Home-Buying Advice for Retirees
You’ve been working your whole adult life, and the only way you got through some of those years was to look at the cut-out of a tropical island that you taped on your computer screen. Now it’s finally happened – you’re retired, and you can finally book flights to that island. As of 2014, the average age of retirement in the United States is 66, up from 63 in 2002. Even then, 42 percent of Americans are at risk of retiring with, basically, nothing. (Almost half of US workers have stashed away just $10,000 or less in savings.)
So if you’re retired, don’t be afraid to wade into the market for a vacation home. After all, in 2007, one out of three homes sold was a vacation home or an investment property, and the demand in that area remains strong 10 years after the housing crisis. Just be sure to do your research on it and take the steps necessary to make sure it’s a good decision.
Here are some steps to start out.
The Finances
Perhaps the initial step in finding the right vacation home for you is to ask yourself a number of basic questions, the first of which could simply be: Where do I want to go? Gulf Shores may be more affordable than Hawaii, but if you’re in love with Maui, you’re probably not going to make as much time for vacation even if you save on the down-payment.
On the flip side, check yourself: Can I afford it? You’re on safer ground if you’ve paid down your first home, your kids’ college fund is socked away, and you have an emergency fund in place. Keep in mind that your retirement will seem far less relaxing if you’re strapped for cash.
Investment Property
Considering all the hidden costs involved in taking on a second property, one might wonder why anyone would invest in a second mortgage to begin with. Fair point. At the same time, it is possible to boost your bottom line. Just be sure to follow some age-old landlord tips. Think about the tax advantages involved, including the expenses deductible against the property’s income. Also consider which type of property you want to lease out. (House, apartment, condo? Nearby, where you want to retire, where your kids are going to college?) Is it more cost-effective to rent out a high-end place or to scout out a low-maintenance home so that you can save on repairs? Finally, make peace with the fact that you won’t make a million bucks overnight. But if you crunch the numbers, you should be able to post a profit over time.
Who’s Home?
Let’s say that you pulled the trigger and bought a vacation home. One thing that people might not consider when getting caught up in the rush of putting their footprint in paradise is that it’s likely they won’t be in this home year-round. So decide who will maintain the home in your absence. Your options here will probably come down to local caretakers, property managers, or doing it yourself. You can also pay the costs of a homeowners’ association (who should then keep your place spick and span).
If you hate shelling out for these fees, however, you might console yourself by saving on the other end – that is, taking steps to keep insurance costs down. These might include installing a roof that’s fire-resistant, or storm shutters, or impact-resistant glass. Especially since many vacation homes are in coastal areas, which are often flood-prone, these measures will not only lower costs but should also keep your family safe during hurricane season.
As with most things in life, it’s important to do your homework before purchasing a vacation home or an investment property. If you fail to take the proper steps before, you might find that your golden years are nothing more than one big headache.
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