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Do you own a retirement/second home?

DaveNV

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Never one to admit being slow on the uptake, nonetheless, here I am, wishing I'd done something a long time ago. I'm exploring options for buying a retirement home in another state, and I'm kind of lost. Anybody out there have experience doing this sort of thing? I'm seeking advice. (Not unlike @slip with his Molokai condo, I'm trying to plan for my future.)

I own my current home, (still paying a mortgage, but with a very good interest rate), and I have a good amount of equity. I have virtually no other debt, a perfect credit rating, and I have a good income. I'm a great credit risk, from all I can see. With that said:

I'm trying to figure out how to shuffle things around so I can buy a place to retire to in another state, while I'm still working here. Once I'm retired, the plan is to move to the new place and sell this current home. Timing for that move is still flexible, because my spouse is a few years younger than me, and won't be retiring for another few years. If we can arrange a job transfer within the Costco organization, moving will be sooner rather than later. Till then, I'd either rent out that second place, or I'd split time and snowbird it.

Those are just details. The biggest question is: How do I do it? Refinance for a down payment? Home Equity loan? Two mortgages seems a bit daunting, but it "could" be managed, if I kept working till spouse is ready to retire. Do I buy something temporary there, and use it as a vacation rental? If the idea is to get a nice home while prices are still affordable, am I inviting trouble? Is it smarter to forget the idea, maximize equity/resale value of my home here, and just bail out when the time is right, and deal with housing prices there at that time? So many questions - my head is spinning. LOL! :D

Any suggestions or advice? Did you already do this? How??

Dave
 

VacationForever

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Cash is king...

We bought our current (retirement) home in early 2014 while still living in California. We did not legally make the move until late 2016. It was a pure retirement home in that we did not rent out the 2nd home. We just did not want someone living in our new home. If we had bought an older home that required remodelling before we moved in, we might have rented it out.

The downside was that we fully furnished this second / current home, which meant we had at least 2 of everything and some went to my son when he bought his place and whatever was left behind went to the buyer. We left a lot of furniture and all of the wall art and pictures/paintings for the new owner. We downsized from a 4600 sq foot home to a 2800 sq foot home.

Our California home had no mortgage on it because we hate debt. When we bought this retirement home, we went on to sell another rental home in California that was also fully paid up so as we did not end up with cash poor and house rich. We did borrow from our investments through something called LMA - Loan Management Account to pay for our current retirement home. Once the rental was sold, we repaid the LMA loan.

After our move in late 2016, we sold our California home in middle of 2017.

Good luck. House hunting is fun.
 

mdurette

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On the financial note, Sounds like you have two needs:
1. 100% financing for the new house. (you mentioned home equity for downpayment and mortgage for new)
2. Keeping payments low if you own 2 houses at the same time so you don't have to keep working.

If I got that straight....then:
1. Either a cash-out refi or a home equity will typically max out at 80% of your current house value. Run this calculation, do you have usable equity in your current house to pull out and pay cash for the next one? (calculation example: Current house $500,000 x 80% = $400,000 max mortgage liens, minus out current mortgage balance = usable equity. If the answer is yes...
2. If 3 years is the real time frame that you would move - then I would suggest establishing the max Home Equity Line of Credit you can get (and do it now). The HELOC can sit there with a zero balance you will have no payments. If you establish now, then when and if you find something, you will be a "cash" buyer, which any seller will find highly desirable. Most lenders also have 3 year early termination charges on HELOCs...so, if you establish it now and you sell in 3 years you can avoid that. HELOCs also have no payments until you use them and when you do use them, the payments are interest-only so they will be kept low.
 

Passepartout

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I'll send you a pm later.
 

chellej

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Dave

We have done this...about 7 years ago we decided where we wanted to retire. We were living in Texas at the time. We bought 40 acres in Idaho and had plans drawn up to build a log cabin. We put a 32-foot travel trailer on the property and built a cover for it. It is an off-grid property. Got generator, septic and water catchment system. Had the opportunity to move to Washington...2 hours from land and jumped at. At this point, we were ready to build but when we crunched the numbers, we realized we could not afford to build what we wanted unless it was our primary residence. We then realized after several winters the work involved with snow removal that this was not going to be a possibility for full time living once we retired. At this point, we stepped back, decided on a smaller version of our cabin and purchased a 7-acre property with a smaller house for our fulltime residence in Washington. It took a while to bring DH around to the fact that the cabin did not make sense for fulltime residence but he is now happy with our situation. We are 4 years into the cabin....the cash we had, in the beginning, was supposed to be enough to build the cabin but the contractors only got as far as closing it in before the money was gone. So we have been finishing as we go and the stuff we can't do ourselves was done.

