Blog

How To Prepare For Retirement: Starter’s Guide For Millennials

Published on Thursday - January 05, 2017

How does a millennial properly prepare for retirement? Better yet, how can investing in real estate today set them up for success tomorrow?

As a millennial, you’re probably in no shortage of advice when it comes to retirement. The school of thought has typically been to put a little money away each paycheck until you reach the ripe age of 65 (or call it quits). For others it abides by more established routes such as Social Security and 401(k)s.

Although these retirement strategies have yielded positive results in the past, the same results aren’t expected for younger generations later in life. In fact, traditional retirement vehicles like Social Security are fading fast and may not be available when millennials reach retirement age. Not to mention, a large number of future retirees are simply failing to save for retirement. According to a survey conducted by the U.S. News & World Report, 40 percent of millennials surveyed reported they do not have a retirement income strategy in place, and 57 percent said they haven’t even begun saving yet.

So this begs the question: how can millennials begin to effectively prepare for retirement?

One of the more savvy options is through real estate. With uncertainty in traditional methods, including the ever-growing and stringent restrictions, investing in real estate remains a proactive alternative to funding retirement. It has the power to not only provide short and long-term financial benefits, including appreciation, but also to produce residual income as well. Even better, these passive income opportunities can be adjusted at anytime to meet your retirement goals at any stage of life.

How To Prepare For Retirement With Real Estate: 5 Investment Vehicles For Millennials

Best investments for retirement income

The world of real estate offers many flexible investment options for financing retirement. As a millennial, however, you’ll need a plan in place to achieve those lofty financial goals. With many years ahead of you before departing from the working world, the key to securing your retirement goals will be based on your ability to prepare for it. This will not only consist of effectively planning and goal setting, but also establishing a retirement strategy at an early age. In essence, this will serve as the roadmap to achieving success with real estate and ultimately outline how you’ll spend the latter days of your life, as well as how you intend to fund it.

Rather than blindly following the retirement guidelines of yesterday, which may or may not provide the financial foundation you need in the future, it’s important to consider your options. Below are five ways millennials can successfully prepare for retirement with real estate:

Invest In Rental Properties

One of the quickest ways to prepare for retirement is through rental properties. Rather than a forever home, a rental property is utilized as an asset with someone else paying the monthly mortgage. Along with it appreciating over time, without you paying a dime, the property also has potential to earn income. For example, if the monthly mortgage is $1,250 and you rent it out for $1,450; this will secure a monthly profit of $200. Although meager, this represents automated income — a prized possession in retirement. The ability to earn monthly dividends without ever lifting a finger is a golden ticket for retirees; and as a millennial, you have the advantage of being able to start investing early therefore accruing more significant profits overtime.

Buy A Multifamily Property

Another layer of retirement with real estate is the purchase of a multifamily property. This multi-dwelling unit (MDU) entails two single-family properties under one roof with each unit having its own living quarters including a separate kitchen and bathroom. Common examples include duplexes and townhouses. Advantages of multifamily properties over single-family include: larger cash flow, more control over value, bigger pool of tenants, and scalability.

When planning a retirement strategy, multifamily properties should be a major consideration for millennials. Along with the ability to live mortgage-free (live in one unit while renting out the other), you have the option to rent out both units and earn double the income. This versatility offers many benefits in retirement, as your financial situation can alter course down the line. A multifamily property can help millennials better prepare for retirement by providing them with numerous backup options.

Consider Commercial Real Estate

The idea of owning commercial real estate shouldn’t intimidate millennial investors. This investment vehicle, which consists of acquiring business properties and leasing individual units to collect rent, offers instant equity and increased cash flow compared to residential investments. Common examples of commercial real estate include retail, office, apartment, industrial and mixed-use buildings.

The appeal of commercial real estate, especially in retirement, is less competition and longer leases. In comparison to residential rentals, lease agreements for commercial real estate are signed for multiple years as opposed to a rental’s month-to-month lease. From an investor perspective, longer leases equate to lower vacancy risks. Along with earning higher income and cash flow than residential properties, commercial real estate holds immense value for those willing to take the risk.

It’s Never Too Early For REITs

REITs (Real Estate Investment Trust) are a form of passive income where investors can earn various types of income, long-term capital appreciation, and even investment portfolio diversification. Similar to stocks, an REIT represents a company–or companies–that own or finance income producing real estate. Depending on your retirement portfolio, including your ability to deal with risk, REITs may offer an additional level of reward your portfolio has otherwise been lacking.

Buy Raw Land

Raw land is one of the more underrated investment options in real estate. A raw land investment is ideal in preparation for retirement as it can be milked in a variety of ways. Investors can subdivide and sell, build rental properties and lease, or simply buy and hold. For millennials, the appeal of buying raw land includes upfront profits and long-term dividends. In addition, raw land is easy to acquire with little-to-no competition, affordable to own and maintain, and has potential for short and long-term profit gains.

The Bottom Line…

The golden years of retirement are different for everyone. Goals, aspirations and financial settings will change throughout the course retirement, which can be detrimental if not planned for properly. Having a strategy in place will help to answer your retirement questions now and later on, even if plans change down the road. In order to successfully prepare for retirement as a millennial it’s imperative you consider all your options and get started early. Appreciation is the name of the game in real estate, and the more real estate investments you accumulate early on–the better.

🔒 Your information is secure and never shared. By subscribing, you agree to receive blog updates and relevant offers by email. You can unsubscribe at any time.