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When building a retirement plan, it is often advisable to create a diversified investment portfolio in order to help grow your money. Financial advisers will often recommend stocks and bonds for retirement investment plans, but the volatility of these means that the risk potential can be far too high. A good alternative for retirees (and one that is often overlooked) is real estate investment.
There is no better time to get involved in property: 2016 was labelled the year of real estate by the Colliers Global Investor Outlook, a report which shows that over half of professional investors are looking to put money into real estate this year.
So with that in mind, here is a breakdown of the advantages real estate has over other investment options for putting together a profitable retirement plan:
Having a retirement plan based on a concrete asset like real estate is a much safer bet than other, more insubstantial investments – with property you don’t have to rely on having equity in ideas or companies, which can (as we all know) be unreliable. Due to its essential nature and the physical bricks and mortar, property tends to be a far more stable market, meaning that the overall risk factor of your retirement plan is significantly lowered.
One of the main advantages real estate has for retirement investment is to do with longevity. Building for retirement starts early and takes a long time, and properly executed real estate investment is much the same: the focus is on stable returns that accumulate over the long-term (a standard example of this would be to invest in core plus properties on a buy-to-let basis, located in popular areas with an established and healthy property market).
Real estate is also one of the few investment options that allows you to earn regular and reliable income as soon as the investment is made. Rental income from the property can assist with debt repayments and admin costs, thus helping you to limit the size of the overall investment and keep a larger proportion of the returns for retirement.
The Yale Model of investment suggests that a fully diversified investment portfolio must include alternative investments to be profitable, and the same goes for retirement plans – real estate represents one of these alternatives. Further diversification within real estate itself is also advisable to defend against potential fluctuations within the property market and increase overall returns. The enormous range of property types and locations available means that it’s relatively easy to properly diversify your real estate portfolio, and thus contribute good returns to your retirement plan.
Advancements in investment technology have also made investing in real estate easier than ever before. One of the reasons property rarely featured as part of retirement plans in the past was that it used to be a notoriously difficult market to enter – it required insider knowledge, legal advice, mountains of paperwork, and easy/regular access to the property itself. Real estate investment can now be done entirely online via Real Estate Crowdfunding. This approach eliminates the paperwork, does the research for you, eradicates the need for legal middle-men, and allows you to invest in properties all over the world, which in turn helps enormously towards diversification.
Investing carries risks, including loss of capital and illiquidity. Please read our Risk Warning before investing.