Our initial funding was from the sale of our house in Texas. The cabin is free and clear and land paid off and we are paying as we go to finish it. We rented the first 18 months we were here and then purchased our current home. We do have a mortgage on our current home but it is very reasonable and we can afford it into retirement.
 

TravelTime

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We own three homes, an office and a huge lot right now (23 acres), all in Northern California. We are in the process of selling 1 home and 1 office, and buying a new second home. We do it through cash mainly, but to buy the new second home, we have been approved for a mortgage as a bridge loan.

Basically, to own a second home at the same time as your primary home, it is either cash or you need to qualify on your income for owning 2 homes. It is quite simple. Not a big deal.

I would question why someone would want to buy a retirement home well before retirement. In spite of us owning multiple homes, I think it makes the most sense for most people to own one home at a time.

Plus it seems home prices are leveling out, and possibly decreasing a bit. Regardless, the extra costs of owning a second home are not worth doing many years in advance of retirement. I think most retirees would be best to exchange their home when they are near retirement, not years in advance.
 
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rapmarks

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In 1988 we built a small vacation home about 150 miles away in a resort. We were teachers and spent the summer there and lots of weekends. We refinanced our main home to do this. we retired in 1999,spent the summer in vacation home and used timeshare and rentals to visit all over the country for a retirement home for the next three plus years.
We finally decided on the area of Florida we wanted, after ruling out Arizona, the Carolinas,Arkansas, and some other areas. We sold our main home. Made the big mistake of filling a storage unit with our things, wasted eight thousand dollars before we got rid of it all.
When we found our house, it was furnished, and the outside work was taken care of by association. Our second home is on wooded lot with no mowing or raking leaves.
We have done well for thirty years. We now fly back and forth, keep a car in each garage.
It is starting to get hard, I put up storm shutters yesterday in preparation for going north. But we have done this for thirty years
 
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VacationForever

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We own three homes, an office and a huge lot right now (23 acres), all in Northern California. We are in the process of selling 1 home and 1 office, and buying a new second home. We do it through cash mainly, but to buy the new second home, we have been approved for a mortgage as a bridge loan.

Basically, to own a second home at the same time as your primary home, it is either cash or you need to qualify on your income for owning 2 homes.
Where is your new second home going to be?
 

slip

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My Dad was 45 when he bought his retirement/second home so I consider myself late also. I do wish I had done it sooner and I think you’ll fall into that too but I’m not one to look back and regret. I usually always lol forward.

Looking back after my mother pasted away, we knew we weren’t tied to our current location anymore and we decided it’s now or never. We had a chunk of cash and an open, unused HELOC so we used some of each so I wouldn’t be cash poor. The renting has worked out great but it doesn’t cover everything. We bought very reasonably and can make the payments easily. Our financial situation sounds similar to yours.

Everyone’s situation is different. I’m the young one in our marriage so that is a big difference. So, your not late, your ready to make some decisions and put your plan in place. Once your sold on your location, I believe the rest will fall into place. That’s when your fun will start. :thumbup:
 

slip

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Also, since we were renting it out, we had to have 30% down. It was only 20% if we wouldn’t rent it.
 

bluehende

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The question I will ask is why the hurry? If you plan to rent for a short time seems risky to me. There is no guarantee the property would not be worth less when you want it. Resort areas are extremely price sensitive depending on the economy. I like to play it safe so would rather use the time to find the place I want to retire to. I would worry that two mortage's leverages way too much. Of course not knowing details I have no way to quantify how you could handle that risk. The nightmare scenario is two houses in an area that real estate is dropping. My opinion is somewhat based on how long the economy has been expanding. I believe a reversion to the mean is in the offing.

We held a summer place for 30 yrs. At the end I would have made a lot more by placing that cash in an index fund. Of course investment was only part of the reason to own
 

TravelTime

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Where is your new second home going to be?

It is on the San Francisco Bay in Point Richmond. It is an up and coming area. In January, the city just launched a ferry from Point Richmond to San Francisco. The developer raised prices by $50K since we signed, which was about a month ago. We are buying a 2100+ sf first floor flat (bottom unit of 2 stories) about 50 feet from the Bay. We have a view from our bed of San Francisco and the Bay Bridge. No one will ever be between us and the Bay. I can’t believe we found this. All the units with our floor plan on the first floor are sold now. A month ago, 19 of 60 units were sold. Now 26 of 60 are sold. Only about 40 or so units have been released for sale. The locals call it “the real estate opportunity of the century.” Very few people are aware of Point Richmond. People in the Bay Area associate Richmond with crime. All my friends told me to not buy here. However, Richmond is currently experiencing a renaissance. Point Richmond is really beautiful and entirely on the bay.
 
