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Buying real estate as a retirement provision

Becoming property owner thanks to favourable financing conditions

Time and time again, discussions go on about a vast number of different products when it comes to private retirement provisions. Sometimes, secure assets such as bonds or time deposits are recommended, sometimes recommendations turn towards stocks or investment funds. However, it is very rare that the discussion includes the most common part of private retirement provisions that has been used for many decades, even though not always on purpose: buying real estate.

Aside from investing money into real estate directly, for example by buying shares in open or closed property funds, buying real estate as a retirement provision is a perfect way to secure one´s own standard of living after retiring. The value of real estate is a permanent one and it is a good way to resist inflationist tendencies. Moreover, it is likely that paying for a loan is cheaper than paying rent, especially in a time of low interest rates that can be seen today. Real estate can be part of retirement provisions in two ways. First of all, the house or the apartment that was bought is to let it instead of living there. This way, one gets a regular income from the rent that is still coming in even after retiring. There is a catch to this alternative, though; as a landlord, one has to take care of a number of different things about the real estate itself and the tenants living there. Many people do not want to take on this ordeal. Yet there is another alternative when it comes to buying real estate as a retirement provision. After buying a house or an apartment, one can live there. This means that there is no regular income as there is no rent paid by tenants, but there is no need to pay rent either, meaning that the available income after retiring is higher. To use real estate as a retirement provision this way, it should be free from any kind of mortgages. The main advantage of living in one´s own home compared to other forms of investment is quite obvious. While it is possible that invested money loses its value when inflation hits or because of other factors, this risk can be counted out when it comes to real estate. Even if the value decreases, it is not important for the owner as he is not selling the respective piece of real estate. If inflation is high, the owned property will be worth even more. Living there for free has to be compared to paying rent somewhere else and the unpaid rent is something like an additional pension.