How You Can Use Real Estate To Fund Your Retirement

2006-08-23

For most people, the house they choose to buy will be the single largest investment they will make during their life. Many investment experts will tell you that purchasing a home is an example of a positive liability. Even though you have to make payments on it each month, it tends to appreciate in value, while things like cars, clothes, and electronics will depreciate in value. Next to the stock market, real estate is one of the most popular investments in the United States. When the real estate market is down, the stock market will generally be up, and vice versa.

Real estate has always been valuable for a number of obvious reasons. First, there is only so much land available in the world, and you will have control over the location and the best use for the home. One way you can use your home to fund your retirement is a 1031 exchange. In a nutshell, 1031 exchanges could be called the 401K or IRA for your home. They don't have a lot of restrictions, and this means they are flexible. You can purchase and sell whenever you want, and you are the person who is responsible for making decisions. Any capital gains that you get can be tax deferred, and the money can be taken out early without a penalty.

Unlike many retirement investments like IRAs or 401Ks, a 1031 exchange can allow you to enjoy the money you save before you become 70 years of age. Any taxes that are charged are lower than what you will find with a 401K or IRA. Another way you can use real estate to fund your retirement is through the use of a technique that is called gifting. The vast majority of Americans do not use gifting as a method for funding their retirement. With gifting, you can give up to $11,000 each year to your children or grandchildren, and you will not be taxed. This will commonly be done with the equity line.

Continue to Part 2 of How You Can Use Real Estate To Fund Your Retirement

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