(Guest post)
Thinking about retirement? If so you are most likely considering investing in several very common avenues to accumulate wealth and prepare for that life-changing event.One avenue being the stock market, one being a 401K or a Roth IRA, and the other, income property or real estate.
While all of these choices can be extremely beneficial and more often than not used interchangeably, owning income property alone does have several advantages in preparing for retirement. The key is to purchase property in an area like Toronto, where the average cost of rent can more-than-cover the cost of the mortgage payment. Comfree, an Ontario MLS, shows that mortgage payments can be as little as $700 for a 2 bedroom condo. Potential rental income for the same property is as high as $1,183.
Less Risk
While many investors and financial advisors will tell you to play the “game” by investing in both the stock market and real estate in an attempt to be more diversified, investing in real estate does prove to be less risky. Sure the stock market will produce large dividends and nice income at the right times, bear in mind that the stock market will also generate loss. The right income properties will always generate income when handled with care.
Easy Access to Cash Flow
Say you purchase fives apartments in five years, and charge $850 a month for rent; which is Toronto’s rental average. This means you’ll earn $51,000 in rental income each year, while virtually eliminating the expense of paying for a mortgage. Once your homes are paid off, you’ll have easy access to cash from your investment every month! It’s not a percentage of a total amount and you didn’t have to work your entire life to utilize that money! It’s money you earn and can use every month.
Several Ways to Earn Income
While a 401k or Roth IRA continue to decrease and get smaller every year, income properties do the opposite! They increase in value and cash flow increases year after year! Consider such benefits as market appreciation! Real estate values double every 20 years so by the time you reach the end of your retirement, your real estate assets will have skyrocketed!
Cash flow will increase as well. If the loan on a home has been taken out correctly with a fixed interest rate that won’t change, monthly payments shouldn’t change. However rent tends to increase over the years. This means you will receive more money in rent while the payment on the home stays the same! Higher rent means more money.
Lastly, the tax benefits that real estate investors receive are amazing considering the fact that they pay the lowest rates of any for-profit groups in the country. Add to that the fact that tenants are basically paying down the principle on the house loan means that at the end of your retirement your net worth will have exploded as well.
Owning real estate is an amazingly powerful wealth-generating tool that people can utilize easily in an attempt to prepare for retirement. Less risky, easy to manage with an abundance of ways to generate cash, income properties are definitely beneficial in planning for retirement.