What do you think of buying a retirement home 5 years ahead of retirement and renting it out?

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  • #84449 Reply

      When retirement comes, sell the current primary home and use the proceeds to pay off the retirement home?

      • Current home value $600k
      • Mortgage Left to pay $280k (at 2.75%)
      • Buy retirement home at ~$400k (down payment ~$100k)
      #84450 Reply

        We did this is in 2018 buying a beach house to retire to 10-15 years into the future. Fast forward to Covid and sky rocketing home prices and we decided to go ahead and make the move in 2021. Sold our primary home in two days for over asking price and paid off the second home. Haven’t done the retiring part yet though.

        #84451 Reply

          My father did this when he retired and it worked out well for him. You just have to be careful and look at the numbers so you pay the minimum (if any) capital gains tax when it comes to selling your primary residence.

          Good luck!

          You can check also: I have access to home equity line of credit for $150,000.00 at 2.95%. I would like to take the money and put it to use. Any recommendations?

          #84452 Reply

            Yes, as long as you can find someone who will take care of it. Also is it a place that is rentable. If where you want to live is getting expensive this makes sense. If the place is not going up in value might be better to invest in fixed income until you are ready to move there. Today you can get fixed income yields higher than many rental yields. Good rentals are rarely good primary homes.

            Good luck.

            #84453 Reply

              I think I want to do the same, but housing prices are coming down in a lot of areas. So I plan to wait a year and reevaluate.

              Otherwise it’s a solid plan!

              Would you also like to explore: After the accident: Can I do something to save my savings and home?

              #84454 Reply

                Absolutely!! Prices are only going up. We do this all the time:) and bonus that somebody is paying down mortgage and you are earning equity.

                #84455 Reply

                  I’ve thought about doing this as a 1031 exchange to defer taxes until I sell the retirement home (or die, which would be even better).

                  #84456 Reply

                    We did exactly that. We had a house in the DC area, bought a future retirement house in FL near the beach. Rented the FL for 7 years and then cashed out of the DC home and moved into the beach rental.

                    However, I invested the DC house sale proceeds instead of putting any towards the FL mortgage since we refinanced as a primary home at 2.25%. IMO, even with rates around 6%, if FIRE is your goal put as little down as possible to obtain the best mortgage (20% max).

                    It worked out perfect for us but we were also buying at recession lows (2013) and selling close to the highs (2020)

                    Also, check out: How often should someone increase their home insurance coverage?

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