As a general rule, the earlier you start investing, the more opportunities you’ll have to build wealth. Whether you’re buying stocks, bonds, or real estate, this is true. However, if you’re wondering if there is an age limit for the latter, the good news is that there isn’t one. You can invest in real estate at any point in your life. If you’re older, however, your approach can be different.
Investing in real estate when you’re older
When it comes to real estate investing, there are a variety of options. You can do the following:
• Purchase an income property and rent it out on a monthly basis.
• Renovate a house and then resell it for a profit.
• Purchase property that will increase in value over time and then sell it (buy and hold).
• Invest in real estate investment trusts (REITs) (REITs).
Let’s take a look at each one because they’re all doable at any age. Let’s also assume you’re in your fifties or sixties, old enough to be retired.
Buying an income property
Becoming a landlord can be a full-time job, but if you no longer have a job, you might have the time to buy an income property, oversee it, deal with tenant issues, and collect rent. On the other hand, you might want to enjoy your retirement without putting in all that work, or you may not be in the right physical shape to do maintenance on an income property. And when you buy a rental property, you run the risk of vacancies or tenants who don’t pay, both of which could result in cash flow problems. Therefore, you’ll need to weigh the pros and cons before buying a home to rent out.
Many people have success flipping houses, and even if you can’t do the work yourself, you can always outsource it if you’re able to snag a home at a low-enough price and still come out ahead. House flipping is risky because you could wind up over renovating and losing money. Similarly, the longer a flipped house sits on the market, the less likely you are to command top dollar for it — and the more time money you might need stays tied up. Once again, you’ll need to compare the pros and cons.
Buy and hold
Buy and hold is a common strategy used with stocks — buy up quality companies and let their stock values increase with time. It’s a good strategy in the real estate world — to a point. If you can afford to buy and maintain a home, there’s a good chance its value will naturally appreciate in time. The question is: Do you have that time? And would you be better off with an income property that puts rent money in your pocket along the way?
So you decided you want to buy an income property. What now?
To do this, you have to purchase a property that has a combined monthly mortgage payment, home insurance payment, and property tax payment lower than the rent the property commands. There are several ways to do this – from buying in an area with high rents, to putting a lot of money down so that your mortgage payment is low.
Residential vs Commercial properties
There is a lot of optimism about long-term growth in both the residential and commercial real estate markets. In terms of investing, people always wonder where to put their money, whether it’s for residential or commercial use.
Rental Return on Investment (ROI) for commercial space is still better and more long-term than residential space. Long-term leases and contracts ensure that the real estate investors get a steady stream of money.
What is the best course of action for you?
Real estate investing isn’t just for people of a particular age group. You can begin when you are young or when you are an adult. In either case, the goal is to weigh your options and choose which ones best match your risk tolerance and time commitment. But keep in mind that real estate can be a lucrative investment for retirees, and it’s never too late to get in on the action if you missed out during your working years.
We’re here to help
Investing in the real estate market requires knowledgeable partners and informed decision-making. To ensure you’re making the best commercial real estate investment decisions for your goals, reach out to us at Asset Point Capital today.