Beware of Dangers of Real Estate Investment in Retirement

Your IRA should feature many different types of investments. You have likely heard about real estate investments for retirement, but are they right for you?

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Beware of Dangers of Real Estate Investment in Retirement
4 Min Read December 8th, 2020 Updated:April 1st, 2022

A diversified portfolio is fundamental to any retirement fund. We've all heard the cliché about not putting all your eggs in one basket, and like most good clichés, it's true. But all the baskets in the world don't do much good if they're not well-woven.

A well-rounded IRA features investment in cash, stocks, bonds, and mutual funds—the old standbys of saving for retirement. But as investors have gotten more and more creative in their attempts to diversify, you can find claims to precious metals, cryptocurrency, and promissory notes as well. 

Another common use of the IRA is as a lender. IRAs can lend to various businesses and pursuits, but many people see real estate as a wise investment because, as another cliché goes, no one is making any more of it. Please make no mistake: real estate can be a smart and lucrative investment that not only generates revenue for retirement but can yield a property that your family may continue to enjoy after its income days are over. But all investments carry risk, and real estate is no exception. Before you close on a property, consider some of the dangers of investing in real estate for retirement.

Property Management – Is That for You?

Owning real estate is not like owning bonds: you do not just stand idly and wait for income. With the responsibilities that accompany maintaining a property and finding ideal tenants, the so-called "passive income" of real estate investment is not so passive after all. You and your IRA can outsource much of the day-to-day management to an outside firm, but that comes at a cost that may make the entire investment more trouble than it is worth. If you do not have the desire to be a hands-on landlord or wish to part with money to hire a manager, directly investing in real estate may not be for you.

Foreclosing on Borrowers

Perhaps you don't want to deal with ownership and management of a rental property yourself and would prefer to lend money to someone who does. With modest interest, these loans can be a great way to build on an investment fund that has matured enough to issue such loans. But when the economy takes a turn for the worst, landlords feel the pain as their tenants cannot keep up with rent. That means landlords can't keep up with their bills, either. 

If you have a loan out that has gone unpaid, your only choice may be to foreclose on the property. Foreclosure is a difficult and unpleasant procedure that costs your IRA money and leaves you with the deed to the foreclosed property, which you may have no interest in managing or paying for and whose market value will be difficult to recoup straight out of foreclosure.

Disaster Can Devastate Property

Even if you do everything right, an act of God can wipe out all your hard work—a good example is New Orleans, which is no stranger to devastating weather. Even with insurance, you may not be able to recoup the loss of a rental property, making Mother Nature herself one of the biggest dangers of investing in real estate for retirement.

When planning for retirement, the goal is to grow your assets while at the same time maintaining stability in your portfolio. Real estate could be part of an overall retirement plan. It is always wise to speak with a qualified retirement advisor who can make professional recommendations based on your comfort for risk vs. reward.

Some people fail to consider the consequences of long-term health care on their income and assets. The costs of extended health care services can easily drain your savings and adversely impact your lifestyle and legacy.

A balanced retirement plan should include a plan for the financial costs and burdens that come with aging. Since you will see changes in your health, body, and mind over time, being prepared for the high costs that come with long-term care will safeguard assets and ease stress and anxiety on your family.

Selling Your Property or Reverse Mortgages

If you have a home that you must sell quickly, many organizations will purchase your home, often 'as is' with the ability to close quickly. For example, in Arizona, people can get cash for homes - Cash for Homes Arizona.

Reverse mortgages are also an option if you have substantial equity in your home. The tax-free money you get - that you do not have to pay back - can fund retirement, Long-Term Care Insurance, or even pay for in-home care so a person can stay in their home. Click here to learn more about reverse mortgages. 

Real Estate Investment Starts With Finding the Right Property

If you're interested in venturing into real estate investment, this website helps you search for available properties -  Rental Properties | Investment Property For Sale | Roofstock. Many experts suggest finding a property near where you live to start - especially if you plan on providing maintenance yourself. Even if you outsource this, the ability to drive by the property can give you extra peace of mind as you venture into real estate investment.

