How to Include Real Estate in Your Retirement Portfolio?


By Annuj Goel

Despite the presence of many investment options and innovative instruments in vogue, real estate and property will never lose their sheen. As they say, the investment portfolio must be a balanced mix of different financial instruments. Therefore, one must not keep all his eggs in one basket and add real estate or property to the retirement portfolio. However, it might be challenging to include a property in your retirement planning bucket. Here is a lowdown on the ways to include real estate in your portfolio.

Start Small

No doubt, investing in a property is easier said than done and it requires investment, planning and research. However, it all pays off when the same property becomes a workhorse and pays you handsome rentals month on month. However, to invest in real estate from a retirement perspective, one must start small.

As soon as you start working, you can start looking for a property to invest in. It should not be a residential property essentially. A small shop, office or a small 2 BHK would be a great starting point. As you move up in the career ladder and income increases, you can go for bigger assets. Starting early and starting small will not be a burden and you will create a rental asset for a lifetime.

Be Innovative

Gone are the days when you needed huge investment potential to reap the benefits of the growing real estate market. With the advent of the economy, innovative real estate investment instruments such as Real Estate Investment Trusts (REITs). Real Estate Investment Trusts are companies which manage large income-generating real estate properties such as warehouses, office complexes, leased campuses etc. REITs present an opportunity for retail investors to benefit from the large rent generating assets which are professionally managed by experts.

REITs are a great way to invest in real estate and include it in your retirement portfolio without buying a property. Keeping up with similar investment instruments such as Infrastructure Investment Trusts of a similar kind will go a long way in planning your retirement.

Equity Shares of Real Estate Companies

When you have your retirement in your mind, planning long term returns must be the end goal. If you are facing difficulties in actually buying a property and wish to earn from the growth of the real estate market over the long term, equity shares of large-cap real estate firms are an excellent option.

Like every other industry, long term investment in realty stocks will ensure a double-digit return. With the focus on housing development in India increasing continuously, the real estate and construction stocks will outperform other industries in the long term. Choose your portfolio entities carefully and stay invested. By the time you reach your retirement, the returns would be amazing.

Focus on Rental Properties

From a retirement perspective, a sustained rental income generating property would be the most desirable. When you are planning from the retirement perspective, keep in mind the factor that the location of the property is approachable and well-connected. A connected property has greater chances of getting tenants than an unconnected and remotely located property. If you are planning for retirement, you can also invest in land parcels. Unlike a constructed property, land does not diminish in value and the returns potential would be excellent after 30 years.

Thorough research and consultation are very important in this regard. You can also look for shops as a rent generating instrument. This would serve as a solid income source post-retirement.

Conclusively, in the opinion of experts, 5-10 percent of your retirement portfolio must consist of real estate and property investment. A mix of REITs, land and constructed rental properties would go a long way in planning for your retirement.

(Authored by Annuj Goel, MD, Goel Ganga Developments)