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  • Writer's pictureDarryl Smith

The Pros & Cons of Using Real Estate Investments to Fund Your Retirement


Investing in real estate can be very lucrative, and I’m often asked if it’s a good idea to buy investment properties to help build a retirement nest-egg. For people who are business savvy and have the time, energy, resources, funds…and a fair dose of patience to be a landlord, this can work out well. However, there are also some legitimate downsides to this type of plan. Let’s have a closer look at using real estate investments to fund your retirement, and what your best options are.

Being real estate rich and cash poor As we all know in the investment world, diversity is key. We don’t want all our eggs tied up in one basket. If you own a few properties but don’t have much else to fall back on for your retirement, you could be in serious financial trouble if the real estate market takes a nosedive or interest rates skyrocket as they did in the early 1980’s. You don’t want to be ‘real estate rich and cash poor’ as the saying goes. Owning a principal residence is often enough of a real estate investment for most people, along with other retirement strategies in place such as RRSPs, TFSAs, and so on. When you own additional investment properties, you have to take on the role of being a landlord – and a good one at that – to attract the best tenants. You do have the option of paying for a property management company, but that can significantly eat into your income.

Issues and concerns Being a landlord is often a full-time job, and can add a lot of pressure and headache. In later stages of life, few of us really want to be concerned with collecting rents, finding tenants, or worrying about maintenance, damage, and repairs to their rentals. We want to enjoy our retirement fully, without having to chase down unpaid rents or repair a leaky roof in the dead of winter. Further, an investment property is not a liquid asset; when it comes time to sell, it could take several months (and significant funds) to get the property ready to list, then several more for it to sell. Comparatively, stock market sell orders are often completed the same day! While we recognize that neither real estate nor the stock market are guaranteed to reap impressive financial gains, the threat of rising interest rates as well as our hot and cold real estate market can add another level of risk.

Setting retirement goals The first thing to ask yourself when thinking about real estate investing is: What’s your vision of retirement? For myself and my clients, it’s about having no debt and a structured cash flow program in place to fund all forms of investing, insurance, bill paying, spending, and vacation money and have everything running on autopilot. Planning also includes Further, it’s about having cash reserves and contingency plans in place to ensure retirement remains as stress-free and enjoyable as possible! When we think about overall investments, the goal is to maintain the principle of the investment and live off the growth - whether it be from rental income, dividends, interest or capital gains. Keep in mind that owning real estate also has a lot of fees, taxes, maintenance, legal and accounting costs that will impact net profit. While there are certainly those who manage investment properties well with great financial benefits, when it comes to relying on it as a main source of retirement income, it’s not a sure bet and can create stress at a time in your life where the goal is to focus on family, travel and enjoying the retirement you work for decades to create. For this reason, it’s always important to talk to a trusted financial advisor. Darryl Smith of Synergy Life Financial is here to guide and encourage our clients while preventing dips in your financial strategy while helping to create financial structure. Whether your goals include retirement, education, estate plans and more, you can have the financial peace of mind knowing you’ve got a thorough, strategic financial plan in place.

Be sure to connect with Darryl today by calling 705-434-0562 or email to discuss retirement planning and investment options so you can get started down the path to retirement within the next 10 years.

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