10 Ways to Make the Most Out of Real Estate Investing Before You Retire

Real estate investing can be an incredibly powerful way to grow your retirement portfolio outside of traditional investments. If you're using real estate investments to fuel your retirement, here are 10 ways to make the most of your real estate portfolio before you retire.

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Everyone's retirement goals are different. Having 10 to 12 times your ending salary saved for retirement is ideal but not always achievable depending on when you started saving. Thankfully, real estate investing can help offset your retirement savings by creating passive income.

Rental real estate is one of the best ways to create a consistent and reliable income source to live off of before and well into your retirement years. Start by determining the amount of cash flow you'd like to earn from your rental properties each month and use that as a driver for your real estate investment efforts moving forward.

ALSO READ: How to Invest in Real Estate: A Complete Guide

If you plan to invest in real estate, you'll need to have the money to do so. Almost all investment loans will require a 20% down payment, which can equate to tens of thousands of dollars needed upfront per property. Based on your retirement goals, determine how much money you should be setting aside each month or year to help fund your real estate purchases.

As a real estate investor, it's important to determine the best markets for achieving your investment goals. For example, high-cost markets may be difficult to invest in because the real estate is expensive, diminishing potential returns. This could mean that to achieve your goals, you will have to look outside of your own neighborhood, market, or even state. Just make sure you choose wisely -- location really is everything in real estate.

Maintaining your property is an important part of being a real estate investor. Making improvements and consistently staying on top of routine maintenance over time means you have less deferred maintenance to deal with in your retirement years. It also helps your property stay competitive in the rental market and provides safer and better living conditions for your tenants.

ALSO READ: How Supply Chain Issues Could Impact Your Rental Property

Single-family rental real estate is by far the most popular way to invest for retirement, but it's not the only way. Explore the different avenues for earning money from rental properties, which could include short-term vacation rentals or even commercial real estate. Consider further diversification by owning rental real estate in different markets or neighborhoods. Doing this means you are reducing portfolio risk while still generating passive income.

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Cash flow is king if you're investing in real estate for retirement. A mortgage can be a super helpful way to purchase real estate with less money upfront, but it also means you earn less cash flow because of the monthly payment.

Many investors choose to funnel any cash flow earned from the property to pay down the mortgage early rather than collect cash flow before their retirement years. Doing this not only helps reduce the interest you pay to a lender but also means the property's cash flow can increase dramatically once the mortgage is paid off, helping further fuel your retirement income.

No one wants to spend hours of their retirement years managing a ton of rental properties. That's why it's crucial to find the right team to help manage your portfolio, including a property manager, maintenance team, and even a bookkeeper or accountant. Doing this before you retire means the systems will be in place and running smoothly for those retirement years.

Most real estate investors choose to purchase real estate with their own money, outside of a retirement vehicle. But there are ways to invest in real estate through a retirement account, called a self-directed IRA. This tool allows you to shelter taxes, similar to a traditional IRA account, but invest in alternative investments such as real estate. This can be an incredible way to maximize your retirement savings while still creating passive income through real estate.

ALSO READ: What is a Self-Directed IRA

While many estate planners advise you to hold on to real estate till death to help avoid costly taxes, there may come a time when you want or need to sell a property in your portfolio before you retire. And that will almost certainly result in capital gains taxes.

To minimize the amount of capital gains taxes you pay in a single year and the loss of cash flow you may suffer from the sale, consider selling the property with owner financing. This can help reduce your tax burden by spreading your capital gains across the term of the loan while also creating a new avenue for income that can pay well into retirement.

Real estate isn't a set-it-and-leave-it type of investment strategy. It takes careful planning, analysis, and management to ensure your portfolio is operating with the least amount of risk and the greatest upside.

Do quarterly or annual checks on your portfolio to ensure you're on track to meet your retirement goals, and stay on top of your team members to make sure the systems are operating as they should.

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Making the most of real estate investing before you retire isn't as hard as you might think. With a little persistence and clear-set goals, you can maximize your real estate earnings to help fuel and sustain your retirement for the long term.

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