Curious How to Diversify Your Retirement Portfolio? Invest in Real Estate
How do you plan to save for retirement?
Investing in the stock market or your employer’s 401k plan is not the only way. In fact, investment in commercial real estate outperforms the S&P 500 index.
Flipping houses is another way to boost retirement savings. The average profit margin on a house flip is nearly 50 percent.
In this post, we’re going to cover the many different ways to invest in real estate. Whether you’re looking for a steady revenue stream or a quick lump sum, real estate has many options for you.
Read on to learn how to diversify your retirement portfolio by investing in the real estate market.
Rental Income
The average return on a rental property is over 9 percent. Owning a rental property is a great way to generate supplemental income.
You do not necessarily need to purchase a rental property with cash. Investment property mortgages are available that allow you to leverage off the lender.
Consider placing a $20,000 down payment on a $100,000 property. The lender pays the remaining $80,000 while approving you for a mortgage.
As the owner, you directly benefit from property appreciation over time. In addition, the monthly rent payment is covering interest and building equity in the home.
Rental property management can be arduous and time-consuming. As the owner, you’re responsible for home maintenance. If a pipe bursts at 3AM, you have to fix it.
You can mitigate this workload by hiring a property manager. The only downside is that it will cut into your profit margin.
Flipping Houses
Some investors aren’t looking for a steady revenue stream and want to generate a quick lump-sum payment instead. Flipping houses is the perfect option.
As mentioned earlier, flipping a house typically generates a 50 percent return on investment. The concept behind flipping houses is to identify an undervalued asset. This is likely to come in the form of a foreclosure or short-sale.
These properties are made available to the public via a bank auction. After acquiring the property, you renovate the interior and exterior to make it more desirable. The key here is to select value-added renovation projects and stick to your remodeling budget.
Finally, you put the house back on the market. If you experience delays in selling, you can join the Sell Quick California movement to unload it for cash.
REITs
Want a way to invest without getting your hands dirty? Like the stock market, investors can purchase shares of real estate investment trusts (REITs).
REITs are purchased just like stock shares. Here you are investing in securities that operate in the mortgage, property management, or real estate space. Over the past 20 years, REITs have yielded a nearly 12 percent return on investment.
Final Thoughts on How to Invest in Real Estate
Real estate investment is a great way to diversify your retirement portfolio. As demonstrated, the three investment strategies presented all yield great returns.
If you enjoyed this article about how to invest in real estate, check out our blog for other great advice on saving and investing.
