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While real estate is not always a priority focus for asset allocation in retirement portfolios, it does, in fact, offer benefits investors should consider. Diversification is one of its greatest benefits.

 

Why Your Investment Options After Retirement Should Include Multifamily Real Estate

Aug 23, 2018

Increasingly often, retirement is a mixed blessing for people. It can be an opportunity to enjoy the fruits of life’s labor and a time of financial stress. Multifamily real estate is one of the investment options after retirement that can help diversify your portfolio and reduce its level of risk, thereby lessening financial worry. If you were a real estate investor before retirement, you probably still have property assets that can be used to your advantage in 1031 exchanges.

The Appeal of Multifamily as an Investment Option After Retirement

While real estate is not always a priority focus for asset allocation in retirement portfolios, it does, in fact, offer benefits investors should consider. Diversification is one of its greatest benefits. While real estate is subject to market trends like all investments, it generally does not correlate highly with the stock market, and so it may provide you with a dependable income regardless of stock market events. As a result, it can lower the overall risk level of your portfolio. It should be noted as well that real estate, in contrast to stocks, is highly illiquid.

Additionally, multifamily real estate offers benefits that other property types do not. Multifamily properties often provide slow, steady growth in both income and value. They are more resistant to economic downturns, as housing is one of the most basic of human needs, and, unlike most other categories of real estate, they are not highly dependent on one or two residents, because rental income from multiple residents decreases the impact of individual vacancies.

On the other hand, multifamily real estate presents challenges all its own. This is most true when you choose not to hire professional management for your property. In that case, genuine passive income is not provided. While managing your own property saves money and gives you the opportunity to remain active in your retirement, it also means being available around the clock. Seeing to emergency repairs, interviewing prospective tenants, and arranging for landscape maintenance, for example, can be stressful.

Financing Multifamily Real Estate After Retirement

Your investment activity after retirement is largely determined by the portfolio with which you begin retirement. You are unlikely to get a mortgage in retirement, so your real estate transactions will probably be self-funded. Your IRA may be a good source of financing, but it can be complicated to use for that purpose. You must have a self-directed IRA, which can be set up at many, but not all, financial institutions, and a custodian for the account to ensure that the many rules and restrictions for using account money are followed.

If you already have real estate assets, you can conduct a 1031 exchange to obtain property without paying capital gains tax and depreciation recapture. You can exchange a property you own for one of equal or greater value using the services of a qualified intermediary. And if you leave that property to your heirs, the taxes will be “stepped up’ to market value and capital gains and depreciation from your ownership will be wiped out.

Other investment options after retirement are REITs (real estate investment trusts) and private placement investment through a real estate investment management firm. REITs offer shares in real estate holdings that may trade on exchanges or privately. Exchange traded REITS tend to correlate with stocks, so they do not have the same securities market risk that a private placement does. A real estate investment management firm can offer portions of a building, such as individual apartments, pooling the risk of vacancy with the other co-owners. If you already own real estate assets, you can also invest with an investment management firm through a 1031 tax-deferred exchange.

At CWS Capital Partners, we are a fully integrated multifamily real estate investment management firm that offers everything from due diligence and multifamily real estate valuation to transaction support and property management. We specialize in assisting our clients with 1031 exchangesacquisitionsrepositioning, and development. We also own and manage luxury multifamily investment communities in major markets around the country and employ a team of experts who can help you hone your investment strategy.

For more articles like this one, check out our investment strategy blog posts.

Please contact us to learn more about investing with CWS Capital Partners, or view our current offerings by completing our self-certification form for accredited or qualified investors.

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The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.

All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.

Advisory services are provided by CWS Capital Partners LLC, a registered investment advisor.

Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.


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