“The major fortunes in America have been made in land.”
-John D. Rockefeller
Commercial Real Estate (CRE) can be a superior wealth creation tool for every generation. CRE provides above-average annual yields, the ability to appreciate in value and long-term benefits that many believe far outweigh stocks, bonds and other investment types. Here’s why investors of every age should invest in real estate…
- Baby Boom Generation (Born 1946-1964) – For the next two decades, approximately 10,000 baby boomers will reach retirement age daily. At retirement, obtaining the highest cash income without reducing your principal equity investment is paramount to ensuring an extended retirement income stream. Commercial real estate provides significantly higher cash yields than stocks, bonds, treasuries and savings rates. The Baby Boom Generation could consider stabilized assets leased to strong tenants on a long term basis to generate a substantial cash return while preserving their principal nest egg.
- Generation X (Born 1965-1979) – Approximately 50 million Generation X-ers have been in the workforce for up to two and a half decades already. Typically professionals of this generation have saved for their retirement through a company 401K plan which are often limited to pre-chosen mutual funds with lackluster performance. What some don’t know is that there are other retirement plan options, including a self directed IRA, checkbook IRA, or Solo 401K plan which would allow them to have significantly greater flexibility to invest in asset classes other than mutual funds. The longer-term time horizon and lower liquidity of commercial real estate plays well into considering using real estate as a retirement vehicle for this generation of investors. Remember that commercial real estate’s unique ability to be leveraged with favorable financing effectively multiplies your equity as the loan is paid down. Generation X-ers could consider purchasing a commercial real estate asset with the intent to hold it through retirement – seeing that the asset is paid off and owned free and clear with a fully amortizing loan once they reach retirement age. As soon as a commercial real estate loan is paid off, the income stream it produces could be multiplied 3x to 10x depending on the original terms of the financing.
- Millennials or Generation Y (Born 1980-2000) – With retirement many decades away, Millennials could consider more “value-add” investment plays which typically have a higher level of risk. Millennials can also benefit from some of the longer term advantages of holding real estate, including its superior ability to hedge against inflation over time.
Commercial Real Estate has very clear and defined advantages over other asset classes and is considered by many as the best asset class. Despite these advantages, there is inherent risk in any investment. Continue to follow RealCrowd’s blog to learn more about real estate investing and be sure to like us on facebook and follow us on twitter. RealCrowd will expand on these ideas in future posts! Be sure to check back frequently!
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