Over the years we’ve seen brick and mortar provide huge return for lots of people, thus persuading them to look at their property or home as their personal pension. There are crystal-clear reasons for wishing to depend on property, either buy-to-let or main residence, and thus make sure your lifestyle is well-funded before you retire. One of the main benefits of property is the tangible characteristic, which makes it completely different from stocks, shares or bonds. It is an appealing form of investment because it is physically owned, as opposite to the general notion of ownership in alternative assets.
Be aware of hidden costs
Every property owners must know that selling or buying property comes at a cost – survey fees, legal costs, real estate agency fees, realtor fees, etc. Furthermore, there are specific annual costs for maintenance and legal safety certificates. Make sure you know about these otherwise you might end up seeing lower returns.
In spite of the costs involved, the average individual still sees property as a worthy form of investing or saving for retirement. As opposite to pensions, you cash is not locked until you reach your retirement age. Healthy income and stable returns from residential or commercial property is an appealing alternative for those concerned about the stock market’s volatility. Nonetheless, property is a form of investment, and one must be aware that hidden costs and potential pitfalls may arise.
The benefits of owning property
When investing in property for retirement, owners must look at the bigger picture first. At the end of 2012 it has rendered an annual return of 11.2% compared to additional forms of investment such as bonds (7.6%) and equities (5.1%). Nevertheless, the price increase of real estate has had a great influence on the real estate market, both in Europe and in the US. Experts claim that residential property in particular is booming.
Smart retirees know that there’s more to property investing than meets the eye. Apart from owning a home and paying off a mortgage until you can become an owner, there are additional forms of investment only savvy investors might be willing to consider. House flipping is one of them, as well as renting. But then again either of the two options are easy. House flipping involves additional costs – which many can’t afford, whereas becoming a lender involves taking responsibility.
As soon as you’ve decided on a form of investment after retirement, the next step is to focus your attention on building up a portfolio. Making decisions is challenging, and if you don’t have a global view of the economy you won’t be able to do alone and make sensible choices. Should you consult with a financial institutions to help you get started? The decision is yours. Truth be told, very few retirees are financial gurus, and many rely on their property to live comfortably in their 70s. Of course, there are other options you might want to consider.
Retirement income funds, for example, are a form of specialized mutual fund. This form of investment automatically allots your cash across a multi-dimensional portfolio made up of stocks and bond. Your investment is managed by a financial institution, and the goal is to produce a monthly income. An all-in-one package is designed to cater to your needs, as well as keep you safe. Having a retirement income puts you in control. You are at liberty to access your cash whenever you want. But then again, making advanced withdrawals leads to a low income down the road.
Last but not least, we have REITs, also known as real estate investment trusts. Similar to conventional real estate, in this case you’re not in charge of your property. A skilled team will manage it; they are in charge of collecting rent, paying expenses and managing fees. All you have to do is collect the profit.
It’s always good to remember one thing when investing in retirement – choose an investment plan and keep your portfolio diversified. In case something happens with one of your investments (because all feature some degree or risk) you’ll have the others to keep you living comfortably by the time you retire.
By Fredrick Cameron and PropertyTurkey.com!