How to Invest in NJ Real Estate for Retirement

nj real estate

Investing in real estate can be as rewarding as it can be stressful and intimidating. If you are close to retirement or newly retired, investing in a new real estate venture can be especially complex. A real estate investment for retirement needs to meet specific needs. Not only does your asset need to be a relatively sure thing, it also needs to be able to keep up with inflation. Many retirees look to real estate investments to provide supplemental income. There is a lot to consider if you are thinking of investing in NJ real estate for retirement. Here is what you need to think about.

1. Do you own your own home?

Most of the time, your home is your most valuable asset. More than savings or other luxury assets, your home has the potential to help fund your retirement. If you are in the position of owning your own home, you might already be sitting in the best real estate investment you could find. There are tons of different ways to use your home’s equity to generate income that will allow you to live more comfortably in retirement. You can downsize your home or use your home equity to fund long term care needs, amongst other things.

2. Buy It, Improve It, Flip It

Flipping is a popular way to get into the real estate game at any age. Also called wholesale real estate living, flipping is when you purchase a property with the intention of selling it to make a profit. If you know what you are doing and can invest in the improvement of a property, flipping can be a lucrative way to fund your retirement. But be wary of some common pitfalls when it comes to flipping homes. You need to have adequate real estate knowledge, home improvement skills, financial savvy, and cash up front to have a successful flip.

3. Residential Rentals

Another popular way to make your real estate investments work for you in retirement is to rent out your property to long-term renters. Long-term renters offer more stability and assurance that you will be able to meet your bottom line every month. Your renters need to be willing to pay enough to cover the mortgage on the property along with insurance, taxes, and regular maintenance. A rental property can provide a monthly flow of cash and can perform better than investing in the stock market. But you have to be prepared for the work and stress that can come with owning a rental property. Needy tenants or long-term vacancies can negatively impact your investment.

4. Commercial Rentals

Some real estate experts will say that owning commercial property can be more lucrative than residential real estate investments. There is certainly more risk and potential for complications—multiple tenants, commercial licensing requirements, long-term vacancies—but renting out commercial real estate can be a great way to generate retirement income. On the other hand, if you purchase commercial property, you could also consider running your own business. One of the biggest expenses of running a business is paying for the real estate. If you own the building outright, it could give you more financial freedom to grow the business you’ve always dreamed of.

5. Buy a Vacation Home to Rent

If you’ve always dreamed of owning a beach house or a cabin in the mountains, purchasing a vacation home and renting it for part of the year can allow you to have your cake and eat it, too. Renters looking for vacation homes are often willing to pay a premium for the right location. You could potentially make just as much money renting for a few weeks out of the year as you could renting year round with residential real estate. Keep in mind that vacation rentals tend to be seasonal money makers and are usually more expensive to maintain than residential investments.

Investing in real estate can be a great way to generate income during the retirement years. Veitengruber Law is an experienced real estate firm. We can help you with your real estate and financial planning goals.

The Multiplier Effect: What it Means for You in 2020

multiplier effect

In 2020, as you consider where and how to spend your hard-earned paychecks, there’s one economic force we at Veitengruber Law would ask you to consider: The Multiplier Effect.

Why exactly is it that money must be spent locally to benefit the community? In short, it boils down to the multiplier effect, which states that each dollar spent has an impact that is greater than the original sum.

For example, if you were to visit a New Jersey locally-owned hardware store to purchase a new door for your home rather than choosing to order from a big-box chain, the money you spent will allow that store owner to earn profits and pay a local employee, who will likewise spend money in the community, hopefully at another local shop, thus multiplying the positive impact of the original amount spent.

In this way, each dollar spent locally has the potential to send positive economic reverberations throughout the region, and will continue to do so as long as the majority of cash earned continues to circulate locally.

When we think about cities and towns in NJ that have gone from thriving and vibrant to economic wastelands, it is evident that these communities lack local investment. Without local businesses and investors reinvesting their wealth, the very infrastructure supporting the community fractures and collapses.

In order to avoid such conditions, businesses and investors alike must commit to the local communities that support them. By the same token, consumers can maximize the impact of every dollar spent by finding local businesses to support.

