We reap best rewards with long-term investments. However, when it comes to retirement, we often forget the benefits of long-term investing.
According to research from the National Institute on Retirement Security, nearly 45% of the working-age households in the U.S. don’t have any type of retirement accounts.
Further, when considering all the working households (including ones with a retirement account and ones that do not have one), they have a median retirement account balance of $3,000. It’s even more troubling that working households reaching retirement have a median retirement savings of $12,000.
The key to avoiding a potential retirement crisis is to start saving early. At the same time, it’s important to invest your retirement funds in assets that can outgrow inflation while offering portfolio security. Real estate is one of the potential investment options you can look at.
A survey published by the Princeton Survey Research Associates International in 2015 put real estate (27%) as the favorite long-term investment option of the respondents, putting it ahead of cash investments (23%), the stock market (17%), and precious metals (14%).
We’ll help you understand real estate assets that can help you retire rich.
Residential rental properties: If you’re a new real estate investor, residential rental properties are the best vehicles to get started. You can start with single-family houses, duplexes, and triplexes. If you have a bigger investment appetite, you can look for small multifamily buildings, ranging anywhere between 5 to 50 units.
Commercial rental properties: Investors with experience in real estate and financial reserves can dive into commercial real estate investing. It includes office buildings, skyscrapers, warehouses, storage units, car washes, strip malls, and even small storefronts. In order to diversify within your real estate investments, you can even construct a small office building and lease offices to small business owners. However, keep in mind that commercial buildings have special safety and management requirements.
Mortgage notes: One thing that every real estate investor would agree with is the time and effort required to manage rental properties. If you’ve limited time or negligible experience in real estate, investing in performing mortgage notes is a good option. Much like rental properties, mortgage notes provide a stable cash flow minus the hassle of managing the property. Mortgage notes are available through banks, loan sales platforms, and brokers.
Tax liens/tax deeds: For investors seeking passive income through real estate, investing in tax liens/tax deeds is another lucrative option. When a property owner fails to pay property taxes, the local county or city places a lien on the property. Any property that has a tax lien or deed issued against it cannot be refinanced or sold until the lien is cleared. A CNBC article states that more than $14 billion worth of property taxes remain unpaid every year, and at least one-third of these taxes are sold to private investors. However, investing in tax liens does require some amount of caution, so start by doing the due diligence on the property and be aware of the potential returns on your investment.
REITs/ Real estate mutual funds/ETFs: If you’ve limited resources or time and yet have plans to add real estate to your portfolio, passive real estate investments could do the trick for you. Some of the top indirect real estate investments include real estate investment trusts (REITs), real estate mutual funds, and exchange-traded funds focused on real estate. The key again is to consider the long-term returns offered by these investments and their past performances.