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Why You Should Diversify Your Retirement Portfolio With Real Estate

Retirement is something we all dream about. Some people plan to travel the world. Others are excited to spend their extra time with family or finishing projects that were on the backburner for years. Retirement is a time to enjoy after dedicating decades of your life to work, but the decrease in steady income can often cause financial stress that makes these dreams impossible. Fortunately, you can take steps to avoid this by creating a retirement portfolio! A comprehensive retirement portfolio allows you to maintain an income during retirement so money does not become an obstacle. However, as 2020 has proven, markets can be volatile, and markets that are thriving one day could disappear the next. That’s why it is critical to diversify your financial portfolio, and investing in real estate is one helpful way to do that. 

Investing in real estate should not replace stock and bonds in your retirement portfolio. Rather, diversifying your portfolio insulates you from quick shifts in the market so you know that you will be ok regardless of the current economic situation. There are several options for investing in real estate which require varying degrees of involvement and capital. You can invest in a real estate investment fund (REIT) if you do not wish to purchase an entire property, but want to generate income from companies that manage properties. Another option is investing directly into rental and commercial properties that will bring revenue during retirement. Regardless of the avenue you choose, Investing in real estate offers distinct benefits from other types of investments, making it a great addition to your portfolio. 

 Why add Real Estate to your retirement portfolio?

Hard Assets are generally less risky 


Though real estate prices do fluctuate, this industry is typically more predictable and stable than the stock market. Unlike soft assets, hard assets cannot disappear overnight and are less dependent on the economy at large. Diversifying your financial portfolio with a combination of hard and soft assets gives you a safety net in uncertain times, as you always have your property to fall back on even if your soft assets are diminishing. 

Other people can manage your property for you


You can choose to manage your own rental property, or you can hire somebody to manage your property for you. Many people choose the latter, allowing you to see the income without having to invest time or energy in finding tenants, maintaining the property, etc. If you do not choose to purchase a property, but invest your money in a REIT or a private loan company, you can count on the company you have invested in to do the work for you. Having real estate in your retirement portfolio allows you to fund the retirement you dreamed about without worrying about the day-to-day details. 

There is no limit to how much you can make


Investing in real estate does not offer the certainty that comes from total return and guarantee the outcome portfolio options. However, it offers the opportunity to earn much more money, as there is no cap to the amount that you can make from the property that you own or the real estate company you invest in. Your income will vary depending on the scale and location of your property, but the sky’s the limit to the number of properties you can buy and the income you can generate. 

Real estate is a great way to diversify your retirement portfolio, however it is an investment that does involve risk. It is important to carefully consider the type of real estate that you plan to invest in, the location, and how involved you plan to be with this property to get the maximum outcome from your investment. For more information about investing in real estate, please contact us and we are happy to speak with you!