If you buy a second home now for retirement later, you could give yourself a hedge against home price hikes as well as a relatively low-cost retirement shelter with an equity cushion.
That assumes during ownership you can find tenants who'll pay enough rent to cover your investment costs. You'll also have to be able to actually use the property when you retire.
"Buying a retirement home while you're still employed is a wise investment, if you can keep it rented until you're ready to move in," says Valerie Patterson, senior producer of RealEstateJournal.com.
That means you'll have to find a property you can rent for an amount that will cover not only the principle and interest but also the bulk of property taxes, insurance, property management and maintenance costs, home owner association dues and any other costs, actual and estimated, associated with property ownership.
Patterson says if you can't secure a tenant, or if the rent you collect doesn't cover your monthly payments, even locking in a low interest rate now may not be wise unless you've got the extra income to cover the difference.
Don't forget to consider tax benefits that can help offset costs.
In addition to mortgage interest deductions on owned home values up to $1 million, tax deductible passive losses on rental properties are as much as $25,000. The passive loss amount does begin to phase out once your modified adjusted gross income reaches $100,000 and is completetly phased out once your income reaches $150,000 says Marie Sternberger, an enrolled agent from Sunnyvale, CA.
Sternberger says don't overlook non-financial considerations related to buying a retirement home now to live in later. Your heath, the climate, some unforeseen event or change could prevent you from moving into your second home at retirement time.
"You would have to sell and pay taxes on the gain, but you could take any passive losses you had not been able to take advantage of. You could do a tax-free exchange of like property somewhere else. You would have some options, but I would be leery of buying a retirement home way in advance of retiring. That's just my opinion," Sternberger said.
Patterson said the upside to buying your retirement home now is that you can count on having someone else paying your mortgage for as long as you rent it. You'll inherit a home with at least a part of the mortgage already paid and a relatively low interest rate locked in.
"It's a good idea to get a head start on retirement living. Your favorite location might be a lot more expensive in 10 to 15 years when 73 million baby boomers begin retiring," said EscapeHomes' CEO David Hehman.
Appreciation may also help offset some of your costs, but to maximize your investment as a retirement nest egg, you probably don't want to tap your home's equity unless it absolutely necessary for some dire financial need.
"However, if home prices fall, you might wind up paying more for your house than you needed to," Patterson cautions. "But it's far from certain that prices will fall, and even if they do, they could easily run up again in the future," she said.
In any event, buying a retirement home now to live in later begins with even more considerations.
Investors should shop for a second home much in the same way they shopped for their first home. Buy the cheapest home in the best block or buy into the cheapest neighborhood in the best community, both to give the home's value room to grow. However, if such a home
doesn't garner rent sufficient to cover the cost of ownership, look in areas where rents have been established.
Look for appreciation potential, typically found in areas where demand eventually will exceed supply. Avoid heavily marketed, but unproven areas. Property with future marketability for you should you need to sell or your heirs also should be considered.
Find a home in close proximity to as many preferred activities, attractions and events as possible. The more of these area features the better the potential for renting the property at a decent rate and selling at a high price later.
"We recommend that prospective buyers identify a gated, master-planned community -- for security and peace of mind -- with the amenities, such as golf, tennis, fitness, clubhouse, etc. that they would enjoy years from now," said Elisabeth Miller-Fox, president of PrivateCommunities.com.
Consider "try-before-you-buy" mini-vacation getaways offered by timeshare developments in potential investment home purchase areas. For no more than a nominal fee, if any, the trips come with an obligation to tour the development, but the rest of the two-to-three day jaunt provides plenty of time to check out the community and potential investment homes -- at the developer's expense.
"We urge prospective buyers to go through the rental process themselves before taking the step of second-home ownership," said Miller-Fox.
Get professional representation for the search, mortgage and property management.
"An equally important factor for this type of purchase is the existence of a rental department that is associated with that community's sales department since people who have rented in a community are often the best source of new sales for the community," said Miller-Fox.
"The rental department is a strong marketing tool for the developer and they typically do a good job of keeping the property rented at the highest market rates," she added.
Written by Broderick Perkins
Thinking about Buying or Selling Real Estate? Call David Lee Walker REALTOR ®
Search ALL Ventura County Home Listings: Foreclosures, Condos, New Homes, and More.....
View Prices, Maps, Photos, Virtual Tours, with Addresses!
Just use your name, email and valid phone as your Password - then click the "Free Instant Access!" button to enter. (Use the same Password when returning. All information is keep 100 percent Confidential) Allow the next page a few seconds to load.
We hate spam too! Your information will be kept 100 percent Confidential.
David's Golden Real Estate Quote of the Day
"Private enterprise is ceasing to be free enterprise."
- Franklin Delano Roosevelt
All sales data is from many sources and is believed to be accurate but is not guaranteed. All Sales that are shown involved other brokerages both on the selling and listing side. Any involvement by Condohouse Realtors is clearly stated and highlighted in RED. David Lee Walker, real estate broker is qualified to advise on real estate. David Lee Walker does not offer legal advice or tax advice. If you have any questions concerning the legal sufficiency, legal effect, insurance, or tax consequences regarding any real estate or other matter, please consult with your attorney, accountant, insurance agent, tax or other appropriate qualified professional. The Sales information referenced to in this Web Site (CondoHouse.com) has been Provided by the Ventura County
MLS Corporation's MLS as of the current Date. The listings and Sales are NOT exclusive to CondoHouse Realtors and may have been Represented by other Brokers. Display of MLS Data is deemed reliable but is NOT guaranteed accurate by the MLS. The Information contained on this website (www.condohouse.com) is believed to be accurate but is not guaranteed. The MLS Data and information being provided is for
the consumer’s personal, non-commercial use and may not be used for any other purpose other than
to identify prospective properties consumers may be interested in purchasing. Any link is for informational purposes only and is not a recommendation nor an endorsement or guarantee. This Information is to be used for a reference and any questions that you may have should be directed to the appropriate Real Estate Agent. If you are interested in any of the properties contained within this website, please contact the appropriate Real Estate Agent. If your property is listed with a Broker, this site is not intended as a solicitation of the listing. The property offered is subject to prior sale. David Walker, REALTOR ®, or CondoHouse Realtors nor Ventura County Coastal Association of Realtors ® or Conejo Valley Association of Realtors ® can not be held responsible for any Errors or Omissions that may have to occur upon the Publishing of this Information. More Disclaimer By submitting your Email address you are consenting for David Lee Walker REALTOR ® to contact you even if your name is a "Do not spam List". By submitting your telephone number you are consenting for David Lee Walker REALTOR ® to contact you even if the number is on
"National Do Not Call Registry".
Real Estate Listing Data Updated Daily
Website Last Modified on
Thursday August 24, 2017 11:05 AM Day 236 of 2017 64.6 129 Days Left in this Year 35.3
Today's Sunrise 6:24 AM PDT - Sunset 7:32 PM PDT
Daylight: 13 Hours 8 Minutes 1 Minute LESS daylight than yesterday.
For Ventura County Real Estate Information Call CondoHouse Realtors CalBRE #: 01124599 805 377 0897
David Lee Walker REALTOR ® California Bureau of Real Estate "Responsible Broker License" CalBRE #: 01124599 Lisa D. Walker REALTOR ® California Bureau of Real Estate "Real Estate Salesperson License" CalBRE #: 01931096 The Father - Daughter Team
805 - 377 - 0897 E-mail email@example.com
This site, built, maintained and updated by David Lee Walker REALTOR ®