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The recent ups and downs in the economy, stock market, and housing industry have people wondering where they should invest their money. The good news is there are plenty of options when it comes to investing your money so it can be hard to know where to start. By weighing your options and choosing several different types of investments, diversification can keep your portfolio from becoming a roller coaster.

The experts agree that real estate is still a good investment. If you prefer to invest in the entire real estate market, you should look at REITs or Real Estate Investment Trusts. This type of investment allows you to purchase shares of a company that owns different types of real estate. It is very similar to mutual funds and does not require hands-on management. On the other hand, if you prefer to invest in a physical asset, you could consider becoming a landlord with investment property. It requires more day-to-day work, but as a landlord, you retain control over your investment properties.

Here are more reasons why real estate makes sense for retirement investments.

Long Term Strategy
Investing for retirement focuses on long-term positions and so does real estate. Except for the recent housing market burst, house prices across the nation have appreciated in value since the 1960′s. The data shows that the longer you hold on to the asset, the higher it’s value.

Leverage
Real Estate investing also affords the ability to own a substantial asset without having to put up all the cash in the beginning. A mortgage allows you to purchase property on credit with a relatively small down payment. This power of leverage lets you control 100% of an asset that appreciates over time with a very small amount of money spent upfront. Stocks only let you buy what you can pay for.

Equity
When your rental property is filled with tenants that pay the rent every month, it’s like having an investment account that someone else pays into for your benefit. And to top it off, your tenants are only paying for the use of your property. They will not ask for this money back or for a share of the profits when you sell the property down the road.

Sellable Goods
Based on what we have seen in the past, your investment property will appreciate over the years. Then when you are ready to retire, you can sell your rental properties and live off of the profits. Or, once the mortgage is paid off and you fully own the properties, you can hold on to them and live off of the monthly rental income you receive.

The degree to which you decide to invest in real estate for retirement depends on your personal situation and how much time and effort you want to dedicate to these investments. If you decide real estate is for you, sitting out and choosing a REIT may be the best choice if you wish to be more hands-off. However, if you are more comfortable getting involved and want to sink your teeth into the real estate field, you should seriously consider becoming a landlord.

Photo by: Andrew Michaels