Dear MarketWatch,
My wife and I are 60 and 57 years old respectively. We have several properties, all mortgage free.
We have a real estate value of $4 million. Our savings include stocks, CDs, and $3.2 million in cash. Our net worth is around $7 million. I have a small business that will run indefinitely and generate about $150,000 in revenue per year, hopefully for the next 10 years. We have no debt.
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How can we structure our actions so that they give us the best return and also protect us from inflation?
Real estate investments are great, but there’s also work to be done on rental management – and there’s work on maintenance. Should we sell real estate and put money elsewhere? Or keep it because of inflation?
What would you suggest as a long-term strategy? I plan to work until I’m 70 because I want to. I have enough time for travel and leisure activities, and I am healthy and in good shape. For me, retirement doesn’t mean sitting still anywhere.
Real estate dilemma
Dear Real Estate,
With a net worth as large as yours and as many moving parts – real estate, investable assets, a profitable business, etc. – you should consider hiring a financial planner to help you make sense of your options.
Before we get into it, I’ll just note that you’re asking the right questions. Real estate is often touted as a good inflation-protected investment, and keeping some of it in your portfolio might make sense for you if you’re able and interested in maintaining it.
There are many reasons to pause before making your decision, and that includes what you mentioned earlier: maintaining the property and keeping it a rental, as well as any other expenses that might arise along the way , like a possible new roof or a new boiler, or something else you weren’t expecting.
I can’t tell you for sure whether you should keep the properties or sell them, because there’s a lot more to consider in your overall financial plan to make that decision – including your risk tolerance and willingness to manage the properties during your retirement — but since you don’t have a mortgage on your properties, you don’t have to make a rushed decision.
Residential real estate is certainly not the ultimate answer to inflation and market protection. It has proven successful in most bear markets since the 1950s, but has not protected investors in the 2022 bear market nor has it outperformed in the bull market since, according to MarketWatch columnist Mark Hulbert.
In his column, he cited an ETF that most closely resembled the residential real estate market. “This does not mean that we should not invest…
