Looking to enhance your retirement income? Real estate investing is a great option.

We all know saving for retirement is important. Diversification is key, so why not add some real estate investments to your traditional investment portfolio? Whether your interest lies in purchasing a second home, a rental property or a future home for your children, real estate can offer a unique path to a secure future.

While affordability can be a concern — the average household income for 2018-2022 is $96,505 per the United States Census Bureau, and the average home sale in Massachusetts is $609,415 as derived from the Zillow Home Value Index as of August 2023 according to The Motley Fool — strategic investments can still pay off.

Real estate can be a safer investment than other options, such as stocks, since home values tend to go up as inflation rises. For example, Hopkinton home sale prices rose by 5% in 2021 while interest rates climbed more than 3%.

With available homes scarce, rental prices are going up. This gives you the opportunity to have a consistent income stream from an investment property. The popularity of short-term rentals such as Airbnb and Vrbo is increasing. More people are seeking to stay at unique properties rather than hotels, which can lead to higher incomes than having a traditional lease on a property.

If you already own investment property and are considering selling, a 1031 exchange could allow you to defer capital gains taxes by selling your rental property and reinvesting the proceeds, less any mortgage paid down, in another investment property of equal or greater value.

Investors who are considering a job relocation but plan to return in a few years may find renting out their current home to be a smart move. After renting your home out for a minimum of two years, you may qualify for a 1031 exchange when you eventually sell, saving you on capital gains taxes. These taxes typically apply to profits exceeding $500,000 for married couples, not including capital improvements made to the property.

The rules for 1031 exchanges are complex. It is a good idea to consult a tax advisor for more detailed information before proceeding. That said, 1031 exchanges can be a great way for savvy investors to get a high return on their investment.

If you are thinking about investing in real estate, contact a local real estate agent to assist you with the process.

Kim Foemmel
Foemmel Fine Homes
1 Lumber Street, Suite 207C
Hopkinton, MA
(508) 808-1149
Kim.Foemmel@gmail.com
FoemmelFineHomes.com

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