If you’re closing in on retirement, trying to put your money to work in a zero interest rate world is not an easy job. Financial writers and gurus are obsessed with the stock and bond markets. But despite the lack of attention, many Americans have fallen in love with real estate as an investment option.
- 28 million Americans are real estate investors (according to data shared by Landlordstation.com in 2013)
- 35% of Americans now believe real estate is the best long-term investment (Gallup), compared to 32% who favor stocks
- Stock ownership is at a low point: Just over 50% of Americans have money invested in the stock market (Gallup)
Americans may believe in real estate, but they don’t necessarily do anything about it when it comes to retirement. Real estate plays only a minor role in most people’s retirement portfolios, according to USA Today, and there are three good reasons.
- Liquidity. Stocks and bonds are much easier to buy and sell.
- Fear of bubbles. Many investors (and homeowners too) were traumatized by the credit crisis of 2008 and 2009 when the U.S. housing bubble burst.
- Too complicated. Investing in real estate can seem very complex because there are multiple ways to own real estate.
Most financial advisors lean heavily on the stock market for retirement for these reasons. Then there’s the not unimportant fact that stock investors have seen massive gains over the past five years.
The issue is what will happen in the next five years and beyond. There are now big questions about how long the bull market will last, and fixed-income investments are paying less and less. All are good reasons to consider what role real estate could play in your retirement portfolio.
Read full article here:
http://www.investopedia.com/news/real-estate-your-retirements-secret-weapon/
They omit the #1 reason: tenants.
I like real estate in theory; wouldn’t want to own individual rental properties in practice.
I get my real estate exposure through REITs. I pay much higher valuations and get much lower cash flow than those who have the stomach to deal with tenants.
Another issue if investing directly in properties is the much much higher turnover costs compared to stocks. That is the total cost of buying and selling a property, including all the fees involved. For stocks the commissions are almost zero or zero in many cases. This also makes the publically traded REIT prefered in that you can trade it as a stock, as well as diversification (i.e. the REIT has multiple properties in general, so that a disaster to one property does not cost the investor the time and trouble.)
I’d love to invest in real estate but right now but, (at least in the California areas I’m looking at) the level is fraud/deception is too high and I’m just not comfortable.
Bring back foreclosures where I can compete to buy with investors that actually have money vs agents that have the connections and I’ll start buying again.
I’d even buy from agents if the deals were fair. But this just isn’t what I’m seeing. Credit is cheap right now and prices have been pushed up like crazy by those willing to borrow 800k+ just to take the risk of possibly making 20k in returns.
“They omit the #1 reason: tenants.
I like real estate in theory; wouldn’t want to own individual rental properties in practice.”
It’s not generally the tenants, it’s generally the dumb landlords. Dumb landlords empower “bad tenants.”
While there may be some evil people with amazing credit reports and beautiful background checks, anybody I know who wound up with “bad tenants” were willfully stupid from the get-go.
Good judgement isn’t for everybody. Probably can’t be taught. Effectively managing rentals requires it. It’s not rocket science, but it’s no playground for dumbbells.