Note: This article is courtesy of Iris.xyz
By Pam Krueger
If you’re closing in on retirement, trying to put your money to work in a zero interest rate world is not an easy job. Financial writers and gurus are obsessed with the stock and bond markets. But despite the lack of attention, many Americans have fallen in love with real estate as an investment option:
- 28 million Americans are real estate investors (according to data shared by Landlordstation.com in 2013)
- 35% of Americans now believe real estate is the best long-term investment (Gallup), compared to 32% who favor stocks
- Stock ownership is at a low point: Just over 50% of Americans have money invested in the stock market (Gallup)
Americans may believe in real estate, but they don’t necessarily do anything about it when it comes to retirement. Real estate plays only a minor role in most people’s retirement portfolios, according to USA Today, and there are three good reasons.
- Liquidity. Stocks and bonds are much easier to buy and sell.
- Fear of bubbles. Many investors (and homeowners too) were traumatized by the credit crisis of 2008 and 2009 when the U.S. housing bubble burst.
- Too complicated. Investing in real estate can seem very complex because there are multiple ways to own real estate.
Most financial advisors lean heavily on the stock market for retirement for these reasons. Then there’s the not unimportant fact that stock investors have seen massive gains over the past five years.
The issue is what will happen in the next five years and beyond. There are now big questions about how long the bull market will last, and fixed-income investments are paying less and less. All are good reasons to consider what role real estate could play in your retirement portfolio.
Just like any other investment, it’s essential to set realistic expectations from the get-go. But deciding what to do next is complicated. Where should you start?[related_stories]
Options in Real Estate
Aside from owning your own home and counting it as part of your retirement savings, these are some of the most popular ways to invest in real estate either directly or indirectly:
- Flipping houses (buying fixer uppers to repair or update and sell at a profit)
- Owning apartment buildings or houses to rent out (you can also own these in a self-directed IRA, if you follow certain rules – see House Your Retirement with Self-Directed Real Estate IRAs).
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