Approaching the age of retirement, seniors may be worried about whether their nest egg is large enough to provide them the financial support they need for the rest of their lives. These thoughts can be scary for many, especially if they have not built up multiple sources of income outside of Social Security. Fearing that their retirement savings might not be sufficient, seniors are increasingly considering investing in real estate to support their lifestyle after leaving the workforce.
Here are three reasons why seniors are purchasing investment properties
1. Establishes steady streams of retirement income
Ideally, retirees should have several streams of retirement income, such as Social Security, 401(k)s or other retirement savings accounts. Real estate could also prove to be a great source of retirement income. When investors select good tenants, they can have a reliable stream of cash flow each month. A survey by the National Association of Realtors found investment home sales reached 1.10 million in 2013.
Retirees could benefit from purchasing properties in areas where demand for rental homes is high. These include Dallas investment properties, which are attractive to tenants who want to live in rental homes to save money for a house or have the flexibility to move when they choose. Investors know that demand for rental properties could translate to steady streams of retirement income, especially if they choose to buy in areas with good schools and other desirable characteristics.
“With a return to more normal market conditions, investors now have to evaluate their purchases more carefully and do their homework,” NAR Chief Economist Lawrence Yun said in a statement.
2. Diversifies your investment portfolio
While some seniors may have also invested in stocks and bonds, these investment options may be more volatile than real estate. Although real estate also has its share of ups and downs, signs of stabilization in the housing market are making investment properties more appealing to seasoned investors. Additionally, with rental properties, investors have the added benefit of collecting rental income even when the market is in a downswing. The 2014 Investment and Vacation Home Buyers Survey found 34 percent of investment buyers wanted to diversify their investments or wanted to take advantage of a great investment.
Diversifying your portfolio with rental homes is key to make sure you will have the funds you need to make your next big investment or grow your nest egg. In carefully picking the area of your investment, the value of the property is likely to continue to rise over time and allow you to increase rents, according to Bankrate.
3. Funds savings accounts
During retirement, some seniors want to be able to help their family members with their own financial hardships. Often, retirees do not account for these types of expenses in saving for retirement, which could prevent them from living the lifestyles they envisioned. Some investors may choose to buy investment properties and count on the income of these rental homes to contribute to college funds and other savings accounts.
Investors hoping to build their nest egg for retirement should consider partnering with a trusted real estate investment firm to make the right decisions in buying properties.