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Luanne

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We did own two homes for a short period of time. We bought our retirement home in New Mexico while both dh and I were still working, and living, in California. It wasn't what we'd planned to do, we had planned to sell our home in California, move to New Mexico, and rent for awhile. But, we found a house we loved, and after consulting with our financial guys decided go go ahead. We knew we'd be making payments on two houses for what we hoped would be a short period of time (turns out it was only for a few months). But, this long winded tale was to say the way we did it was to take out a Home Equity Loan (or maybe it was a line of credit) to pay for the down payment on the new house.
 

Sugarcubesea

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Never one to admit being slow on the uptake, nonetheless, here I am, wishing I'd done something a long time ago. I'm exploring options for buying a retirement home in another state, and I'm kind of lost. Anybody out there have experience doing this sort of thing? I'm seeking advice. (Not unlike @slip with his Molokai condo, I'm trying to plan for my future.)

I own my current home, (still paying a mortgage, but with a very good interest rate), and I have a good amount of equity. I have virtually no other debt, a perfect credit rating, and I have a good income. I'm a great credit risk, from all I can see. With that said:

I'm trying to figure out how to shuffle things around so I can buy a place to retire to in another state, while I'm still working here. Once I'm retired, the plan is to move to the new place and sell this current home. Timing for that move is still flexible, because my spouse is a few years younger than me, and won't be retiring for another few years. If we can arrange a job transfer within the Costco organization, moving will be sooner rather than later. Till then, I'd either rent out that second place, or I'd split time and snowbird it.

Those are just details. The biggest question is: How do I do it? Refinance for a down payment? Home Equity loan? Two mortgages seems a bit daunting, but it "could" be managed, if I kept working till spouse is ready to retire. Do I buy something temporary there, and use it as a vacation rental? If the idea is to get a nice home while prices are still affordable, am I inviting trouble? Is it smarter to forget the idea, maximize equity/resale value of my home here, and just bail out when the time is right, and deal with housing prices there at that time? So many questions - my head is spinning. LOL! :D

Any suggestions or advice? Did you already do this? How??

Dave

I will be purchasing a retirement home more than likely in FL but there is a small chance it could be in AZ. Headed back to Naples in December and will look at my top 5 condo developments. My goal is to purchase 2 years prior to retirement so that I have funds to purchase furniture and do any updates I want in my new place.
 

bogey21

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A number of years ago I bought a condo in Hot Springs Village, AR to use during racing season with the idea I might retire there. Paid something like $32,000 fully furnished and rented it out on a weekly basis (or let friends use it) the rest of the year. I did so well renting it I bought a second one exclusively for the rental income. Rental income exceeded expenses on both. Later I pretty much decided to stop traveling and to retire in a CCRC. I sold both condos for about 20% more than I paid for them and moved on. Unlike TS Weeks RE tends to increase in value...

George
 

lynne

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We purchased our Hawaii retirement home in 2001. It was a plantation style home on 5 acres surrounded by Norfolk pine with over 200 macadamia nut trees. We refinanced our current home which was almost paid off and had enough cash to purchase the Hawaii home outright. We knew that our opportunity window was small as housing prices in Hawaii were beginning to rise and we wanted to secure our plans to move here permanently. We hired a property manager and had the house rented to cover our costs (property tax, GET, maintenance...) and keep the home occupied. In 2006, we sold our home in NY, loaded up our 40' container, shipped one of our cars, purchased a small truck here in Hawaii and made the move.

Our timing was almost perfect as we were able to sell our NY home for an unimaginable profit during the housing boom and were able to move here debt free.
 

am1

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We purchased a beach house 15 minutes from our house last year. In a gated development with a nice pool and few minute walk to the beach.

More work but we I visit a few times a week. People borrow it or we just go for the day. Try to stay over one night a week.

More likely a son will live there full time then us.
 

OldGuy

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Yes, 3 times.

gonna retire someday

nah
 

Snazzylass

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But where? Where would you like to retire? Make sure you have a good reason to buy now. Being a landlord? I grew up in the business and have no interest. I'm without a mortgage in AZ but large monthly HOA. It works for now. I agree with another poster that home prices may have actually softened in most areas after the rising mortgage rates from 11/16 to 12/18.

You'll likely want to look at a HELOC since you have such a great rate on your first, but most folks get a bit sticker shock when they learn what rates are for a second. You'll need to look at the math and ask yourself if it feels right.

On the other hand, you always get your best mortgage rate on your primary. It might make more sense for you to retire, sell where you are, transfer with Costco and then purchase your new home.

