As you've probably guessed, there are some downfalls to investing in real estate.
But there are still ways to make real estate a part of your investment strategy.
Why it could be a good idea:
1. The more kinds of investments you have, the better.
Diversification is important, especially when you're saving for something so far into the future. You invest in a variety of stocks because when one sector falls, others hopefully don't. And you invest in bonds because they aren't as volatile as stocks, and tend to move in the opposite direction. Diversification reduces the risk of losing a big chunk of money at once.
Real estate is great for adding diversity to your portfolio. It's tied to the market like anything, but it's not going to be correlated the way stocks and bonds are.
2. The second and probably more obvious benefit is the cash you'll get from charging rent.
In the beginning, you won't see a lot of this money. First, you have to cover your mortgage payments. Then you have to pay for things like insurance, taxes and any homeowner fees. Expect those three expenses to take up at least 25% of the rent.
And don't forget about the cost of any maintenance the property needs or gaps between tenants. She suggests putting aside some money from the rent to build an emergency fund.
But hopefully you'll have paid off the mortgage in 30 years and by the time you retire. If you choose to continue renting out the home, you're looking at a stream of income. Or you could choose to live in the home or sell it altogether.
Why it might not be for you:
1. Surprises. You never know when the AC might break, the roof could leak, or a pest problem could turn up.
2. Becoming a landlord can be a lot of work. There's always the worry that you can't find a quality tenant. Finding tenants, processing their applications and running background checks is definitely time consuming.
You could hire a management company to do that work, but that will eat up even more of your rental income
3. It's a big commitment.You must pay the mortgage, taxes and insurance. And if the roof leaks, you have to fix it.
If you decide to invest in rental property:
1. Build an emergency fund separate from your personal savings. Save at least the amount of the highest deductible on your insurance policy.
2. Do your research. There are different laws in different states that landlords have to follow.
3. Be prepared to put at least 20% down when buying a property you're going to rent.
If it's not for you:
Maybe renting out a house or apartment is more responsibility than you're willing to take on right now. Or you may live in an area where property is just too expensive. You can still make real estate a part of your retirement savings by investing in Real Estate
source:http://money.cnn.com/2017/03/28/retirement/millennial-retirement-real-estate/index.html
