Most financial advisors would have you believe that when planning for your retirement, the goal and the inevitable outcome is subsistence solely on the savings you have accumulated until the point of your exiting the work force. The reason they try to sell this strategy of mere sustainability is because the investments types they put forth-such as mutual funds, life insurance products, stock and bond portfolios, etc.-are typically the ones on which they stand to earn a commission. This designated route barely stands to keep up with inflation, let alone build long-term wealth and consistently pay for living expenses. That being said, the goal should be to NEVER worry about having enough money during your later years, but to see investments comfortably cover expenses while exceeding inflation, all WITHOUT depleting your savings and principal balances in your retirement account.
Think always of working to perpetuate and not simply to preserve. This means having your money continue to work for you, such that perhaps even your heirs will have residual wealth to use towards their own retirement. Investing in real estate allows you to obtain this goal because it produces above-inflationary returns and can grow your wealth in multiple ways.
First, real estate produces positive cash flow after monthly expenses. After the
mortgage payment, property taxes, insurance, repairs, and property management, you can still make 7% - 12% and more on your down payment. Using a loan from a bank or private financing institution to leverage your investment can help you see even higher returns on your money.
Second, depreciation benefits obtained from owning real estate can significantly reduce the amount of taxes owed on the rental income earned. Reducing taxes is imperative to wealth building since it is your biggest expense in life.
Third, properties purchased below market value come with built in equity, allowing for immediate profit. No stock allows for this same benefit, which comes in addition to possible future appreciation of the property's market value.
Fourth, if you purchase a property using a bank and put 20% - 25% down on the investment, you can pay down the loan every year, giving you one more profit center when investing in real estate.
The fifth, and most important advantage of investing in real estate is that you have control over your investment where other types often delegate it to another outside party. Buying a property and buying correctly puts the power of controlling cash flow in your hands. Furthermore, you have control over your exit strategy and you have collateral-in the form of a hard asset-for your investment.
With all of these benefits of investing in real estate, it's a no-brainer that you should include real estate as a large part of your retirement portfolio.