For most people, having a home under your name is already a sign of wealth. This is since not everyone can afford to buy their own real estate. Thanks to the numerous efforts of the government and mortgage companies, one can now buy a house at a more affordable rate. Still, the question remains. Is it true that homeownership can help you build enough wealth for a comfortable retirement?
Homeownership Perks: Is It Worth the Risks?
With homeownership, one can build equity and enjoy seeing and using their tangible asset even before paying for it in full. You get that feeling of security and enjoy your own privacy. You can even experience a sense of accomplishment knowing every penny you spend helps you reach your ultimate goal.
Owning a house also offers economic benefits like the following.
- Protect you against changes in rental costs
- Give you a better sense of control over your property
- Reduce monthly payments overtime
- Improve your credit standing over time as you pay off your mortgage
- Leverage homeowner tax preferences
- Build your wealth
Homeownership comes with a lot of perks but not without a substantial amount of risks. House hunting and the mortgage process can be complex. There are the upfront costs and numerous expenses associated with the sale and after.
When you own a house, there is a need to ensure the safety of the property. This includes home maintenance and repair and the need to conduct electrical inspections for safety purposes. An electrical inspection report (EIR) will help you boost the safety of the property so you can find ways to improve its efficiency and save more money in the process.
The risk of default is another con. Even tiny homes can cost a considerable amount of investment. Failure to make timely payments can lead to foreclosure.
Even with the number of risks associated when buying a house, the pros usually outweigh the risks. This is since you can use the equity you build as needed during your senior years.
How Can Homeownership Help Improve Your Retirement Income?
There are many ways you can use your home to your advantage during your retirement years. These include the following.
Tap into Home Equity
Whenever you need extra funds to finance anything, you have the option to use your home equity. This is the calculation of your property’s current market value compared to any liens attached to it. The more you pay down your mortgage, the higher your equity gets.
For instance, you wish to age in place. If you are house-rich but lack the funds to sustain your needs, you can opt to sell your home instead and downsize. This can mean selling the house to buy a cheaper one and enjoy reduced expenses.
Owning an Investment Property
Seniors can turn their property into short or long-term rental real estate. For instance, you can rent out your spare room and earn more while staying on the property. Others use their large backyard to rent out to tiny house homeowners or businesses.
But if you don’t like the idea of being too near your tenants, you can also choose to buy another investment property instead. You can buy a residential building and start your way to become a landlord. If you buy a multi-family home, you can stay in one unit and rent out the rest.
Crowdfunding vs. REITs
If you are not into buying properties but still want to invest in real estate, you can choose to do real estate crowdfunding instead. You can earn money from rental income and sales. You only need to invest in a small share, spread your investment, and mitigate risks.
As for Real Estate Investment Trusts, these allow you to invest through mutual funds. Instead of stocks and bonds, you’re investing in real estate or mortgage insecurities. You get to avoid taxation and earn a considerable amount of cash.
Owning any property has its pros and cons. But there is no denying that the perks associated with homeownership can indeed greatly help improve your income after retirement. Be sure to do your research before investing in any real estate investment scheme to safeguard your senior funds.