Real estate can become challenging at a certain point in life. For a worry-free retirement, planning should be risk-free. Is real estate ownership a good investment?
It all depends. On the one hand, home ownership can serve as a secure provision in old age, but on the other hand, it can also result in a financial burden. Since most people need the accumulated wealth to finance their “golden years,” it is important to weigh carefully on this issue.
Assess situation
What are the personal interests and desired lifestyle? What kind of assets are available to make this possible? What are the financial possibilities minus fixed and variable costs? Is home ownership the right property for the years ahead? Do the facilities do justice to housing in old age? There are many factors involved, and it is important to plan ahead, beyond today’s status.
Emotional factors should not be underestimated. Although they are not directly tangible, they also play a significant role. Although one is aware that the acquired property no longer fits the current situation, one still does not want to permanently give up the property because of personal memories. Often, however, the opposite occurs – especially at retirement age: With the sale of real estate, many owners fulfill their dream of owning a property that suits their current stage of life. As the requirements for the perfect home change with age.
Recurring expenses
Swiss real estate owners should be aware, especially at retirement age, that there are a number of financial recurring costs that need to be considered. This includes, for example, repayment and interest on a mortgage loan, maintenance and repairs, insurance and taxes. It should be noted that tax regulations in Switzerland vary from canton to canton and it is important to find out about the regulations in your own canton. Particular attention continues to be paid to the current imputed rental value, as this cost burden often clouds the calculation for a carefree lifestyle in one’s own home. These costs can add up over the years and contribute significantly to the overall budget. It is therefore important to calculate recurring costs ahead of time to ensure that you have the necessary income and reserves to cover the costs.
Maintenance of the property
Energy retrofitting of real estate is a topic that retirees should consider. Climate-friendly properties in particular remain attractive in the long term and reduce operating costs. This is especially important in retirement, as income tends to be lower and any savings in utility costs are welcome. Properties with good insulation, CO2-neutral heat pumps, solar panels and good ventilation improve the quality of living and contribute to climate protection on top of that. A well-insulated and efficient property with a solid foundation is also more desirable in a possible later sale than a property that incurs high energy costs. Failure to invest in a refurbishment may well reduce the sale price by a large amount.
Weigh risks
The first and most obvious decision question that every owner and retiree should address concerns finances. This means the initial and ongoing costs, as well as the long-term advantages and disadvantages of owner-occupied property, over renting or selling, must be carefully weighed. It is important to filter out what financial risks are associated with the options and how to protect against them – especially in view of retirement, as income is generally lower. Too much expense, high taxes, vacancy, tenant damage, etc. are examples that can hit your finances. Especially for landlords, for example, the vacancy of rental apartments is not good news, because during this time the service charges for the property must continue to be paid. However, if the property is managed properly, regular income can be generated from rental income, which can ease financial concerns in retirement.
Conclusion
Real estate investments in retirement are complex and require careful financial planning. To find the best option for your situation, it is generally recommended to consult an expert. This person can help analyze the potential benefits and risks and develop a strategy to minimize the risk and maximize the benefits. It is recommended to plan finances carefully and make sure there are enough financial resources for retirement.
