I published a lengthy comment on Forbes today in response to an article by Dennis Miller titled Is Real Estate Ever A Wise Investment For Retirees?  . You can read Dennis piece here .

I thought his comments were quite interesting although I did not entirely agree with a few of his points. Heres what I wrote in response:

Hi Dennis,

Great article but I have to say I take issue with a few points you made.

1. For many years, you could buy good-quality property, as much as you could afford, and you were almost guaranteed to make money. That ended in 2008.

My own experience, and the experience of other real estate investors I know suggests that there are always opportunities to invest regardless of what the broader market is doing or has done. Real estate is highly local. There are almost always areas poised for growth across the country, or perhaps in another country (Canada for example) that provide investors with lots of potential for profit.

A lot of people lost money in 2008 because they were simply buying and hoping for appreciation. Buying and hoping is speculation in my books, not investing. And appreciation is only one way to make money in real estate. If thats your only play, youre at the mercy of the markets, especially if you havent chosen a market after doing research to find an area that has solid economic fundamentals.

2. Age: Given that this article is addressed towards retirees, let’s address the age issue. If you’re close to retirement, let’s say in your late fifties, or have recently retired and are in the 60-65 year old range, real estate could potentially still be a fit for you. If you’re planning on living into your 80’s, perhaps beyond, you could still buy property now and experience increasing monthly income for the rest of your life in the form of cash flow from the monthly rents you collect.

If you have significant capital to invest with you could potentially buy property that provides positive cash flow (read: income) to you on a monthly basis. In the right area you can buy property with a conventional mortgage and receive cash flow as soon as you rent the property. Or you may choose to put up a larger than normal down payment to improve the amount of money returned to you each month in the form of cash flow.

3. Effort: If you use a top notch property management firm the amount of work you need to do is relegated to paperwork and making decisions on large improvements to the property. No need to answer phone calls at 3:00 AM. If you buy right, the cash flow from the property covers the costs of the property management company and still provides you will monthly income.

4. “But we’re looking for real-estate investments that are professionally managed and liquid.”

Not knowing exactly what the liquid investment is that you mentioned you recently added to your portfolio, I can only speculate here. Traditional forms of real estate are not liquid compared to equities. Everyone knows that. I suspect that if you’ve found a liquid form of real estate as you say, that it’s some form of REIT or fund that in turn invests in property. If that’s the case, I wouldn’t consider that a real estate investment but another form of investing in equities which means you take on all the risks associated with investing in the stock market and achieve few of the benefits of investing in real property.

5. Capital gains: while you don’t say this directly, you imply that the only way to make money in real estate is via capital gains. If an investor is in their 60’s and 70’s and beyond, then I agree that relying only on capital gains would make real estate potentially less attractive.

If on the other hand you consider that there are many additional ways to make money in real estate, the picture brightens for investors of all ages.

You fail to mention other benefits such as:

• Monthly Rental Income
• Equity: buy undervalued property or negotiate a good price and you can have equity on day one in addition to your down payment.
• Appreciation (AK: my mistake he did mention appreciation!)
• Leverage: using a mortgage (the bank’s money) means you can buy far more property than you could if you were to invest your own capital in securities.
• Tax advantages
• Mortgage pay down: your tenants pay off your mortgage for you and aside from the down payment essentially pay for the asset you own and control. 
• Refinance / Re-Invest one property can become many over time (perhaps more relevant for younger investors.)

I still enjoyed the article! I find that too often capital gains is the only focus and believe that even investors who are past retirement age can benefit from real estate if purchased properly, following a proven system that relies on solid research and economic fundamentals.

Adam

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