Μany parts of the Midwest were insulated from the housing meltdown of 2008, North Dakota in particular bucked the trend and has had a decade of solid real estate appreciation.
This real estate confidence, along with still recovering housing prices in the south, along with the lowest interest rates seen in generations, have sparked the curiosity of many mid-western retirees looking for a second home in retirement.
Our firm feels privileged that we can play a small role in helping our clients achieve their retirement goal of becoming “Snowbirds”. We hope to be able to pass some of this acquired knowledge on to our readers and shorten your “learning curve”.
Here are our top five tips for buying a second home in retirement:
Talk to your children
Nothing can change your plans quicker than children or grandchildren!
In our office, Rita had always imagined herself lying on a sunny Florida beach, leaving the brutal winters of North Dakota behind. Everything was going as planned until her first grandchild arrived! Her grandson is the apple of her eye and she is happily delaying Florida indefinitely.
Visit with your children and ask where their lives/passions/careers might take them. Will you want to follow them?
Rent for a FULL YEAR
Renting for a full year is HIGHLY RECOMMENDED. Even if you are relatively sure of where you want to live.
Yes, renting for a year will feel like throwing 12 months of rent in the garbage, but buying to soon and paying your realtor a 6% commission when you change your mind hurts even more.
Believe me, I’ve seen it!
Various reasons why you might regret a hasty home purchase:
- Friends from back home move to a neighboring city and you want to be closer to them.
- The realization you hate your new town or become home sick. (It happens!)
- You retire the earliest of your group of friends and no one follows you to your new city!
You want to be able to test-drive everything from the individual seasons in your new town, to the seasonal rotations of the other retirees.
While renting, visit with your neighbors about the area. What direction is the community headed? Is it growing and vibrant, or does it feel stagnant? Ask around, are there other nearby communities that might be a better fit, more affordable, or better amenities?
Does the area offer enough to keep you busy and entertained year-round? Keep in mind…. Boredom is the enemy of your retirement budget!
Find a LOCAL realtor
Every town has a “wrong side of the tracks”. Only a trusted professional from the town you are interested will be able to guide you into the friendly areas of town in a way not yet available from browsing real estate listings on the internet.
A local realtor can find comparable properties (comps) and help you gauge if your new home is listed at a good price.
Hiring a local realtor shouldn’t add anything to the cost of purchasing your retirement home, and is well worth the effort.
Plus-size your emergency fund
The purpose of an emergency fund is to help us cope with unexpected expenses that need to be dealt with and we need to do this in a way that doesn’t mess up our pre-determined retirement cash flow.
Now that you own two homes, your original emergency fund won’t be large enough to cover twice as many home-related emergencies.
Think about it, you now own two of everything, lawnmowers, water heaters, and driveways!
Everything will break or need to be replaced eventually. Having funds in your investment accounts isn’t enough (That’s cheating). These funds are allocated for later, and have the sole purpose of earning you compound interest. Emergency funds need to be liquid, outside your retirement accounts, and accessible on weekends and bank holidays.
“Think of your emergency fund as an insurance policy”
Make a list (Check it twice!)
Walk around your house with a legal pad and start to think about everything you want in your new home, don’t forget the garage.
Everything from couches, to lawn mowers, to alarm clocks.
Any items you can plan for ahead of time, and squirrel away some money for, will help offset your final moving costs. What we want to avoid is poor planning where our credit card picks up the slack in our planning.
This is poor planning and we should avoid it where we can.
What things will you take from your current house to the new house? Who will cut your grass/shovel your driveway when you’re at the second house? Will you buy new or used? If your new home has a previous owner, can you purchase their furnishings? Does the new home need any improvements? Are you paying cash or taking a loan, what are the down payment requirements? HOA fees?
This list will serve to turn some of the intangibles of moving into a tangible list, which we can create prices for, which we can include into our budget.
The fewer surprises, the more likely your second home will remain a blessing, and won’t feel like a curse!