People are moaning and groaning about taxes and government in Chicago these days. Yet, a friend of mine who is a private wealth manager says that about 98% of his clients still choose to stay here even after retirement. Sure, these retirees have put down their roots and may even have grandkids here, but there’s another reason behind their choice to stay: Chicago still has opportunities to grow wealth. And, real estate investing is one of the best bets for retirees. Let’s take a look at how real estate investing compares to other investment options and how the market could play out next year.
Chicago Real Estate Compared to Other Investment Strategies
There’s a long-standing debate about whether stocks or real estate investments are better. There are, of course, advantages and disadvantages to all investment activities, so the one you choose needs to match up with your personal financial goals. Many retirees are already involved in the stock market through career-related retirement plans, but still need more than they saved for retirement to continue their current lifestyle for the next several years. Which option offers the best returns?
Stocks are popular because they are liquid assets; you can sell them quickly and easily or even roll them over into a retirement account tax-free. But while some stocks can outperform real estate, people often make risky emotional decisions when investing and can get caught in an unexpected economic downturn. In short, you can win big—and lose big. That’s why most financial advisors recommend that you invest in the stock market with an eye toward long-term gain. But, as retirees, do we want to wait that long?
Real Estate Investment Trusts (REITs)
One type of dividend stock, however, does tend to be more stable and offer above-average returns: REITs. By buying a REIT, you are effectively purchasing a share of a large residential or commercial real estate portfolio. Some appreciate this real estate investment option because it is low effort—the portfolio is managed for you—and it is liquid like stocks. However, there are downsides as well. Like stocks, you still do not have direct control over the investment and you need to wade through complicated analytics reports to understand how it is performing. And, like stocks, you may need to be in it for the long haul to see significant returns. But if you do see returns, they will currently be taxed like ordinary income because they are not “qualified” dividends.
Private Real Estate Investing
Compared to REITs, private real estate investing offers some significant advantages—especially in Chicago. The real estate market doesn’t respond to the wild ups and downs of the stock market, so it is relatively more stable and it’s a tangible asset that provides more options for exit strategies in any market conditions. This can help lower your overall risk exposure. And, if you find the right investment property, the returns can outpace other investment options in the short-term. As retirees, we are not building for a future anymore; we want to use the money while we are still enjoying our sunset years in our beloved city, right?
So, Where’s the Chicago Market Heading?
While prices in some areas of Chicago, like The Loop, have gone through the roof, the rest of the city is still slow to recover from the housing crisis—but things are looking up for investors! There is still an inventory of foreclosed homes to pick up at low prices. In addition, there are about 12% of homeowners currently underwater on their mortgages. There is an even bigger group of people who have inherited a house, or have a house that has been neglected or need updating to bring back to market standards. If you have the leads on these distressed homeowners, you can help them out of their “ugly” financial situation and purchase their property for less than market value. The time to buy these distressed properties is now, when distressed properties are still available.
Looking ahead to next year, we expect housing prices to continue to rebound and demand to increase. Already, corporations like Echo Global Logistics and Beam Suntory are intending to expand or relocate to the Windy City. In addition, McDonald’s is planning to open their new corporate headquarters here. These new jobs will increase our local economic stability. New residents will have good paying jobs, increasing their desire to buy a house next year. Perhaps they will buy the investment house you picked up this year?
Let One Real Estate Investment Turn into a Business
If you buy the right Chicago investment house now, next year looks very promising for achieving the best returns compared to other investment options. Real estate investing may be a great adventure for you in your retirement years, and once you purchase your first Chicago investment house, you may want to invest in more houses. But, don’t allow amateur investing mistakes to get in your way. You’ll want some guidance and tools to help make it easier for you. Let HomeVestors®, the We Buy Ugly Houses® people, help you jumpstart your new real estate investment business. Get in touch today!
Each franchise office is independently owned and operated.