As the adage goes, ‘’Make hay while the sun shines.’’ It is important for one to begin planning for retirement and devise a retirement planning strategy to support one’s latter years when the “Sun ceases to shine and hay can’t be made.’’
A retirement plan should ordinarily contain a diversified portfolio of investment vehicles such as company securities, government or corporate bonds, annuities etc with real estate being largely recognised and confirmed as a winning portfolio that provides dual benefits of capital appreciation and recurrent income generation.
Including real estate as an integral part of your investment portfolio ensures you have the following benefits at retirement;
1. A good store of value and hedge against inflation: The trend of capital appreciation raises the equity in your property making it a good store of value. By an eventual sale, the equity in your property is released resulting in substantial capital gains. Rental prices are adjusted periodically to reflect the prevailing inflation index. Where inflation rises, rental prices are raised. Increased rents result in increased income and higher purchasing power.
2. Security of all or part of your investment: Land is indestructible. Considering structure on land can be destroyed or damaged, improvements or restoration of structures resulting in a more modern and marketable structure can increase the value of your investment taking costs and expenses into consideration.
3. Land is finite and constitutes a fundamental area of need in providing shelter in various forms. This attribute of land according to Maslow’s hierarchy of needs ensures a steady demand. With the right objectives and methods in acquiring or developing your investment, there would always be a marketplace for such investment.
4. Semi-liquidity in form of rental incomes allows for income streams to support your passive years during retirement. In our climes, the practice of advance rents allows for re-investment into our forms of investments or in more cases re-investing the sums into another real estate acquisition or project.
5. Passive income: in majority of cases with a few exceptions, real estate incomes streams are steady and reliable. There is no requirement to actively obtain your income and with a competent property management company in place, one can lie back and enjoy a stress free retirement.
To build a stable and profitable source of retirement income in real estate, there is a need to be systematic, focused and patient as a you build a portfolio of income producing properties. As it is said, real estate investing is for the long haul!
