If your retirement dream includes bouncing around between a beachfront condo in the winter and a mountain retreat in the summer, you are in good company. Perhaps you want to keep a small condo close to the kids while also maintaining a home in an area more conducive to how you plan to spend many of your weeks throughout the year. These are only a few of the many reasons why retirees often maintain a primary home as well as a secondary home.
While this may seem like an idyllic retirement experience, understand that there are numerous factors to consider before you sign a contract on a second home.
The Financial Impact
One of the most significant factors that you need to review upfront is the financial impact that a second home will have. You may need to take on another mortgage payment. If not, paying cash for the full sales price may impact your ability to draw dividends or to generate other income from that money. You also pay for repairs, utilities, maintenance, taxes, insurance and decorating costs for two homes rather than one. Because you may plan to spend ample time in both locations, your travel expenses should also be accounted for.
On the other hand, you may be able to use your properties to generate side income. For example, you can rent whichever home you are not currently in out to travelers as a furnished vacation rental. While this may generate a profit or at least help you to cover some expenses, keep in mind that you may need to hire a property management company to decrease the hassle avoided with managing the home on your own.
The Long-Term Outlook
Before making a major purchase like a vacation home, it makes sense to think about the long- term impact that this purchase will have on your life. What is the real estate market currently like in a desired area, and what is the market outlook? Do you eventually plan to move into the vacation home full-time in a few years? Do you want to be tied to a specific vacation destination, or do you want to travel frequently and explore other interesting and beautiful areas?
More than that, think about how the real estate purchase will impact your finances. You may accumulate a nice nest egg in your vacation home, but accessing that cash at a later date may require you to refinance or sell the property. Buying real estate ties your money up in a non-liquid asset. You may need your money to grow with a guaranteed return, such as in high-yield CDs, rather than in a real estate that may have a riskier financial outlook.
The Lifestyle Experience
Buying a vacation home can improve your lifestyle in retirement dramatically if this is a financially-sound move for you to make. It gives you a comfortable place to live while you are away from your primary home. Because you have carefully selected the right home for your needs and decorated it with our own furnishings and other items, you can feel truly relaxed and at home while you are in tis space. More than that, you can easily float from your primary
home to your secondary home without having to make reservations. You may even keep some of your clothes at each location, and this eliminates the items that you may need to pack as you prepare to transition to the other home. Altogether, life may be much more comfortable and relaxed in retirement when you have two homes to live in.
While buying a retirement vacation home is seemingly ideal at first glance, you can see that numerous factors should be considered before deciding if it is right for you. Keep in mind that the actual location where you select your new vacation home may impact your finances, your use of the home and more. Therefore, analyze all options before finalizing your plans.
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