For whatever reason, I’ve been working with several clients lately that have an inordinate percentage of their net worth tied up in real estate or other illiquid assets. This is threatening their retirement income plans and their estate plans. Don’t get me wrong. I love real estate and I love real estate investing and investments. Just make sure you’re planning along the way. Your financial life is not about The Plan—it’s about planning.
Remember, Cash is King
So far, it is still impossible to take your ATM card and stick into the side of your home or your investment properties and pull out cash. If you are in the habit of accelerating your mortgage pay-off, stop. Review what you’re doing and why. Just because that seemed like a good idea years ago doesn’t mean it’s a good idea now. It’s hard to get that money back once you’ve put it in your house, especially in this lending environment. Often, you’re better off keeping the mortgage, getting the mortgage interest deduction, taking the money you would have used to pay off that mortgage, having that money make money for you, and in the future be at choice as to whether to pay off the mortgage or keep it going. The potential upside is more retirement income and more liquid assets available to you. To me, that equals financial security. Having to sell a piece of real estate in a potentially down market to generate cash for retirement or other needs is terrible. Often it results in lower sales prices and less proceeds in the seller’s hands. What I want for my clients is options. Keep your options open. Keep your assets balanced.