Retiree considering real estate investment. Crazy thinking?

[Kim Newman Kanney]

I am in the process of selling a piece of farm ground. I want to diversify as well as keep this money in tangible assets. I'm 62. All of our income at this point comes from pensions, annuities, etc.  Am I crazy to be considering jumping in to rental properties at my age? I would definitely hire a property manager. The financial advisors I've spoken with only want to sell me on investing in more annuities, life insurance, etc.

[Dave Foster]

@Kim Newman Kanney, You're on a real estate forum.  So I'm pretty sure it's going to be unanimous (me included) that you should have a real estate component in your portfolio :). That farm land took care of you for a lot of years probably.  and no matter what the market said it was worth it always produced (well usually) and couldn't disappear like a stock or security.  Any prudent advisor would want you to have real estate component.  Especially you've got one now and can turn it into production in other ways without paying tax.

Active vs passive?  that depends on your preference.  Many folks like to take on a new project like buying a rental.  One of my favorite clients sold the farm and bought properties near each of their children and had them manage the properties.  So it became kind of a family endeavor.  And the children got the properties tax free then they passed.

Or you could purchase a managed vacation rental somewhere that you like to visit or may want to retire to someday.  Make some income on it for a while.  Enjoy it some for a while.  And down the road move in.

You can do all of the things above without having to pay the tax when you sell that land.  That's what you would use the 1031 exchange for - to defer the tax indefinitely and then when you die your heirs get it tax free.