I'm Too Old To Invest
|If you have ever entertained the notion of investing in real estate but have thought you were just too old to do so, the time to reconsider has come. Age brings with it many elements such as conventional wisdom and years of experience. The former, often being the culprit that leads to a lower risk tolerance for the mature investor. |
This lower tolerance coupled with the constant market fluctuation leads to the assumption that investing in real estate would be a bad idea. Older investors often mitigate such risk by limiting their exposure to the market. When in actuality, they can also do so by making wise purchase decisions by using their many years of experience.
Senior citizens and retirees are also typically dependent on the money accumulated in their respective retirement accounts to fund their living expenses. Since they are no longer contributing money to their retirement accounts, they are more concerned with their portfolios than younger investors, especially with such a swinging market. Therefore, they are less likely to reach into their savings and available monies and invest in property.
Instead of focusing solely on the current market, retirees and others living on a fixed income should also consider their purchasing power over the next twenty-five years. Inflation is the greatest risk, and investing now would be extremely beneficial for the future. In addition, one should also understand that investments are needed in order to keep up with the pace of inflation and to protect purchasing power and principal. Abandoning possible growth because of not thinking there it time to re-build one's retirement portfolio can offer substantial risks as well as missed opportunities for profitable endeavors.
It is a good idea to establish safe and liquid investments to fill for one's investments for the future two to five years. In doing so, financial security is established. With the allocation of funds in this part of the portfolio, making an investment can be more easily focused upon. As maturity brings with it a change in lifetime goals, it would be a wise decision for any investor to review and reassess his/her approach to real estate over time. Anticipating a specific date of retirement would also be beneficial. Defining this date allows for consideration in of financial independence, taxes, inheritance, lifetime goals, management abilities, and health care needs.
There are several advantages to age centric real estate investing in regards to older investors. If there is a substantial gain from the sale of property to be made, senior citizens have the ability to use the installment sale option. This provision allows the seller to postpone the taxes to be pain on capital gains. This in turn assists in the balancing of income necessities and gives them the ability to legally avoid paying capital gains taxes by spreading them out over time.
It requires that the seller receives a portion of the proceeds of sale in one or more tax years instead of the year of sale. It can also be used to hold back receipt of large amounts of taxable gains during the years when you have a larger income. If you do not use this plan, the taxable gains in conjunction with your income could potentially put you in a different tax bracket and could ultimately lead to paying more taxes.
Investments can be made along a variety of avenues. Clearly defining the type of property investment will fit personal needs, goals, and lifestyle is a good way to begin. When considering the purchase of a house, a general rule of thumbs is that the housing cost should not exceed 25% of your total spendable income available.
Applying for maximum homestead exemptions is another way to make your situation as profitable as it can be. Doing this allows you to reduce the tax assessment by a specified amount in order to determine the final taxable value of the property. Real Estate Investment Trusts (REITs) to most effectively and efficiently manage real estate both locally and abroad. Consider a reverse mortgage. A home Equity Conversion Mortgage (HECM) is an option if you have a dwindling portfolio and you cannot manage your living expenses.
Also, shifting to an income property in a down market can be quite lucrative. Those who wish to sell their property and wish to receive the most possible profit should consider other options. For example, seniors often find themselves living in a huge house which formerly housed an entire family. In this type of situation, it would be profitable to rent the home as is, convert it to a business complex, or add units to it. This would allow you sell it in the future in a better market while continuously generating additional revenue on the property and allow you to keep your older tax basis.
Renting the property also offers the opportunity of lower real estate taxes than if you had initially sold the house and bought a smaller one in which to live. If you are simultaneously living in a new home during the sale and do not quality for or the $125,000 capital gains exemption has been used up or it is not applicable to your specific case, look into qualifying for a tax-free exchange under the IRS Section 1031 Exchange provision.
When thinking about investing in the real estate market one needs to weigh the pros and cons in regards to his/her financial situation and personal lifestyle. It is true, that younger investors are more apt to take greater risks and can offer to put in more sweat equity than their older counterparts. Older members of society are generally more prone to focusing their attentions on health, maintenance, and the enjoying the assets of their wealth and holdings. But they also bring to the table their many years of experience in dealing with the real estate market. Age does not have to be the most relevant component factored into the equation when deciding to invest, but what an investor can potentially have to offer should be.
|Jeff Adams is the nation's leading expert in finding motivated sellers, hungry buyers, and private lenders through the Internet.|
His automated online investing system for attracting buyers, sellers, and investors has allowed him to do over 350 deals since 1995 while having a regular job the whole time as a firefighter!
After working at real estate investing the hard way, Jeff finally swore to himself that he'd had enough: He then invested serious time and money into creating systems that would pay off in less aggravation, more time, and more profits! Jeff developed systems that meant...
- He could stop knocking on doors of people in pre-foreclosure. Instead, the real motivated pre-foreclosure prospects now call him;
- He didn't have to compete head-to-head with other investors that had the same pre-foreclosure lists; Jeff's systems now set him apart from the competition;
- Jeff was no longer tied to the office, because his "Virtual Office" systems work from any web connection;
- He saved hundreds of thousands of dollars each year in real estate agent commissions, because his systems now do that work for him; and
- Jeff also saves hundreds of thousands each year in hard money lender points and fees. Jeff Adams now has all the money he needs, lined up and ready to go.
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