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Securing Your Retirement With Real Estate

Securing Your Retirement With Real Estate

Posted by: Josh Manier
Updated: January 15, 2019 

For many people, real estate has been a key component to building their overall net worth. Whether it’s residential rental property, such as renting out a home previously lived in, or purchasing income producing properties, there’s been a lot of money made across the country by investing in real estate.

As prudent and seasoned investors draw closer to retirement age, the primary focus of the account is maintaining the current balance and growing it less aggressively. The logic behind this less aggressive strategy is to reduce the volatility of the account in order to more accurately predict how to distribute income throughout retirement. The more stable the account balance at the time of retirement, the better the investor can answer questions such as…

How long will my retirement dollars last? How much should I take out each month? What are my investment options to help preserve the balance of my account as I take distributions?

Ultimately, the goal of most individuals when they retire is to live a comfortable lifestyle while drawing from their retirement accounts. This is where the self-directed retirement account comes into play. This retirement vehicle allows accountholders the ability to own investment real estate within their retirement account. Instead of selecting bonds or annuities, which have long been the traditional investment of choice by most retirees, investment real estate often provides a higher annual yield and more flexibility for the accountholder.

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For example, let’s suppose you are 60, ready to retire, and your retirement account is worth around $500,000. Let’s also assume your self-directed retirement account purchases three investment rental properties totaling $450,000. The rental income minus expenses equals $31,500 (a 7% return) each year. Keep in mind, this is the net cash flow back into the retirement account and does not include any property appreciation. So, in this scenario, you have $50,000 in cash within your retirement account for easy liquidity should a personal need arise, $450,000 worth of real estate, and $31,500 of rental income being generated each year.

Under this scenario, provided the properties remained occupied with no major property expenses, you could draw $31,500 per year from the account in perpetuity without reducing the value of your retirement account. Down the line, you may want to liquidate an investment property to give you the ability to take more money out per year, which will then begin to actually deplete the value of the account.

Owning real estate within your self-directed retirement account allows you to preserve your retirement income, and gives you the flexibility to control how you retire. Discover why over 1 million people have chosen this better path to retirement, and learn more about these retirement account strategies.

Josh Manier has been a real estate and mortgage instructor for the past 5 years. He is also managing partner of Island View Private Loan Fund, LP, which provides real estate investment loans to investors throughout the country. 

You may contact Josh by phone at 952.345.3445 or via email at josh.manier@jvplfund.com.