Buying real estate instead of saving for retirement?

Hi, I'm a little nervous that I am not able to save much for retirement due to buying two houses. I'm thinking it's good for retirement to have a few houses paid off, am I thinking correctly? I was thinking later on having one house at least paid for and the other renting will help in retirement - but am I being stupid? Thanks for your opinion!

6 Answers

  • 1 decade ago
    Favorite Answer

    Historically, real estate has been an excellent investment, but as we can see now, real estate has its ups and downs too. If you are buying real estate now, you are probably making a wise choice. If you are holding real estate that you may have paid a much higher price for, I think you are making a wise choice holding onto it too.

    You have a good plan, however, it is very important to diversify. Do you have a 401k plan you can participate in? If so, it would be wise to start your diversification there. Make sure your 401k is well diversified too. Don't be afraid to ask a professional. A good professional is more than worth his/her price.

    I would also recommend a good cash position. A good plan involves more than just the max return. Sometimes not losing is the best way to gain. You have a good start in real estate, so your next focus should be your 401k, a good cash position, and then individual stocks, bonds, REITS, annuities, etc.

    I spent 11 years as a stockbroker/financial planner before becoming a banker. If you would like free professional advice on how to allocate your 401k, don't hesitate to email me. I'm happy to help.

  • 1 decade ago

    While real estate has historically increased in value over time, the returns on equity markets (stocks, etc.) has outstripped the gains in the real estate market in nearlly all cases. There are a few exceptions in markets such as NYC or San Francisco where there is little in the way of new construction due to non-availability of land to build on so unless you're invested on one of those markets, you'll do much better over time with equities than with real estate.

    When comparing 50 and 100 year rolling averages, real estate has barely kept up with inflation. Equity markets on the other hand have done stunningly well by comparison.

    If your real estate investments are heavily leveraged, i.e. using borrowed funds to invest, your rate of return can be pretty substantial when compared to your cash invested, i.e. the down payments. However sitting on a few paid-off homes in hopes of having a decent retirement is a fools mission. You will do far better selling them off and putting your money in carefully selected equity investments than you will sitting on the houses. A well-balanced equity portfolio will return nearly double over time compared to real estate in nearly all cases.

  • 1 decade ago

    Excellent question.

    In my opinion you are doing the right thing in trying to generate a n additional income stream to fund your retirement. Whether property is the right answer will depend on where you live etc.

    But in reality we are not talking short term here as a lot can happen in a few years but in 10,20, 30 years? No one can really guide you and even the specialists can only look at the past to guess at the future.

    Keep pushing for additional revenue streams because this will give you great flexibility as you get closer to retirement.

    There is an interesting article on this at

  • 1 decade ago

    House prices have been very high for the last few years and are declining right now, due to the subprime mortgage fiasco. You should have some savings in something more secure than real estate.

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  • Anonymous
    5 years ago

    your paying 1/3 of the rent? and banking in a 401k 700-900 a month? that is definitely the best thing to do from a money point. If you were on the hook for 100% of the rent, then things are different, but if your happy enough with the living arangements, nothing will beat that pre-tax investment. the big thing to consider is that living arrangement, your living in 1/3 of a residence! you need to compare apples to apples, what if you bought the place your currrently living in and then you become the landlord to your roomates?

  • Anonymous
    1 decade ago

    Smart moves.

    Specially if you have more than one children.

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