Everyone knows that investing in real estate has always been a somewhat safe bet when done in the right circumstances. Real estate generally holds a stable value and can be exploited for various means, rendering it rather lucrative. The idea of investing in real estate might sound expensive and inaccessible for most people. But this is not at all the case.
You can make small investments in low-risk properties that will be financially worthwhile in the long run, you just cannot think short term. It is a long game that must be played here. Read on to see why investing in real estate is a great safety net for when you retire.
An Asset That Can Pay For Itself
Ideally, when you invest, you are choosing a property that will not cost you very much in upkeep nor will the mortgage take a chunk out of your living expenses. In the best of cases, you are able to find a place that can be rented out for the same price as your mortgage.
There are two factors that will make this possible, or not. The first deciding factor is the amount of your down payment. If you have a sizable sum to invest straight away, it’s very possible that your monthly payments will be low enough for a renting scheme to be solvent.
The second factor is the current interest rate. If you decide to buy at a time when rates are high, this could add on an extra $35,000 to $60,000 to the cost of your loan. If you want an asset that pays for itself, keep these two things in mind before purchasing.
Capital Gains Over Time
Let’s say that you are now reaching retirement age and you invested in a small rental property in your early 40’s. This real estate investment does not earn you any money but you are just about to break even every month. It is at this point that you will start to see the profitability of a decision you made twenty years prior.
As this property is nearly paid off, your mortgages will soon disappear and any money made from renting it out will go straight into your pocket. What’s more, you should not disregard the possibility of capital gains over time.
If you purchased land outside an up-and-coming city, it is likely that it has increased in value and that if you decide to resell, its price might have doubled or even tripled, leaving you with a nice sum of cash just as you hit your retirement. This sort of investment is a safe way to ensure that you have a source of income as you retire and it is independent of any government programs.