Most people prefer to form the core of their retirement investment corpus with income-earning assets. However, there is another asset that is commonly held by people. This asset is real estate and it forms a big part of the safety element for people. Many people also consider this a necessity because when they retire their own home gives a sense of security few things can match.
Real estate here refers to a residential home. The asset here is used mainly for the purpose of residing in and in most cases does not generate any income. This is also not a liquid asset where the amount can be converted into cash in a few days by selling the property and getting the cash. Further, there has to be a lot of homework in the process because one also cannot change the real estate investment quickly and whenever one wishes to.
This is a high-value item and is usually a long-term holding for an individual. It also occupies a significant part of the net worth of the individual. But the property might not affect the flow of income directly when it is used for the purpose of residence. In most cases, the property is acquired during the life of the individual and this is then paid off by the time of retirement so that one is able to enjoy the benefit of living in it when one has retired.
This is often used to satisfy a part of the overall financial plan of the individual and is useful for the purpose of safety and security. During life it can be used for the purpose of staying and can hence save the money that would have to be spent as rent otherwise. It is a very useful tool for the purpose of diversification.
Routes For Using Real Estate
Currently, the only way for using this asset class is to buy a property and then hold it in one’s own name. The property market is slowly developing and it is expected that soon new options like real estate MFs will emerge. Real estate mutual funds will increase he participation because a lot of small investors with little sums of money will be able to invest in real estate.