This is the final post in the series of how to start investing at certain stages in your life. If this isn’t the right one for you, below are the other posts, which might be more up your alley.
- How to Start Real Estate Investing as a Teenager
- How to Start Real Estate Investing as a College Student
- How to Start Real Estate Investing as a Young Professional
- How to Start Real Estate Investing as a High Income Earner
- How to Start Real Estate Investing in the Military
- How to Start Real Estate Investing In or Near Retirement (this post)
You may feel like you are too late or it’s an uphill battle. But, the only reason you are considering investing is because you are worried you haven’t saved enough. You are finding the 401(k) or pension won’t provide you with the lifestyle you want in retirement. Or, maybe you are worried you won’t have much to pass on to your children. You have big decisions to make.
Risk vs. Reward
This is always the question in real estate and health and probably everything else. As we age, the future value of a dollar starts going down (if we don’t spend it now, we might never be able to, and then the value is zero). That calculation is unique to every person, and depends on your age and health and the amount you have saved already. Nonetheless, you are reading this because you’ve decided to invest. Here’s a few things to consider:
- Liquidity. When near retirement age, you are going to want more ability to convert your assets to cash when needed. The exception is if you have well more than you need and want to pass it to your children (and, if they want to own property, too). If not, you want more liquid assets, which means you need to be looking at short term projects like syndications or more stock-like things such as real estate ETFs, REITs, and real estate funds. These generally have less risk, less return, and higher ability to cash out when you want.
- How much are you willing to risk? Think of a bottom dollar amount which you have to protect. If it’s not in cash or gold, it’s probably at risk in some way. In fact, even cash and gold is at risk. A short term bond or CD might be your favorite option for that bottom dollar amount. After that, you can stomach more risk on the remainder.
Steps to Take to Begin Investing
- Manage your health first. Take the time to address any medical issues you have. See a doctor if you haven’t done so in a year. The last thing you or your family wants is for you to have a bunch of projects going and then you have a stroke and can’t manage them anymore.
- Determine how much you need. Think of all your expenses in retirement, from taxes (you still will pay them) to insurance, to Netflix. Add 10% for a cushion, and determine what deficit you have from what your income will be. That’s the income you will need from your investments.
- For Those Without Much Money. If you don’t have a lot of money saved now, real estate will be a challenge. You could partner (see #5 below) with you doing the work and your partner bringing the money. Doing this gives you another job and then you are not really retired, though. If you don’t want to do that, then house hack. Read everything you can find written for young investors just starting out with little money. Without money, be prepared to work.
- Determine your risk. If you are able to take a greater level of risk, you might be comfortable with buying and self-managing properties. It’s a job, but you’ll have a lot of time, and it’s only a part time job. If your risk is less, then see above.
- Partner. You will want someone to take over the project quickly when you are no longer able to do so. This is a great time to work with a child or other trusted individual who is younger or healthier than you. Take a lot of time to think about whether you want to partner or not. If you disagree, will this cause familial strife? If so, then don’t do it.
- Do It Yourself. I’d only do this if I have plenty of money saved and I’m not ready to hang up my hat and sit on the beach every day. Right now, I don’t feel anywhere near that, so I’m looking forward to owning a boutique hotel or multiple condo type property, living in one unit and renting out the rest. I think it would be great to put in a couple hours into management a week and relax the rest.
I’m not going to lie, starting at this phase in life will be a challenge. But it can be done. When is the best time to plant a tree and invest in real estate? 30 years ago. When’s the second best time? Today.
