Investing in Real Estate For Retirement

by Alden Smith

When your parents retired 30 years ago, they planned on Social Security, savings and possible equity in their home to get them through their retirement years.  It worked well for a lot of people.  Now it is a different story.  Everything is much more expensive (look at the price of a gallon of gas) and living with your parents' retirement plan will no longer work.  Planning for retirement can be very tricky.  We live longer, wish to travel, and will probably have high medical costs. Plus with a volatile stock and housing market, noting is certain.  This article will discuss investing in real estate and how it can get you in a good position for retirement.

The Real Estate Market

With all the gloom and doom we hear on television, you might think that investing in real estate is not such a great bargain right now.  Actually, the reverse is true.  The market will correct itself as it always does.  Real estate is the first to suffer when things go awry, but is the first to make a comeback, and in a huge way.

Is Real Estate Investment Wise For Retirement?

Yes, it is.  But first you must understand the real estate market.  Don't be taken in by the so-called invest "gurus" that you see so often on early Sunday television.  Real estate investment is a tough subject to learn because of all the laws and different aspects of the market.  With the online venue we have, take time in investigating the market.  Here are things you should be aware of:

• The real estate law of your state
• Federal income tax law
• Property management
• Real estate finance
• Real estate leasing
• Real estate sales
• Real estate appraisal
• Construction practices and procedures
  

This sounds like a lot of work.  It is, but the benefits pay off.  You can technically earn a degree in real estate online.  Learning these things gives you a strategy for the market.

The Latest Thing In Real Estate

By now you may think it just isn't worth the bother to pad your retirement with real estate.  Learning about it is a long process.  Now there is something that, even though it has been around for a while, few people know about: Real estate investment notes.

What Are Real Estate Investment Notes?

For the investor, a real estate note is a wise choice at this time in market troubles.  Real estate notes have been around for as long as there have been realtors, but have not been well known until lately.

A real estate investment note is defined as a written document that states a promise to pay and the terms. These terms include:

• the amount
• interest rate
• length of time in which to fulfill this promise.
  

You can purchase these notes through several venues.  They typically close in 3 to 3 weeks.  And the income?  Passive, of course.  There is no disadvantage of learning the market, scouting for appropriate investment properties, or chasing around after bad renters.

How They Work

Basically, you invest in a promissory note that earns passive income.  Think of it as lending money to a person you know will repay, and having that income plus interest coming in monthly.  On top of this, any cosmetic or functionality improvements made on the property you have invested in increases the value of the note. The beauty of a real estate investment note is that if for any reason you wish to sell, you don't have to wait for the sale as you would actual real estate.  Investors that know real estate are always looking for good deals, and will snatch up any note that is on the market.  They realize that a real estate investment note is a wise buy, and a creator of passive income.

How It Ties In With An IRA

It is legal to use a 401(K) or a self-directed IRA to invest in real estate investment notes. This increases your value of the fund because you are moving cash into it from your investments.  You can best research real estate investment notes via the internet.  The great thing about these notes is that they are secured by actual property, and even if there is a default, your money is safe.

So What Are The Benefits?

Here is a list of benefits of owning a real estate investment note:

• They generate passive income.
• They are secured by real property.
• The notes are taxed at low long term capital gains of 15%.
• They can be purchased with a self directed 401k or self directed IRA.
  

Owning a real estate investment note is one of the best choices you can make for retirement.  Investigate them today.

Alden Smith is an award winning author and regular contributor to DoItYourself.com. He writes on a variety of subjects, and excels in research.