Buying a
vacation home
that doubles as a future
retirement home
requires forethought and thorough investigation. Conventional wisdom tells us to
first settle on a desired location and then look for the least expensive house
in the best possible neighborhood. This is of course true, but buying a future
retirement property demands additional consideration. Without a doubt, the
purchase of a dual purposed home can be one of the most important and
financially rewarding decisions a pre-retirement couple undertakes. Quite
simply, the ultimate home buying decision comes down to establishing relatively
conservative financial boundaries, drawing up a wish list and employing a real
estate broker to find a home that will serve your needs now and in years to
come.
Even prior to the financial planning phase, a vacation and future retirement
home buyer should take a step back and make certain that there is 100%
commitment. Ask yourself a few simple questions. First, is it possible that your
financial position could materially change for the better or worse in the
upcoming years? Have you decided on a location that requires a dramatic
environmental change? What about relatives, does it matter that their next trip
may require a flight instead of a drive? If you’ve answered ‘yes’ to any of
these, our advice is to find a long-term rental in the area and give it a test
drive. If, on the other hand, there are no doubts, it is time to set your
financial parameters.
Once the decision is made to move forward, you need to figure out how much of a
home you want and what type of home you can afford. The latter is a bit easier
to quantify as most financial institutions prefer mortgage payments that are
less than 29% of gross monthly income. However, if you have a good financial
track record, banks will afford you some latitude. Obviously, lending rates are
a crucial factor in this equation, especially if you go the adjustable rate
route. A word of caution: be careful of Adjustable Rate Mortgages that look
particularly attractive in today’s low interest rate environment as an uptick in
rates could lead to a potentially unpleasant financial situation. Remember that
buying now for a future retirement is a long term proposition and your new
investment should appreciate with no financial carrying cost surprises.
An additional factor to consider is whether your prospective
vacation property
can provide rental income before it becomes your full-time retirement home. If
so, you would be able to deduct a portion of your mortgage interest payments,
taxes and property amortization against the rental income. In other words, it is
a great way to build equity and create additional cash flows. It should come as
no surprise that an increasing number of people have taken advantage of this
strategy.
After defining your financial boundaries, it’s time now to come up with your
wish list. What do you want in a home? How many bedrooms and baths? Do you want
to live in a
private gated community
or out in the country? Does it have potential as a rental property? In addition,
off-site criterion should be established to ensure that all aspects of your
vacation home experience are amenable to your current and future retirement
lifestyle. For example, are there property management services and what about
local conveniences such as transportation and healthcare facilities?
Now that you are armed with your financial parameters and wish list it’s time to
find a local broker and see what’s available. Almost 70% of home buyers leverage
the internet to research properties so if you haven’t already, it’s time to
start surfing the web. Simultaneously, you should be refining your financing
plan by contacting a number of financial institutions and mortgage broker
aggregators. Don’t be bashful, comparative shop with at least two or three
companies to ensure that you understand the various financing options and are
being offered the best deal. As we all know, the relationship with a broker is
extremely important. A broker must truly understand your financial parameters,
desired home criterion and lifestyle objectives. Brokers are normally paid for
by the seller. Therefore, it’s your job to establish the broker and buyer
relationship that best works for you, not the seller. Remember, this is your
vacation and future retirement home.
With a bit of good luck, buying a vacation and retirement home can yield some
interesting financial benefits including long term capital appreciation and
additional cash flows. Thorough planning can help mitigate future uncertainties
and make the home buying process into a truly rewarding experience. For
information on vacation and retirement homes visit:
http://www.golfhomeconnect.com