Retirement is an exciting milestone, but it can be a frightening one as well. Seniors who plan to retire from work are generally limited to a fixed income — one that largely consists of Social Security benefits, withdrawals from savings, and, for the lucky, a pension. But sometimes, even those income streams aren’t enough to attain financial security and maintain a decent standard of living later in life. And that’s why it’s worthwhile for seniors to look to real estate investing as another viable income source.
If you have financial concerns going into retirement or you’re trying to plan wisely for that period of life, it pays to think about the ways real estate can boost your cash flow as a senior. Here are a few worth considering.
1. Rental income
People are always going to need places to live. Provide one, and you have the potential to collect monthly rent payments that boost your senior income on a consistent basis.
You have a few choices when it comes to generating rental income. First, you could rent out a portion of the home you live in if yours is suitable to that type of setup. For example, if you have a finished basement or a converted garage, housing a tenant may be more than feasible. And if your home is paid off by the time you retire, which is the case for many seniors, you can use that money to cover your property taxes and maintenance and possibly still come away with cash to spend on leisure or other bills.
Another option is to buy an investment property and rent it out. This move is riskier than renting out part of your primary home, as you’ll be taking on the risks of owning a separate property (think costly repairs), but the upside is you won’t have to deal with a tenant living under your roof. And if you outsource maintenance and rent collection to a property manager, you’ll largely avoid the hassles of being a landlord.
2. Home equity
Even if your primary home isn’t completely paid off by the time you retire, there’s a good chance you’ll have plenty of equity in it at that point. And that gives you the option to borrow against it if a need for extra income arises, whether via a home equity loan or line of credit.
Of course, there’s another good way to cash in on the equity you have in your home: Sell your home and pocket the gains that ensue. You might choose to go this route if you find you don’t need as much space as you once did, or if you’re willing to move to a different neighborhood, or city, where housing costs are lower.
3. Income from REITs
Short for real estate investment trusts, REITs are similar to mutual funds, only instead of investing in stocks or bonds, you’re generally investing in companies that own and invest in properties. Some REITs focus on residential properties, while others focus on commercial properties like malls, office complexes, and hotels.
The benefit of buying REITs is that it allows you to invest in real estate without actually having to own a second home or a building. And like stocks, REITs pay dividends that can serve as a steady income source during retirement.
It never hurts to secure extra retirement income
As much as you may plan for retirement, sometimes that period of life can be more expensive than anticipated. Rising healthcare costs and other surprise expenses can throw your financial projections off course. If your goal is to ensure that you have a healthy stream of retirement income at your disposal, consider making real estate part of your plan.