Real estate as a retirement plan

We’ve all been there: We’re working away at our job and catch ourselves daydreaming about retirement on the beach without a care in the world. And that’s exactly what your golden years are for! But until you can kick back, relax, and put your feet up, you need to consider how you’ll afford these golden years.

You know retirement is important and you’ve likely heard of RRSPs and TFSAs at one point in your life (if you haven’t, check out our guide here), but what other options are there to save for retirement?

Many Atlantic Canadians are saving for retirement through RRSPs, TFSAs, non-registered savings, or employer-funded pensions, but one less talked about option for your retirement portfolio is real estate. There’s no denying it—in rural New Brunswick or seaside Nova Scotia—Atlantic Canada’s real estate market is unprecedentedly strong.

We talked to Sara, an Atlantic Canadian who recently purchased her sixth investment property as part of her diverse retirement plan. Sara knew since her early twenties that her line of work wouldn’t have a pension, so she asked herself, “How do I save for retirement as a single person?”

“Real estate felt like a natural direction for me—people are always going to need places to live, so why not own them and have it as a regular, monthly earning for me?” says Sara.

As an advocate for Atlantic Canada, Sara considers how the population is growing and where people are moving or travelling, which allows her to be nimble when buying a new property. Sometimes, her property may be someone’s first introduction to Atlantic Canada, so before she buys, she ensures the neighbourhood and property will leave them with a great impression, wanting to spend more time here, return as a visitor, or even move here.

“Real estate feels more personal than other investment channels, like stocks or bonds. I like to think the homes I own are improved by renovations and finding people who love them as much as I do—I love when they make it their own home.”

Owning a combined five properties, either with her business partner or on her own, she began looking to purchase a sixth home by herself. However, due to lending ratios and formulas at her current financial institution, Sara was denied a sixth mortgage—her banker wouldn’t consider her situation outside of the prescribed formula.

“My situation is unique. I heard credit unions are easy to deal with and my lawyer suggested I try a local credit union, so I did! It’s a new relationship that I’m so grateful to have,” says Sara. “Working with a credit union was such a different experience from past transactions. They listened and understood that real estate is a business to me, and I have a plan. I want to still be in a relationship with the credit union 20 years from now—it’s a real partnership.”

Like most things in life, there are pros and cons. “Having a monthly recurring revenue—an element that is diverse from other retirement investment channels—and building a community and relationship with people are great benefits of real estate as a retirement plan,” says Sara.

However, if you go to sell, there’s no guarantee your property will be worth more in the future because the market fluctuates. And the longer you own things, the more likely they are to require infrastructure improvements, like roofs and furnaces.

Sara recommends learning as much as you can and talking to the right people to determine if homeownership is best for your retirement portfolio. Credit unions are here when you’re ready to talk mortgages and retirement.