Equity

Acquiring real estate property over your lifetime can be a great way to build equity. With patience, almost all real estate will appreciate in value over the course of many years, even in a sluggish or down market.

You can then borrow against equity in the property or sell the real estate for cash and use the proceeds for investment opportunities or more liquid income. Putting some of those capital gains into a retirement savings fund could even save on your capital gains taxes while still protecting your nest egg.

Rental Income Streams

A real estate investment property doesn't have to sit empty. You can earn income on that property through tenants and rent. By renting out a property with a mortgage on it, you can use the rental income to pay most or even all your monthly mortgage, cover maintenance fees and even see a small monthly profit. In the meantime, you'll be accumulating equity on the home.

Once the property is paid off, that rental income becomes pure profit after maintenance costs while being a landlord can offer you tax breaks on everything from property expenditures to fees for property management companies.

If you're older or simply don't have the time to screen tenants, shovel snow and ice off walkways or maintain a property, hiring a property management company can take care of that need. Certainly doing so will cost you money, but they can take care of all the duties and obligations associated with being a landlord.

Flipping Properties

While purchasing low-cost housing, improving it and later reselling it for a profit involves a lot of sweat and hard work, it can be a great low stress "job" for the retiree. Before you invest in real estate flipping, invest your time in location research, planning and finding a great real estate agent. This is one area where the virtue of patience can pay off handsomely.

Reverse Mortgages

A reverse mortgage can turn your property equity into liquid cash while you retain ownership on the property. Typically, no payments are required on the home equity loan until you are either no longer resident on the property or you sell it.

However, interest will begin to accumulate on the property as soon as the reverse mortgage process begins. This means you won't have to make payments, but your loan will be accruing interest. The loan is then paid from the proceeds of your estate or, again, once you move or sell the property. If you pass away before the loan is paid, the inheritors of you home would need to do so.

By turning your property equity into cash, you can create an income for yourself during your retirement years. But remember that you will be simultaneously depleting your net worth and the overall value of your estate. So this is a tradeoff that merits due consideration before jumping in.