In addition to staying in AZ (and by the way, Phoenix and Flag are expensive but other areas much more reasonable), I own a little lake lot in Indiana. I'd like to save enough before retirement to build a little house there. Cash. It might be doable!
 

DaveNV

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I appreciate all the great comments, folks. Tuggers are the best! You've given me a lot to think about, and some very smart ideas about analyzing exactly what I want to do. Thanks! :thumbup:

@Snazzylass: We're looking strongly at Southern Nevada. Still deciding where, and not ruling out any particular area. We're spending a few days down there at the end of this month to "walk the streets" a bit, and get a feeling for whether it would be a good fit. The Costco transfer is actually a huge part of the possible plans, and isn't an easily accomplished thing. I've been approaching things from the idea that a transfer wasn't likely to happen, but if one can be arranged, it may change everything, and we can move sooner. All else being equal, we'll probably wait to buy something until we know if/what will happen for my spouse's job. Then we'll sell here, move there, and deal with the real estate market at that time. This is a very loose plan. Stay tuned. :)

Dave
 

WinniWoman

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My brother bought a second home but is wealthy. I assume he paid cash.

One thing he did say is that having two homes right now is a pain, as instead of having one home to maintain, now he has two. Even though he bought a gorgeous home- no matter what- it needed to be repainted, needed landscaping, needed this and that. Needed furniture. He hires people for everything because he has the money. It is in a gated community but the HOA fees only cover the community- not the landscaping or exterior of the home. Certainly not the interior.

He said little things are annoying- like he does not have a second set of yard tools at the new home, for example, and my sisterinlaw likes to do some gardening. They do not want the hassle of buying two of everything when it comes to things like that. And kitchen tools and dishes and pots and utensils. Also- stuff like their paperwork and files and so forth are back in NY and staying down in Florida for 3 months- they find they wish they had some of it with them. They have some clothes down there, but have to take more down and back. In their case- they drive down from NY so they will have use of a car for the 3 months, but other times they fly. Their main home is in NY and the second home is in Florida. (where else?). Oh- and then they have to get a neighbor to check in on their home when they are in Florida for the winter. When they do sell the NY home they are not taking any furniture. When that time comes he is thinking of just renting something in NY when they visit. Lots of these things to think about.

I asked my brother what we should do, as when we sell our home I really hate the idea of renting something (and storing our stuff) until we can buy another place. He told me to float money for a down payment and take out a mortgage (though we both will not have jobs so I don't see how that would work anyway). But our FA advised against it (and I know our attorney would, too).

Although we are in decent shape for retirement supposedly on the financial front, and our current home was paid off long ago, the FA said we should not take out a mortgage with it's corresponding closing costs and so on. And then there is the carrying costs of owning two places until our main home sells. That we should wait until our home sells to buy something else. We don't know what our final sale price on our home would be and we do not know how long it would take to sell. Not the answer I wanted to hear, but I figured as much.

Heck- we do not even know where we will end up and this scares me also. The FA said renting for one or two years is ok for us. But what if we rent somewhere we think (or know) we want to live and nothing comes up that we want or can afford to buy? What if we decide we don't like the area or the state? Now we have to pick up again and move somewhere else and move our stored stuff again? This not the type of life we want. We are homebodies, not gypsies.

Dave- at least you have moved a lot so you are used to it. We have not. I actually can understand why most people do not move in retirement. What a hassle! Not to mention leaving family and friends and the community they know.

One thing I do know is I would not want to be a landlord. And I do not want anyone else using my home- 1st or 2nd. I also would not depend on rentals to make things work financially.

My husband has a friend who was also pretty well off (3 pensions between him and his wife) and they bought their Florida home before they sold their NY home. This enabled them to take their time and move their stuff back and forth. Their home here took a long time to sell. It was a decent plain vanilla bi level home in a good school district and it did finally sell, but he was surprised how long it took and then the closing in NY here, unlike in Fla., took long also.

We do know another couple that is thinking of buying a full ownership at a timeshare resort in the Northeast and using that for now and when they retire and renting it also, and eventually getting something for winters in Florida and go back and forth as snowbirds.

Seems we know a lot of people who have second homes and also who were able to buy their retirement home before selling their current home. I wish we could too. We feel kind of left out....

I would love to buy a summer fractional ownership at Riverwalk in NH- May through October (not sure they even have any of these left. Most are 9 weeks with off seasons thrown in. No thanks) and just keep our home to avoid this whole thing. But- I know we can't financially. Also- could be very risky buying full or fractional ownership in a timeshare resort. Sometimes I wish I could just throw caution to the wind....

It all comes down to money and how much risk you feel comfortable with. The numbers have to add up so you won't put your retirement into jeopardy. Just be careful. I am sure everything will work out in the end no matter what you decide.
 
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