What was your thought process on buying a retirement (2nd) home early?

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WalterMitty
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What was your thought process on buying a retirement (2nd) home early?

Post by WalterMitty »

Brief background.

I'm 52, work/live in the Midwest. Hope to retire at 60, and would like to spend winters in Florida (most likely) or maybe Arizona. My parents currently spend about 5 months near me, and 7 in Florida...so they have sort of the blueprint.

One path forward is to continue to visit various places as time allows and then when we retire, purchase the winter escape home.

Another path, is to do the search now, and the buy the place soon:
1) Diversification: investing in a hard asset, taking some out of the market.
2) If we decide not to pay in a lump sum, the mortgage payments can be made while still working
3) Potential to rent out (VRBO, etc) to reduce purchase and ongoing costs.

Love to hear from folks that have pulled the trigger early on the retirement home. Any do's and don'ts? Lessons learned, etc.
fabdog
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Re: What was your thought process on buying a retirement (2nd) home early?

Post by fabdog »

We bought ~ 9 months before I pulled the trigger... and we had decided on the place to retire.

If we had purchased a place 8 years in advance... it would have been in the wrong place... what we thought that far out vs what we thought as we made the final call were quite different

Mike
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JoeRetire
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Re: What was your thought process on buying a retirement (2nd) home early?

Post by JoeRetire »

WalterMitty wrote: Wed Oct 20, 2021 3:35 pm One path forward is to continue to visit various places as time allows and then when we retire, purchase the winter escape home.
IMHO, this is the correct path.

Lots of things can change in 8 years or so. Changes in the target locale, changes in your finances, changes in your family situation (parents, children, grandchildren, etc) - these can all affect where you want to escape to, or the kind/size of dwelling in which you want to live.

Until you are actually retired (or at least very close to being so), you won't really know what you want/need. Folks in my over-55 community retired first, spent a few years snowbirding using rentals, then bought if they were so inclined. Some still rent and don't ever want to own a distant home at their age.

My wife and I purchased a second home that was less than a 2 hour drive away. We used it every weekend and most vacations for almost 8 years. Then we decided it was where we wanted to be for the rest of our lives. So at that point we sold our primary and retired to our second home. Different situation than yours. We may still choose to snowbird in Florida on a regular basis at some point. If we do, we will almost certainly rent. We also have a grandchild about to be born on the other coast, so may choose to "snowbird" out there instead or in addition. We'll see.
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Lalamimi
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Re: What was your thought process on buying a retirement (2nd) home early?

Post by Lalamimi »

we bought 10 acres in 1999 for a weekend place, future retirement. DH retired end of 2006 and moved up there. I commuted weekends. fast forward to
2018. Now have 3 grands, and DH's back could not take the long drive to see the kids, etc. I was laid off. We sold and retired on 1 acre near the kids. Son moved back out that way last month. oh well.... In other words, situation changes. Keep looking until you are sure.
jebmke
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Re: What was your thought process on buying a retirement (2nd) home early?

Post by jebmke »

We bought our current house about six months before I retired. We had moved back to the US from overseas. Prior to buying we rented for a year in an area about an hour away (more urban, closer to airport) since I was commuting from Baltimore to Milwaukee every week. We were very familiar with the area we bought since we had spent many years on vacations (mainly sailing) in the area.

In retrospect, I wish we had rented in this area for a year or so after retiring. It takes quite a while, actually living in an area to become familiar with life as a resident. Visiting isn't the same.
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ACA
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Re: What was your thought process on buying a retirement (2nd) home early?

Post by ACA »

I bought second home 18 years ago. Plan on retiring there in next 6-7 years (after kids finish college). And I wouldn’t do it any differently. I will sell my main residence then and that equity will provide plenty of money for 8-10 years, allowing me to retire around age 55. I have been able to pay off second/retirement home AND enjoy it over the last couple decades. Kids grew up on the lake every weekend, many friends have been made and have enjoyed owning a true “getaway retreat” while working.
earlywynnfan
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Re: What was your thought process on buying a retirement (2nd) home early?

