When is the Right Time to Buy a Retirement Home?


You have worked hard for decades and you are finally seeing the light at the end of the tunnel: your retirement. Your plans do not call for you to stay in the same home, city or even region. You have plans to purchase a retirement home on some sandy, white beach or shrouded by rich, green trees in some mountainous area well off the beaten path. You have your vision, but how do you get there and when is the best time to do so?

Have a planYou have worked hard for decades and you are finally seeing the light at the end of the tunnel: your retirement.

Market Watch contributor and former Deputy Managing Editor of Personal Finance for USA Today Rodney Brooks spoke with Jim Heafner, president of Heafner Financial Solutions out of Charlotte, North Carolina, who suggested that not enough retirees have actually tested their acclimation to the areas in which they intend to retire.

Rather than deciding that a particular region is where you want to spend your golden years based solely on how it looks in pictures, do the leg work. In this case, leg work means speaking to people who live in a particular place and visiting for yourself. Granted, the idea of taking a vacation for the purposes of research should not feel too terribly burdensome, but it is important all the same.

“Do your research and due diligence,” said Heafner. “Spend time and vacation there. I hear people all the time say they will sell their home and buy an RV. Have you even tried an RV? You should rent one. Maybe [you will find that] you don’t like campfires. I find it unusual that people will spend thousands on an RV and haven’t tried it.”

Think of retirement as a new car. The only way that you will know if it is right for you is to test drive it first. Visit a neighborhood, rent a camper for a weekend and do whatever you have to do well enough ahead of time to know that you are ready to commit.

Why you should buy early

Perhaps you have it in mind that you will work until the moment you receive your golden pocket watch, and only then will you explore the market to find your retirement home. Daniel Bortz, a real estate agent and freelance financial writer contributing to Zillow Porchlight, suggests that there are plenty of reasons to purchase your retirement home before you hit the end of your professional life.

Of these factors, the foremost might be your ability to qualify for a homebuyer’s loan. According to Bortz, financial institutions tend to look at your debt-to-income ratio to determine an applicant’s worthiness, and that ratio is likely to be at its lowest while you are still gainfully employed. If you are still making a steady income, you are more likely to qualify for a larger loan than you would when your income-earning days are at an end.

Similarly, still having an income provides the two-fold opportunity of being able to pay off your mortgage more quickly and having money to put toward necessary renovations. Because income allows your finances to be a bit more fluid or flexible, being able to push money around and float a mortgage payment on a retirement home—even if it runs concurrent with your current mortgage—is easier than it would be on the fixed income that you work with during retirement. Because being a new homeowner means that you are on the hook for repairs and renovations, you can also use any excess cash-on-hand for necessary and desired upgrades.

With regards to the idea of income, Bortz also points out that purchasing a retirement home early means that you can leverage it as a rental property. Depending on your mortgage, you can rent your property above your monthly payment, which allows you to earn a little extra income on top of what you make for work. You may even be able to use its status as a rental property as a means to deduct mortgage interest, property tax and other costs from your taxes.

Another advantage of renting is that it serves as something of a petri dish for potential issues you may have with the property. If a water heater goes bad or you have issues with electrical or plumbing while tenants are staying in the home, you can address them while you still have the income to accommodate and without having to go through the hassle that would come with dealing with those issues while you live there.

If your plans call for retiring to a secluded home somewhere beautiful, make sure that you are working ahead of schedule to make that happen. Do not wait until the last time you punch out before you start taking steps toward purchasing a retirement property; do it as early as you feel comfortable and once it is financially viable.

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