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my retirement plan

All around us, people are getting rich off real estate, buying at just the right time and reselling at higher values or by using tenant rent money to pay off an existing mortgage. Are investment properties a good idea? Or is the market in a downward spiral? As with anything, there’s no one-size-fits-all solution, but getting information is the first step to assessing whether or not investment properties will be included in your supplemental retirement plan.

Pros of owning investment properties are obvious. Hypothetically speaking, imagine owning a six-plex in a slow-changing, yet prosperous part of Atlanta where you charged each tenant $1,000. Your monthly mortgage for the building might be $3,000 but you’ll still have that extra $3,000 cushion each month. Another benefit of property investments is the generous tax kickback you may receive. If you delight in getting your lump sum tax return at the end of the year, then perhaps investing and selling properties when you need that quick chunk of cash is right for you. Also, there’s no penalty for opting out early or age regulations regarding when you can start using your earnings. You don’t have to be rich or super business savvy to add property ownership into your retirement planning agenda. It’s been dubbed “the equal opportunity wealth builder.”

Cons of investment properties include the no guarantee risk. It’s also not a feasible option for everyone because of high transaction prices. Not everyone has thousands of dollars saved to make a substantial down payment. Vacancies, bad tenants, maintenance costs and property oversupply are a few of the disadvantages. Like any investment, there are many factors beyond your control that could affect your income. For better guarantees, 401ks or IRAs should be included in your financial retirement planning.

According to Money Magazine, economists predict a 15% decline in the most expensive housing markets in the next year, thanks to rising mortgage rates. Therefore, smart investors will look to places like Panama City, Florida, Olympia or Washington for investment properties, while steering clear of Santa Barbara, New York City and Las Vegas. Your success will depend largely on the investment you choose, but also on your tenants. Security deposits, a slightly higher rent or the realtor you choose, will usually keep the riff-raff out.

Donald Trump once said, “If you take care of the downside, the upside will take care of itself,” meaning that if you have a backup plan for anything that can go wrong, you will undoubtedly succeed with your real estate investment. While there are many variables, you may find investment properties to be a lucrative retirement planning idea, in addition to your 401k, pension and stocks.