Decades from now when you retire, you are going to take a look at your income and assets to see if you will be living a comfortable retirement. One big portion of your retirement picture will probably relate to real estate. You may have paid off a home, and/or rental properties; and that would be great! Or you may still be paying a fairly large amount on your home mortgage or paying rent each month to a landlord.
Obviously, the scenario where you are still paying monthly for your housing is not an optimal scenario. Luckily, you can do a lot to increase the chances that the real estate you own will have been a net wealth builder over your lifetime. You do this by educating yourself and reducing the risk on real estate you buy and own. It is the real estate choices you make decades before you retire that will probably will be the difference between a comfortable retirement or living on social security to social security check (Note: We all know that Social Security may not be around a few decades from now).
Of course, saving and investing money in mutual funds, stocks, bonds, etc. is also vital to your retirement picture; but your financial adviser can assist you with those issues. In this article, we are just concentrating on real estate.
Making smart choices on real estate during your lifetime, which really effectively means not losing money on high risk real estate and avoiding money-draining real estate choices, will be a big help towards a relaxing retirement future.
The first issue that you should consider in making good retirement choices can be summed up here in determining whether or not your investment is an asset (buy those) or liability (skip those!!!):
If the real estate you buy is an asset, it is more likely to add to your net wealth and help your finances at retirement. Buying liabilities will probably not help your retirement.
You also need to consider if your real estate purchase is a safe and sound purchase, because the lower risk choices you make, the more likely it will add wealth to your retirement. And the actions you take when buying and owning property will determine whether or not you made safe choices. For example:
There are many other tasks you can do to reduce your risk, help make the real estate you buy an asset instead of a liability, and hence add net wealth to your retirement. But it all starts with avoiding bad, high-risk real estate, which are money draining mistakes.
Educating yourself on how to avoid those wealth-destroying decisions will hopefully turbo-charge your retirement. The end result, decades down the road, may be the difference that gives you that comfortable retirement lifestyle.
Leonard Baron, MBA, CPA, is a San Diego State University Lecturer, a Zillow Blogger, the author of several books including "Real Estate Ownership, Investment and Due Diligence 101 – A Smarter Way to Buy Real Estate", and loves kicking the tires of a good piece of dirt! See more at ProfessorBaron.com.