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About the Author

Mallory Knee is a freelance writer for multiple online publications where she can showcase her affinity for all things beauty and fashion. She particularly enjoys writing for communities of passionate women who come together for a shared interest and empower one another in the process. In her free time, you can find Mallory trying a fun new dinner recipe, practicing calligraphy, or hanging out with her family.

LTC News Contributor Mallory Knee

Mallory Knee

Contributor since September 25th, 2020

Editor's Note

Consider the changes that will occur over time with your health, body, and mind. The cost of long-term health care can devastate your hard-earned assets and create a family crisis. 

The cost of long-term care services can currently run over $100,000 a year, depending on the type and location of the care. The LTC NEWS Cost of Care Calculator will show you both the current and future costs of these services. 

Prepare Family and Finances for Long-Term Care Costs

How will you address these high costs? Will your family need to provide some or all your care? Without advance planning, your family will be faced with a crisis. Being a caregiver is physically demanding and creates stress and anxiety. Paid care is expensive, and the costs increase every year.

Affordable Long-Term Care Insurance offers the guaranteed tax-free funds to pay for the type of care you wish in the setting you desire. Several types of policies are available. While the cost of LTC Insurance is affordable for many people, it is even more affordable if you obtain coverage in your 40s or 50s when you still enjoy good health.  

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You can find many tools and resources on LTC NEWS to assist you in your research for a planning solution or help your family find the appropriate care for a loved one at the time of crisis. 

To help you plan the costs and burdens of changing health and aging, LTC NEWS has put in place several resources, including:

Find all the resources on LTC NEWS - Resources for Long-Term Care Planning | LTC News.

Seek Professional Guidance

Insurance rates are regulated, so no insurance agent, agency, or financial advisor can give you special deals. However, insurance companies' premiums vary over 100% for the same coverage.

Experts suggest using a qualified Long-Term Care Insurance specialist to help you navigate the many options available to you and your family.

A specialist who works with the top companies can match your age, health, family history, and other factors and find you the best coverage at the best value. A specialist will save you money, and you will have peace of mind knowing they are making the appropriate recommendations - Work With a Specialist | LTC News.

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Start by reading our four guides -  

If they are lucky enough to own a Long-Term Care Insurance policy, be sure they use it. Sometimes families wait, thinking they can save the benefits for a rainy day. Waiting on using available Long-Term Care Insurance benefits is not a wise idea. 

Get Help in Filing a Long-Term Care Insurance Claim

Quality care obtained early will help provide a better quality of life and reduce the risk of a deep decline and facility care. If you need help in starting the process of a Long-Term Care Insurance claim, LTC NEWS can help.

LTC NEWS provides free assistance with no obligation to help you or a loved one complete the claims process with a Long-Term Care Insurance policy. We have teamed up with Amada Senior Care, who will do all the work, free with no obligation. 

You can also get support in finding quality caregivers and get recommendations for a proper care plan, whether a person has a policy or not. - Filing a Long-Term Care Insurance Claim | LTC News

Benefits of Reverse Mortgages 

Today's reverse mortgages for those aged 62 and older could be an ideal resource to fund a Long-Term Care Insurance policy OR even provide money to pay for care if you, or a loved one, already needs help and assistance.  

Some people have much of their savings invested in their homes. With today's reverse mortgages, you can find ways to fund care solutions, care itself, even help with cash flow during your retirement. 

Learn more by asking questions to an expert. LTC NEWS columnist and host of the TV Show "62 Who Knew" will answer your questions regarding caregiving, aging, health, retirement planning, long-term care, and reverse mortgages. 

- Just "Ask Mike." - Reverse Mortgages | LTC News.

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You can write a story or ongoing column for LTC NEWS. You can write about many topics, including aging, caregiving, health, lifestyle, retirement planning, and long-term care, to name a few.

Be sure to write for our core target audience of adults aged 40 and older. Our audience is worldwide; however, our primary target is the United States, Canada, the United Kingdom, and other English-speaking nations. 

Improve your website or blog's SEO and gain exposure and traffic at the same time by being a contributor to LTC NEWS. 

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Email your story idea or article: - LTC News Contributors | LTC News

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Learn more about how LTC NEWS can help you market your business, drive traffic, and improve SEO - Advertise With Us | LTC News.

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