Many people look forward to retirement. Personally, I find the idea a little stressful.
As someone who thrives on staying busy, I can't imagine not spending the bulk of my days working. Also, the idea of having to live off of savings is pretty daunting -- even though I'm doing my best to build myself a decent nest egg.
Not only am I trying hard to save money for retirement, but I'm also making sure to put my money to work by investing it. And to that end, I own my share of stocks and exchange-traded funds (ETFs).
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I also have a fair amount of money invested in real estate, and my hope is to hang onto those investments well into retirement. But my real estate investing strategy doesn't involve owning income properties. Rather, it entails putting money into what I consider to be a less risky and cumbersome asset.
The problem with income properties
Many people do quite well for themselves by investing in income properties. After all, you can make money not only via monthly rent payments, but also on the sale of your property if its value appreciates enough over time.
But owning an income property takes lots of work. You have to manage tenants, keep tabs on rent payments, deal with vacancies, and address maintenance issues as they arise. Those are tasks I don't have time for.
Then there's the risk of owning income properties. Any time you own physical real estate, something can break. And then, it's on you to pay for the repair in question.
Plus, when you own property, the taxes you pay each year for the privilege of ownership can rise. So can your insurance premiums. These are risks I'm not eager to bear.
My real estate investing strategy is simpler
The real estate assets I own are REITs -- real estate investment trusts -- which are companies that own and operate different portfolios of properties. They make money from leasing activity and tend to pay higher dividends than your average stock.
Some REITs are publicly traded; others aren't. But either way, I like REITs because they allow me to put money into real estate without having to bear the risks associated with owning income properties.
My goal is to hang onto my REITs for many years, all the while collecting dividend income that I reinvest. And ideally, I'll keep those REITs in my portfolio as a retiree. At that point, I may need to cash out my dividend payments and use them as income, rather than reinvest them, but that's OK.
Owning an income property can be a rewarding and lucrative experience. But I'm nervous enough about retirement as it is, so I really don't want to put money into an investment that's apt to stress me out even more.
Owning REITs, however, has been a fairly stress-free experience for me. Sure, the value of many of those REITs tumbled last year in line with the stock market's broad downturn, but that's to be expected. At least this way, I don't have to worry about withdrawing thousands of dollars from my savings to pay for repairs on a home I'm not even living in.
