Jason has been involved in the financial services industry as an advisor and financial educator for more than ten years. Prior to joining Pure Financial Advisors, Jason taught in the Financial Planning program at the University of Redlands and helped design a similar program at Grantham University. He is especially happy to see former students [...]

Financial Educator Jason Thomas, CFP® of Pure Financial Advisors outlines some of the advantages and methods for using rental real estate as a part of your financial plan in retirement.


Today we’re going to discuss if real estate should be part of your retirement plan and for many investors, the answer may be yes. Real estate has many potential advantages. Some of them include the potential for income. You can receive income from rents that you collect from the properties which makes real estate one of the most popular assets for those seeking income. You can get appreciation; the properties can obviously go up in value. Just be sure that you understand that a property invested in for income may have certain features and a property invested in for appreciation may have certain other features. And get a property that is a good fit for what your particular objective is.

There may also be tax advantages to investing in real estate. Depending on your personal situation, what types of transactions you’re involved with you may be able to have very favorable tax treatment. So, it’s always a good idea if you’re going to engage in a real estate transaction to discuss it with your financial planner and your tax professional in addition to the real estate professional that’s helping you with the transaction.

You can also use leverage in the purchase of real estate. Unlike other types of assets, you can finance a large portion of the purchase price of most properties with a mortgage. This can be a huge advantage to put more of your capital to work and require you to put less down overall.

Another advantage to real estate, last but not least, is diversification. Real estate can add something to the mix of what would otherwise likely be a pure stock and bond portfolio for many investors. This is important because it can potentially smooth out your returns since real estate does not function in the same way as those other assets. So, they’re not going to have the same performances at the same times.

If one or more of those advantages sound like something you’re looking for in your investments, then real estate might be a fight for you. For many investors, at that point, the question is, how do you go about doing it? Do you invest directly, or do you invest in some other way indirectly? If you want to invest in properties directly, this probably means that you enjoy or at least don’t mind the day-to-day tasks with property ownership, or you have a specific interest in specific properties.

If this is not you, and you do not wish to manage directly, preferring to delegate, you might want to look at other ways to own real estate. Like purchasing a REIT or real estate investment trust, which can give you the ability to have access to the real estate market passively and can be a convenient way to get some immediate diversity that would be very difficult when owning the properties directly.

If you have additional questions about how real estate might fit into your overall retirement plan or if you have additional financial questions, please contact us at purefinancial.com. Thanks for listening.

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