Using Real Estate in Your Retirement Portfolio

Using Real Estate as Part of Your Retirement to Diversify your Portfolio.

Our past posts have looked real estate investment in the shorter timeframes.  This post takes a look at making real estate a part of your retirement portfolio.  Whether its Ohio, West Virginia or Pennsylvania, rural real estate can be an important part of a retirement portfolio.

While flipping homes and day trading speculative stocks appeals to some investors, the average pre-retiree or retiree often meets their retirement goals with a long-term approach. By using rural real estate as part of your retirement plan, you gain peace of mind. When taking a buy-and-hold approach, it’s important to find good real estate deals. Rural real estate in areas such as West Virginia, Ohio and Western Pennsylvania offer several distinct advantages. Not only do investors often compete with fewer people, but they can also enjoy rapid appreciation as land becomes scarce. When it comes to building up a retirement portfolio, rely on real estate to protect against the stock market fluctuations and possible market crashes. According to a piece by forbes.com, real estate is an attractive way to generate steady returns during retirement. For more retirees, a reliable income stream is more important than a hole-in-one on the golf course or the perfect brunch restaurant with friends. Experts point out a few of the reasons real estate resonates so well with pre-retirees and retirees.

Lowering risk while protecting the principal

When using real estate as part of your retirement plan, you lower your risk. Rural real estate is unlikely to go down in value as developers need land. Many members of the baby boomer generation seek wide open spaces for their retirement. Developers often seek rural real estate for 55-and-older master planned communities. Principle protection is a big part of retirement planning. When it comes to real estate, you won’t lose your principle as you do when companies go bankrupt or lose their place on the stock market exchange.

Taking advantage of what makes logical sense

Experts also point out that everyone needs a place to live. Few people look into a crystal ball to determine whether a stock will go up or down in value. Owning real estate gives retirees more control because it’s a tangible asset that you can buy or sell without worrying about shareholders or the Wall Street drama. When you own buildings in rural America, you decide whether to renovate, rent out or tear down the buildings. You can make changes to boost the property value. Of course, with rural real estate investments, you don’t necessarily rent out the investment properties.

Using a self-directed IRA

A growing trend is to use a self-directed IRA to buy real estate for retirement. While a 401(k) only allows people to invest in mutual funds and, sometimes, company stock, a self-directed IRA opens other doors. The Internal Revenue Service permits people to put retirement money into alternative investments such as rural real estate. Some companies help you set up a self-directed IRA with check writing privileges. The advantage of using a self-directed IRA is that your gains are tax-deferred. If you own a Roth IRA, the distribution or sale of the real estate and any gains are also tax-free. With a traditional self-directed account, you still owe taxes on the gains just like you would with a traditional 401(k) or traditional IRA. The IRS has strict rules about using the real estate as an investment for retirement as opposed to personal or vacation use.

Using retirement money to invest in real estate lets people invest in what they know and understand. Diversification is another factor since it adds variety to your portfolio which might also include individual stocks, bonds and mutual funds. Real estate also offers inflation protection.

At Kaufman Realty & Auctions, we guide clients interested in investing in rural real estate in Ohio, West Virginia and Western Pennsylvania. By using rural real estate as part of your retirement plan, you diversify your portfolio. For more information about buying and holding rural real estate properties likely to appreciate, please contact us.


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