With the current economic climate what it is, it’s understandable that you’d be worried about the viability of your retirement fund. There are a lot of great ways to beef up your retirement fund through side gigs, but if you want reliable income, real estate is going to be your best bet. Here are a few of the different ways in which you can utilize real estate value to help keep you in the black throughout your retirement.
First, it is important to understand that a reverse mortgage is not income. It’s more like a loan program for retirees. Much like a second mortgage, a reverse mortgage is based on the amount of equity you’ve built up in your home. Most people use it to either offset whatever payments they’re still making on the home or to beef up a retirement fund. How you use the money is up to you.
You can repay whenever you’re able–as long as you keep living in that home. If you move, you have to start paying back the loan. If you pass away before the loan is paid off, your heirs will inherit that loan. Current reverse mortgage statistics say that when this happens, the most popular option for heirs is to allow the lender to sell the home and send them a check for however much is left over after the loan has been repaid. Either way, you don’t have to worry about it.
If you no longer need the larger home you purchased to accommodate your growing family (who has long since moved out), sell your home and use the proceeds to either buy a new home or to pay for a rental. Smaller homes are cheaper and easier to maintain. You can also earn extra money buy selling off the stuff you won’t be moving to your new place.
In addition to the monetary benefits, small homes are better at maintaining their temperatures, which is good during the months with severe weather. They also usually stay cleaner because there is less space in which a mess can build up. Finally, they give you an excuse to get out of hosting every single holiday because you simply won’t have the space to accommodate everyone!
Another option, if you want to downsize but don’t necessarily want to go through the hassle of selling your home is to rent out your current home. The nice thing about this is that you can set the rental price to whatever you like (though sticking to current rental market rates is a good idea). A good rule of thumb is to make sure that, at the very least, the rent you charge offsets the cost of your new home’s mortgage or rental payments.
If you’re a do-it-yourselfer, buying a home that needs some fixing up and selling it for a profit is another popular way to use real estate to your advantage. Foreclosures can be bought for pennies on the dollar, refurbished and sold for a considerable profit–especially if you do the refurbishing yourself.
Like with your own home, you can also choose to rent out these properties to help pay them off and put some extra money in your pockets.
The nice thing about house flipping is that it gives you something to work on, which can be helpful in those early days of retirement. Many people have a hard time making the transition from working into retirement. Having a house to fix up will keep you busy and give you the sense of purpose that you had when you had to go to work every day.
Other Types of Real Estate
Houses aren’t the only types of real estate that you can use to your financial advantage. Multi-family properties are great investments as many popular towns and cities are facing housing shortages. You could also invest in commercial real estate, which always turns a pretty penny.
And, of course, your house isn’t all there is on your property that you can rent out. Consider renting a room or two in your home to someone young starting out on their own (like a college student). Or consider renting to another retiree to build some sociability into your (or their!) life. You can also rent out your driveway, your garage, and storage space in your attic or basement!
You worked hard to be able to buy your home. Why not put it to work for you?