Relying on rental properties for retirement income?

Even though I’m contributing money to a retirement savings account on a monthly basis, and even investing in some dividend stocks in my individual investing account, I’ve always felt like real estate could be a better investment option for retirement income.

The idea started with a family member who’s doing just that: relying on a portfolio of rental properties, and one small business, for retirement income. This relative also has plenty of money in savings but hardly anything in the stock market.

He’s quickly approaching retirement age without having to think about where his income will come from. He’s already set for a comfortable retirement.

Does it make sense to heavily rely on rental properties for retirement income?

Is relying solely on rental properties a good strategy?

I know the common advice is to not put all of your eggs in one basket — and I agree. But isn’t spreading out your risk through several rental properties meeting this rule? Although, you’re still putting money in the same type of investment (real estate property) you’re spreading out the risk of not having income from one property alone.

Sure, there are things that can go seriously wrong with rental properties, like a horrible tenant, vacancies, leaky roofs, and a myriad of other problems. But there are also plenty of things that go wrong with the stock market.

The truth is, you just never know. Which is why it’s important to create multiple types of portfolios, with rental properties as one of them.

While I’m not trying to dissuade anyone from investing in the stock market (after all that’s what I’m doing), I do think it’s nice to stop every once in a while, reassess your financial goals, and look at other vehicles that drive you to where you need to be.