Investing in bricks and mortar can help to secure retirement income
When it comes to building long-term assets, only the top fifth of American households build a nest egg from stocks and bonds. For those who aren’t rich, real estate is their main source of wealth in later years.
Investing in commercial property can be wise, but the family home makes up a significant part of most people’s assets. Those who take the time to calculate the investment in their home and compare it to the investment in their retirement accounts are likely to be surprised.
The experts at Wachovia Bank say understanding this can help people make good decisions while they’re younger. But it can also help middle-agers secure their golden years.
Trading to a larger house during your prime working years can be a good retirement savings strategy if you can afford the payments. Equity builds and the value of the home rises each year.
A rental property can provide income as long as costs such as the mortgage and maintenance are more than covered by the rent. Equity builds and the property increases in value over time.
Some people buy vacation homes for family use, hoping to cash in on future appreciation. Others rent out a property so it creates an income stream. And still others, looking forward to their retirement years, buy a second home anticipating that they will downsize.
Location is important, but amenities, future needs, maintenance, and an exit strategy must be considered.
No one should buy a property that will strain the budget if annual income drops, say Wachovia advisors.