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Houses Under Fifty
Thousand |
Vacation Homes
Buying a Vacation & Retirement
Home
By Robert Flournoy
Even prior to the financial planning phase,
a vacation and future retirement home buyer should take a step
back and make certain that there is 100% commitment. Ask yourself
a few simple questions. First, is it possible that your financial
position could materially change for the better or worse in the
upcoming years? Have you decided on a location that requires
a dramatic environmental change? What about relatives, does it
matter that their next trip may require a flight instead of a
drive? If you’ve answered ‘yes’ to any of these,
our advice is to find a long-term rental in the area and give
it a test drive. If, on the other hand, there are no doubts,
it is time to set your financial parameters.
Once the decision is made to move forward,
you need to figure out how much of a home you want and what type
of home you can afford. The latter is a bit easier to quantify
as most financial institutions prefer mortgage payments that
are less than 29% of gross monthly income. However, if you have
a good financial track record, banks will afford you some latitude.
Obviously, lending rates are a crucial factor in this equation,
especially if you go the adjustable rate route. A word of caution:
be careful of Adjustable Rate Mortgages that look particularly
attractive in today’s low interest rate environment as an
uptick in rates could lead to a potentially unpleasant financial
situation. Remember that buying now for a future retirement is
a long term proposition and your new investment should appreciate
with no financial carrying cost surprises.
An additional factor to consider is whether
your prospective vacation property can provide rental income
before it becomes your full-time retirement home. If so, you
would be able to deduct a portion of your mortgage interest payments,
taxes and property amortization against the rental income. In
other words, it is a great way to build equity and create additional
cash flows. It should come as no surprise that an increasing
number of people have taken advantage of this strategy.
After defining your financial boundaries,
it’s time now to come up with your wish list. What do you
want in a home? How many bedrooms and baths? Do you want to live
in a private gated community or out in the country? Does it have
potential as a rental property? In addition, off-site criterion
should be established to ensure that all aspects of your vacation
home experience are amenable to your current and future retirement
lifestyle. For example, are there property management services
and what about local conveniences such as transportation and
healthcare facilities?
Now that you are armed with your financial
parameters and wish list it’s time to find a local broker
and see what’s available. Almost 70% of home buyers leverage
the internet to research properties so if you haven’t already,
it’s time to start surfing the web. Simultaneously, you
should be refining your financing plan by contacting a number
of financial institutions and mortgage broker aggregators. Don’t
be bashful, comparative shop with at least two or three companies
to ensure that you understand the various financing options and
are being offered the best deal.
As we all know, the relationship with a
broker is extremely important. A broker must truly understand
your financial parameters, desired home criterion and lifestyle
objectives. Brokers are normally paid for by the seller. Therefore, it’s your
job to establish the broker and buyer relationship that best
works for you, not the seller. Remember, this is your vacation
and future retirement home.
With a bit of good luck, buying a vacation
and retirement home can yield some interesting financial benefits
including long term capital appreciation and additional cash
flows. Thorough planning can help mitigate future uncertainties
and make the home buying process into a truly rewarding experience.
About the Author: Robert Flournoy is a
staff writer for Golf Home Connect. For additional information
on golf course community real estate visit {Golf Course Communities}
Houses Under
Fifty Thousand | Vacation Homes |