Post by earlywynnfan »

There have been numerous threads on this. I went through this same decision a year ago. We bought, with a window of 10-12 years before retirement, in a SC beach resort community. Like you, I'm in the Midwest. Here are a couple factors that swayed our decision:

1) DW and I are simple people who know what we want. I know life can throw curveballs, but our dream wish list hasn't changed, and this locale meets far more of our desires than anywhere else on east coast.
2) Have 2 daughters in college. Both have said they don't want to live in OH. If they do, we also keep the current home. If they end up somewhere close together, we sell and buy a small place close to them. If they scatter, then we have a very desirable location for them to visit us. (Coolest grandparents ever!)
3) We rent it out. Knowing that the highest unplanned retirement expense would be our retirement home, I had been setting aside xxx extra in a 457B and xxx extra in taxable earmarked for it. Watching myself get piddly interest, and not wanting to risk losing principal, I was getting frustrated. With rental income, even while budgeting for future big-ticket items, we still are spending less now than we had been setting aside just for the home. If the purchase didn't make this financial sense, we wouldn't have done it. ~3% mortgage rates helped a lot.

If you are planning on buying by the ocean, I'd like to warn you about two things. I cannot stress these enough.
*The salty air is BRUTAL on the house, even compared to the snow/ice/cold up here. Example: our HVAC unit. Our house sits maybe 1/2 mile from the actual ocean. Our HVAC is expected to last 7-8 years. The oceanfront homes, they're lucky if it lasts 5. This is tough to swallow when the boiler in my OH house is 50 years old, and will probably last another 50.
*We kept being told "the renters will pay your mortgage!" Well, they certainly help, but definitely crunch your numbers, I don't see how anyone in my neck of the woods could get enough rent to cover a mortgage. I knew that ahead of time, and you should, too.

Our big decision came down to: save and have a larger down payment, or buy and let the renters help (with all the negatives that includes.) Financially, we felt it better to buy. I only have 1 year behind me, but so far it's been a positive.

Good luck,
Ken
michaeljc70
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Re: What was your thought process on buying a retirement (2nd) home early?

Post by michaeljc70 »

Unless you are expecting good appreciation or can use the 2nd home quite a bit before retirement, I think it is a waste of money to buy early. With home prices near all time highs, I wouldn't be buying far in advance.

I can think if some exceptions, like if you want something very specific (complex/development or area or ???) that rarely becomes available.
phxjcc
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Re: What was your thought process on buying a retirement (2nd) home early?

Post by phxjcc »

WalterMitty wrote: Wed Oct 20, 2021 3:35 pm Brief background.

I'm 52, work/live in the Midwest. Hope to retire at 60, and would like to spend winters in Florida (most likely) or maybe Arizona. My parents currently spend about 5 months near me, and 7 in Florida...so they have sort of the blueprint.

One path forward is to continue to visit various places as time allows and then when we retire, purchase the winter escape home.

Another path, is to do the search now, and the buy the place soon:
1) Diversification: investing in a hard asset, taking some out of the market.
2) If we decide not to pay in a lump sum, the mortgage payments can be made while still working
3) Potential to rent out (VRBO, etc) to reduce purchase and ongoing costs.

Love to hear from folks that have pulled the trigger early on the retirement home. Any do's and don'ts? Lessons learned, etc.
If you do not KNOW where you want to retire, then by all means keep visiting until you do.

When you KNOW where, wait for a dip in the market. Yes it DOES happen.

Parents bought during the interest rate crunch in the late 70's and go a smokin deal on a VA repo (at 14% interest!).
Friends bought during the GFC and all 5 got great deals, Palm Springs, Scottsdale, Sedona, Vegas, SLO

You are young enough to wait for a dip while you finalize you plans.
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