When Buying Investment Property, is it Better to be Young?
9 January, 2012 / by Bryan Jaskolka
Ask anyone over the age of 55 and they’ll likely be able to give you a long list of things that were better when they were young. But, is buying investment property one of them? While investing in real estate is always a much better option than buying stocks, bonds or mutual funds (especially in today’s market,) do investors have a timeline on this type of investing? And should they be trying to do it before they hit a certain age?
It turns out, it might be better to think about real estate while still young and focus on other shorter-term investments once you get older. That is, according to Moshe Milevsky, finance professor at York University’s Schulich School of Business, who says “If you are 55 and buying [the investment property] with a full mortgage, it will never be a pillar of anything because you will be carrying debt through most of your retirement.” This isn’t good news for retirees who are already wondering how they’re going to fund their Golden Years while living on a limited income. In truth, Mr. Milevsky might not be wrong.
Consider that property with the full mortgage. That alone could take 10 – 20 years to pay off. And if like many real estate investors, seniors take out a second mortgage loan on their own property in order to pay the down payment for their own property, this could add an even heavier burden to the debt load, at a time when often, people can least afford it.
Another reason why not waiting to invest in real estate might be a good idea? Because it’s a lot of work! Unlike when you’re buying mutual funds or trading in stocks, it’s not a simple matter of one visit to your bank, or sitting at your home computer checking where different stocks are sitting. You need to always be in contact with your tenants, arranging or making repairs, and of course, going to the bank at least once a month to deposit rent cheques and (or more for those months when tenants might sometimes fall behind.)
While investing in real estate is usually the no-brainer when it comes to investing, your retirement years might be the time to buy those mutual funds, bonds, or invest in the stocks you’ve always been interested in. Now is the time to take advantage of those investments that seemed risky before, but will now give you the large short-term gains that have always tempted you!