Real estate investing is a buzzword that has started to get thrown around quite often — and for a good reason. When real estate investing is done right, it can be financially rewarding and allow you to fund your retirement account steadily.
Unlike stocks, which can be pretty volatile, real estate offers more stability, allowing you to grow your investments over time consistently.
Investing in real estate is a reliable way to build and sustain long-term wealth, which may allow you to retire early and continue funding your retirement after the fact. If you’re looking to get started in real estate investing so you can retire on your timeline, or you have a varied real estate portfolio and are looking for retirement advice, you’ve come to the right place.
Follow along as AA Tax & Accounting Services, LLC discusses real estate investing and navigating retirement.
Can I Fund My Retirement with Real Estate Investments?
Most people spend their days working to earn a living — allowing them to bring in cash for the here and now while also saving for their future. Knowing that you will be working day in and day out for the indefinite future can be extremely daunting, especially if you cannot put aside any money for your retirement each month. That’s why many people are intrigued by real estate investing.
Whether you want to invest in real estate as a side hustle or go all in and make it your main income stream, real estate can be an effective way to fund your retirement account. However, it isn’t as simple as buying a property and renting it out.
To be an effective real estate investor, you need to understand the market, have the capital to get in the game and have patience throughout the process (as it is a long-term game).
Benefits of Real Estate Investing in Retirement
As we mentioned, real estate investing is an excellent source of income to fund your retirement accounts. It’s also an effective method to bring in revenue during your retirement. Here are a few benefits of real estate investing in retirement.
Positive Cash Flow
During retirement, you rely on the money you previously set aside to fund your lifestyle. This can seem daunting if you don’t have any additional money coming in. Investing in real estate allows you to continue bringing in money month after month. On average, income yield from investment properties ranges from 6% to 8% annually.
Over time, as you continue gaining equity in your rental properties, the income you generate will be able to cover your mortgage, taxes, and fees — allowing you to net money each month, thus generating income in retirement.
As your rental properties age, you may experience depreciation. Depreciation reduces the value of your property, and as a result, you’ll be able to claim a lower property value and reduce your tax burden come tax season. The depreciation lowers your property’s value, reducing the taxes you owe on that property each year.
The lower your property taxes, the more income you can generate from renting it out. Plus, if the total depreciation amount ends up being higher than your rental income for the year, you can claim a tax loss.
Another tax benefit real estate investors can take advantage of is a 1035 Exchange. When selling a property, you must pay the Internal Revenue Service taxes on any profit earned from the sale and on any depreciation claimed over the years you owned the property.
These tax payments can be avoided if the sales profits are used to purchase another real estate investment property, which is an attractive tax benefit for many retirees interested in real estate investing.
Tax Consulting Services in Cedar City, Utah
If you’re hoping to retire soon and aren’t sure if real estate investing will be enough to fund your retirement, reach out to the AA Tax & Accounting Services team. We can help you navigate retirement planning and walk you through everything you need to know — considering your real estate investments.
The AA Tax & Accounting Services team is committed to helping you feel confident and happy to walk you through our real estate retirement planning tips. Contact us to schedule an appointment.