They say that the most valuable thing you can purchase in this economy is land, since they aren't making any more of it. However, the second most valuable thing may be the house on that land, since housing prices seem to keep climbing each month.
Noted financial guru Dave Ramsey has some surprising advice for retirees who are hoping to make some extra cash with one of these investments, and it may ring true for everyday investors as well. Keep reading to learn more about what Ramsey told one caller who recently called into his show, and why he says this stressful investment is best left alone.
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A man named Lee from Omaha called into The Ramsey Show recently, asking for advice after he said he was getting mixed messages from his wife and friends. According to the 68-year-old, his friends had recently started pressuring him to invest in real estate after he used some of his IRA funds to pay off his mortgage, telling him that diversifying his investments could be a smart money move.
However, Lee says his wife isn't on board, which is why he was turning to the financial guru for help. Ramsey was quick with a brief piece of advice that really summed up his feelings on the matter: "Listen to your wife," he said in response to the question.
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Why Are Real Estate Investments Risky in Retirement
"Listen to your wife" is typically great advice, but there's more than just a relationship dynamic at play here. That's because Kiplinger lists several reasons to avoid real estate investing in retirement.
First, you cannot count on monthly rental payments to subsidize your income. It may seem like you'll be getting a hefty check from your tenant(s) every month; however, things like vacancies, lack of payment, repair costs, and even insurance increases can all take a huge chunk out of that money.
Related: Influencer Claims Dave Ramsey’s Methods ‘Keep You Poor’ and People Are Very Divided
Next is your tax implications. Real estate taxes continue to climb, which means you'll still be making monthly payments on the property, even if you own it free and clear. Not only that, but then there's Uncle Sam to consider. That income can push you into a higher tax bracket, increasing your bill. It can also add to the amount of money that you are taxed when it comes to Social Security, and increase your Medicare Part D and Part B premiums as well.
Lastly, you have to worry about the ongoing maintenance costs of the property. I'm not just talking about repairs and upkeep, either. Legal fees, advertising, and having someone to actually walk the property or answer the phone when there's a problem can all add up as well.
While I get the allure of building a decent-sized real estate portfolio in retirement, owning an investment property could potentially lead to more headaches during a time when you're supposed to be living a quieter and more relaxed life, adding to the many reasons why Ramsey likely suggested Lee pass on this idea from his friends.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
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