Beware of Dangers of Real Estate Investment in Retirement

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Published: Dec 8th, 2020
Beware of Dangers of Real Estate Investment in Retirement
Article Updated:July 13th, 2021

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. Make no mistake: real estate can be a wise 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. 

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.

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.  

LTC NEWS Research Tools

LTC NEWS offers many research tools to help you to discover your options. Find these resources by clicking here

Just like you need a financial advisor to help you design a reliable and diversified retirement plan, you need a Long-Term Care Insurance specialist to find you the best coverage at the best value from the many options available. 

Find a trusted and qualified specialist by clicking here.

Advertising and Marketing Opportunities on LTC NEWS

Reach an educated audience. Readers of LTC NEWS are researching retirement issues, including aging, health, caregiving, and long-term care. Other readers seek information for a parent or other loved one who is experiencing declining health or aging issues and require extended care.   

Many marketing opportunities are available, including sponsored content articles. Sponsored content offers you a long-form way to sell yourself, your company, and your ideas.

Learn more about how LTC NEWS can help you market your business - click here.

Get Published on LTC NEWS

LTC NEWS offers many resources to help families address the consequences of long-term care, aging, health, caregiving, and other retirement issues. You can be part of the effort to help educate consumers throughout the U.S. and around the world.

Email your story idea or article: or click here.  

LTC News Contributor Mallory Knee
Mallory Knee

Contributor Since
September 25th, 2020

Freelance writer where she can showcase her affinity for all things beauty

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.

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