When real estate investing comes to mind, many retirees think about fix-and-flip properties first. In recent years, many parts of the country have seen an upswing in fix and flip real estate investing. When done correctly, a retiree could net a thousand dollar monthly profit. Social security, 401K, and other investments and savings will pay the rest of your post-retirement living expenses providing for a comfortable retirement.
On the other hand, property rehabilitation takes a lot of capital. Instead, retirees are getting on board with new and innovative ways of investing in real estate. Here are 6 things retirees need to know.
#1: Riskier Investments Offer Higher Returns
Marketplace lending platforms like Sharestates give investors the ability to grow their investment portfolios with commercial and residential real estate through something called crowdfunding. The investor does not perform due diligence on her own. Rather, Sharestates’ 34-point underwriting process is a process that scrutinizes each investment property’s details and each borrower’s credit history and other critical investment criteria. This inevitably leads to a variety of investment types that vary in risk and return potential.
Like a lot of things, real estate investing goes in cycles. Before the 2008 housing market crash, fix-and-flip real estate was hot. Real estate investing giants and average Joes alike got involved. As a result, lending standards tightened.
Riskier investment classes offer higher potential returns, but they also carry higher potential losses. Therefore, retirees should ask whether they can afford to lose an investment before pursuing the promise of higher returns.
#2: Yield on Capital Gains Is Not the Sole Measure of Value
Sharestates has averaged 8%-12% returns annually, but yields on capital gains are only part of the story. When evaluating real estate investment properties, factors like appreciation, depreciation, the ability to cover vacancies, and interest rates are often overlooked. Furthermore, there’s a direct, transparent connection between investor and the investment taking the middleman out of the equation. Sharestates provides short-term loans to fund real estate projects while investors choose the projects they wish to invest in.
#3: Self-Directed IRA’s Can Triple Your Returns
The National Association of Realtors found that close to 1.1 million people had invested in rental homes and flips in 2015 even though alternative real estate investments have higher returns and less risk. One way retirees are taking advantage of better access to real estate investment vehicles is by using self-directed IRAs. Sharestates allows investors to invest in a property using their self-directed IRA accounts, which is a great option for those preparing for retirement or who are currently in retirement.
#4: Crowdfunding is a Trending High Yield Real Estate Investment
Many retirees are getting into real estate investing through real estate crowdfunding platforms that allow them to pool their money for real-life real estate investments. The money goes directly into the hands of the individual borrower to purchase, renovate, or refinance a real estate project. Investors reap the benefits through monthly dividends or interest earned.
#5: Real Estate Investments Provide a Hedge against Market Volatility
Investors who pool their money with Sharestates could see their principal paid back within 6-24 months depending on the project. This gives retirees protection against market volatility. That’s an important hedge for retirees who lost over $25K in the last stock market collapse. Marketplace lending is helping retirees hedge against catastrophic losses by putting their money into collateralized assets.
#6: Traditional Investments for Retirees Offer Lower Yields
Current low interest rates have helped to stabilize the economy but are also keeping yields in traditional investments like stocks and treasury bonds very low. It is in that environment that retirees are seeking better ways to utilize their savings in order to produce more liquid investment income.
Right now, buying treasury bonds are safe, but yields are being offset by a negative interest rate. Retirees are guaranteed to get the minimum yield, but T-bonds are not going to fund your retirement.
When it comes to investing for retirement, real estate crowdfunding, also called marketplace lending offers attractive returns with fewer risks than many other investment classes.
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