What will the multiplier effect mean for you as a New Jersey resident in 2020? Should you cancel your Prime account and forego the convenience you gain as a modern citizen of a global economy? Of course not. There are, however, ways you can spend locally without having to restructure your life.

First, if you’re in the fortunate position to have the capital to purchase an investment property in the new year, consider looking nearer to home rather than just shopping for the best bang for your buck. Not only will doing so encourage additional investments – people can’t invest money they don’t have, after all – but it will also improve the New Jersey landscape by ensuring property development continues to happen right here where we live.

Furthermore, every dollar spent in New Jersey is not only just earned and re-spent, but it is also taxed! Consider that cash spent locally can be taxed repeatedly – nearly indefinitely – until someone in that cycle breaks the chain by spending the money elsewhere. Tax dollars are absolutely essential to the establishment and maintenance of vital community services: schools, libraries, parks, and public transportation are just a few of the most beloved public services, none of which will survive without a steady stream of local spending.

What if you’re a first-time home buyer rather than a big-shot investor? Are the dollars you spend really going to have a significant impact, or does massive impact only accompany huge property investments? The answer couldn’t be clearer.

In the calendar year 2019, if we only consider NJ buyers who purchased new homes, they will have splashed out more than two billion dollars. When the National Association of Home Builders crunched the numbers, they calculated that the multiplier effect of such an astronomical sum would account for the creation of nearly four million local jobs, over $180 million toward wages and income of those workers, and $225 million in revenue for local tax funds.

Furthermore, this two billion will still be positively impacting the community after 12 months! Clearly, if we want our incomes to sustain, nurture, and grow the very towns in which we live, we have to commit to spending, investing, and hiring locally whenever possible.

If this article has sparked you to action, and 2020 will be your first year focusing on keeping your money circulating here at home in NJ, we couldn’t be more delighted. Here are easy-to-use resources to get you started:

 

 

How to Start Investing in NJ Real Estate

NJ real estate

You do not have to have a six figure salary to start investing in real estate. On the contrary, it is possible to get your start investing in NJ real estate with very little start-up money. Even college students are taking an interest in owning properties. Real estate investment has the potential for higher returns than other investments with an average annual return rate of 11.42% compared to 10.31% with the S&P500. With real estate investments, you have control over your assets: your knowledge and hard work directly affects the value of your assets. Real estate investment is a great way to grow your assets no matter where you are starting from.

While you don’t have to be well-off to get your start in real estate investing, you do have to have a well thought-out and realistic financial plan—and stick to it! Part of this plan means understanding the commitment you are making. Real estate investment is not a “get rich quick” scheme. This is a business investment and it will take time, money, energy, and a lot of work to see a return on your investment. Create a business plan before you start. The plan should include how many properties you wish to buy, the time frame for these investments, and the cost of these investments.

In order to make a sound business plan for your real estate investments, you will need to educate yourself. Before you spend time and money on an expensive class, do some research online. There are a plethora of free online guides, podcasts, blogs, and articles designed to provide essential information to those breaking into the world of real estate investment.

Another way to educate yourself is to talk to those in the know. Make connections with the people that are already successfully doing what you want to do. You can find these people locally or online through different real estate forums. These experts can give you invaluable first-hand knowledge of the industry and help you make other connections with vendors, contractors, and other businesses in your area. All of this knowledge will help you find your niche in the market.

The two biggest things you need to know are types of property and location of property. You also have to know how much of a financial investment will be required, as well as the time investment that different types of properties will require. Additionally, the ability to evaluate a locality or neighborhood and make an informed assessment of its potential value is an invaluable skill in this arena. An important thing to remember when making these assessments is to buy where the numbers work out—which means understanding your financial limits and sticking to your business plan.

It is imperative to remember that, like with any business, there are risks. Expect challenges and set-backs because every property comes with its own set of problems. Real estate investment is a business of constant learning and adapting to new and ever-changing variables, which is what makes it such an exciting investment.

The most important thing you can do is get started! Even the most well laid plans will go nowhere if you never act. Do the research, make your plan, and take the first step towards building your financial future.