Should you buy a vacation home as a place to retire?

While Frank and Lasly Bradley were still working, they went on vacation to the mountains of Montana. They preferred the cool summer temperatures to the 100-degree heat in Sacramento, California. After retiring in 2012, they purchased a vacation home in Montana, about a four-hour drive from Glacier National Park, for $ 143,000 on 1.5 acres. For the past five years, they have considered selling their four-bedroom, three-bath Sacramento home.

Finally, last October, Lasly, 72, a retired nurse, said, “It’s time to sell the house.” Even with careful retirement planning, they decided that the cost of living in Sacramento was too high. A dozen eggs cost $ 5 in the California capital compared to $ 1.89 for 18 eggs near his home in Montana. Electricity and gas reached $ 700 a month in Sacramento’s summer. Looking for a place to retire? Read more here. So in January, they sold their home in California. “I don’t have to think about going home and taking care of it,” said Frank, 73, a retired finance manager at the University of California Davis Medical Center. They now have more expendable income and more free time. Like other retirees and those planning to retire, the Bradleys bought a vacation home with the intention of retiring to a place they already knew and liked. In fact, second home sales were up 44% year-over-year in 2020, according to the National Association of Realtors. About 45% of vacation home buyers are in their 50s and 60s and buy for personal use, said Shaun Greer, vice president of sales and marketing for Vacasa, a vacation management company. When planning ahead for retirement, how can buying a vacation home help with the transition? You can buy the second home, as the Bradleys did, eventually sell your main home and make the vacation home your primary residence when you retire. Use MarketWatch’s Custom Tool to Find the Right Place to Retire Some people buy vacation homes “as rentals with future plans to retire there over time,” said Jodie Hardesty, director of marketing and business development, Eastern Shore Vacation Rentals, Easton , Maryland. a way to secure your place. “Before buying a vacation home, it is wise to think carefully about whether you can actually afford it. Consider your income now and what it will be when you retire. Even if you qualify for a mortgage on a second home, there are hidden from home ownership, “said Amanda Pendleton, home trends expert at real estate website Zillow.” It’s not just your mortgage payment, if you’re applying for a mortgage. “If your first home is down, Your retirement fund is more than adequate, your emergency and rainy day funds are in place, and all college costs are paid for or planned, buying a vacation home may be the right fit for you. If “all your finances are established and you still have some extra money in your pocket, “a second home might be right for you, Pendleton said. However,” you don’t want to stretch or compromise your position in retirement. ” Hidden costs include property taxes, homeowners insurance, utilities, and property maintenance and repairs. If it is a common interest community, additional costs may be homeowners association fees, condo fees, and potential appraisals. If a reserve fund is not funded at 90% of what the reserve study requires, homeowners can receive an appraisal, said attorney Robert Wiegand of Denver-based Wiegand Attorneys & Counselors LLC. “Could you afford it?” Before buying a second home, here’s what the experts advise: Find your best location. Ask yourself, “What am I going to do with my retirement time?” Pendleton of Zillow said. “How am I going to spend my days?” For the Bradleys, it’s fly fishing, camping, hiking, crafts, golf, an orchard, the mountains, growing friends, and enjoying family visits. “You have to be a little tough to be here,” Frank said. Find out “what appeals to you and how you can afford it.” Know your priorities. Even if you’ve found a vacation home that you love, consider whether it’s easily accessible for your needs. Do you want your family and friends to be able to visit you easily? If you intend to travel by air in the future, how far away is the nearest airport? Does the community meet your religious, cultural, intellectual, or fitness needs? Evaluate medical care. Consider your current and future health. “You need to know that you have good medical facilities,” said Sylvia Ehrlich, president of Intrepid Relocation International. “A variety and force of medical support”. Look for a home with longevity. Does the house meet your needs now and will it do so in the future? Will you be able to climb stairs or is there a bedroom and bathroom on the first floor? Are basic products like the grocery store and pharmacy close enough to your home? Will you ever need a ride if you can no longer drive? “Even if you can pay, you can’t always get help” to carry it, attorney Wiegand said. Consider possible rental income. Do you want to use your vacation home as a rental property or for personal use only? Is it allowed to rent? In any case, a home with at least two seasons or that is attractive throughout the year may be preferable. Some experts advise not counting on rental income, while others point to renting a second home as a way to offset your expenses until you move there. The cost of using a management company to handle the rental is typically a percentage of rental income ranging from 20% to 35%, Vacasa’s Greer said. Others say it can go up to 50% of the rent. Visit in all seasons. Make sure you can enjoy or at least tolerate seasonal variations in temperature, humidity, and altitude. Maybe rent first to make sure you’ve found your dream location. Talk to the people in the area. “Rent for a few months or a year to get a feel for the community and if you feel comfortable there,” Ehrlich said. Retirement is different from vacation, so anticipate what a place will be like in the dead of winter or the heat of summer. Does the place turn into a ghost town in the off-season? For the Bradleys, living in a rural area works because they have many interests, as well as two standard poodles. They also make friends easily. “There is never a bad time of year here,” Frank said. However, the closest town, Darby, is 10 miles away. You have to have “the ability to entertain yourself,” he added. A word of caution: “You really need to be in tune with your partner,” Frank said. “They have to like each other.” They have been married for 27 years. Harriet Edleson is the author of the next book, “12 Ways to Retire with Less: Planning for an Affordable Future” (Rowman & Littlefield, May 2021). A former AARP writer, editor and producer, she writes for the real estate section of The Washington Post.