You spend your whole life planning and saving for your first home, starting your family, paying for kids college, and finally saving for your retirement. It is not unusual for soon-to-be-retired investors being concerned that there will simply not be enough money to allow them to live a comfortable life after they retire.
Many retirees or soon to be retirees have found commercial real estate investment a perfect solution to ensure that they can live an exciting and full life after they enter retirement.
In the United States, Baby Boomers are not only living longer than ever but are remaining vital and active for years after they retire. Most who are planning life after work want to maintain, or even enhance, the way they have always lived. Even with careful planning, often 401(k)s, stocks, bonds, and the value of their home will not provide the means to continue the way they envisioned retirement.
Retirement Friendly Strategy
Commercial real estate investment can be an effective way to diversify and balance your investment portfolio with assets that will always have a tangible value. The money you are investing for retirement needs to be placed in investments that are stable. Placing your investments in a volatile stock market can create anxiety and stress that can impair your sense of well-being. When you are nearing retirement, you need to look at investment strategies that will be safe and provide a reasonable return on your investment. Even during downturns, the commercial property investor will typically see less disruption, because rental income does not change in the short term.
Commercial real estate can be just the answer for many who are planning their retirement.
Stable Income Stream
As we have seen in the last few months, the stock market can be extremely volatile. Corrections, or simply bad market sectors, can create losses that can quickly diminish any retirement portfolio. Commercial real estate properties are a long-term investment. Changes to the marketplace are measured over years, not hours like stocks. This provides both more stability and less stress.
While every investment is unique and there are no guarantees, as a general rule, real estate investments can create a stream of income during your retirement. The underlying investment will rise along with inflation. Rental income from commercial real estate properties tends to be more stable than the stock market.
The lease terms for commercial properties are typically well suited for retirement planning as well. Most lease terms for commercial properties, generally ranging between 3 and 15 years, provide stability for the property owner.
Commercial Property Investment is Better Than Residential for Retirement Planning
Commercial real estate removes many of the risks that can be associated with buying, flipping or renting single-family homes. If the tenant moves out of a single-family home, the rental income is lost. If you have a multi-family or many commercial properties, the loss of a single tenant will not substantially impact your income stream. In addition, commercial leases typically include annual fixed rental increases or a fixed amount greater than inflation. This is not normally a part of a residential property investment.
There are two compelling reasons that commercial real estate leases are an ideal hedge against inflation.
Historically, commercial real estate property values have appreciated at a greater rate than inflation. Again, there are no guarantees that this will continue, but looking at historical performance is often a good indicator of the future.
The second reason commercial property is an excellent hedge against inflation is that commercial leases typically include annual fixed rental increases or a fixed amount greater than inflation. This is not normally a part of a residential property investment.
Normally the most difficult step in adding commercial real estate to your retirement strategy is knowing where to begin and learning the process. Commercial Academy has you covered. Our team has helped thousands of individuals just like yourself.
We provide comprehensive training and give you access to our tools and team to help you seamlessly add commercial real estate to your investment portfolio.