investment, you will just need a few key formulas and nothing will be more difficult than long division. Once you have remastered these ideas, you will have the numerical tools to effectively guarantee real estate investments.
3. Use a taxable account: Why try to avoid charges by contributing through an IRA or 401k when the government provides tax advantages to real estate? Especially in the early years of a real estate investment, the cash flow that you receive may not be entirely what the IRS considers taxable income. Non-money items like depreciation and amortization serve to dramatically reduce your taxable income but have no impact on your income. Taxable losses are potentially wasted in an IRA or 401k however have great value in your taxed account.
Real estate needs to be a piece of a diversified investment portfolio, especially in retirement. By equipping yourself with the proper tools to evaluate transactions and the self-awareness to seek out real estate investments when others tell you not to, you will take ownership of your investment future.
MD Properties LLC - Qatar