investment properties

Donald Trump and countless other billionaires made their fortune starting in real estate investment properties. They buy in strategic areas when the market's low and resell when the market inflates. Sometimes these transactions happen fast, like with special offers on condos that haven't been built yet but will soon be worth double or even triple the pre-sale price. Property investments can be a practical supplemental retirement plan.

Pros of owning investment properties are obvious. Hypothetically speaking, imagine owning a six-plex in a slow-changing, yet prosperous part of Atlanta where you charged each tenant $1,000. Your monthly mortgage for the building might be $3,000 but you'll still have that extra $3,000 cushion each month. Another benefit of property investments is the generous tax kickback you may receive. If you delight in getting your lump sum tax return at the end of the year, then perhaps investing and selling properties when you need that quick chunk of cash is right for you. Also, there's no penalty for opting out early or age regulations regarding when you can start using your earnings. You don't have to be rich or super business savvy to add property ownership into your retirement planning agenda. It's been dubbed "the equal opportunity wealth builder."

Cons of investment properties include the no guarantee risk. It's also not a feasible option for everyone because of high transaction prices. Not everyone has thousands of dollars saved to make a substantial down payment. Vacancies, bad tenants, maintenance costs and property oversupply are a few of the disadvantages. Like any investment, there are many factors beyond your control that could affect your income. For better guarantees, 401ks or IRAs should be included in your financial retirement planning.

According to Money Magazine, economists predict a 15% decline in the most expensive housing markets in the next year, thanks to rising mortgage rates. Therefore, smart investors will look to places like Panama City, Florida, Olympia or Washington for investment properties, while steering clear of Santa Barbara, New York City and Las Vegas. Your success will depend largely on the investment you choose, but also on your tenants. Security deposits, a slightly higher rent or the realtor you choose, will usually keep the riff-raff out.

Many couples buy large homes to fit their children comfortably, but find it's too much space when the kids move out of the house. In this case, downgrading to a small bungalow or apartment and letting someone else pay the mortgage is beneficial. While it's not superior to a 401k or IRA, investment properties are a retirement planning option that may work for you.