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I originally posted this in the realty section forum but I'd like to get opinions from those of you who may have done this and are now retired. How did it work out?
I'm going to semi-retire in the next 4-5 years and plan on buying a small inexpensive house in another part of the country in a small town where taxes are low and crime is very low. I can buy a nice little house there for about $50,000 to $70,000. That's all I need or want. Since it's a small town, there aren't a lot of homes for sale at any given time that would meet my criteria.
I currently live in CA where prices continue to go up and up. My current house increased in value about 20% just this last year. I will eventually sell this house and pay cash for the new house in the small town.
My question is, does it make sense to buy my new house even two or three years before I'm ready to move there, get a mortgage on it as a second home for about $300 a month (which I can afford to do) then pay it off when I sell my current home and move there permanently?
I keep thinking this will take a lot of pressure off me to sell this house quickly, then have to find another house quickly in the new town and having to settle for whatever is on the market at that time. It will give me the luxury of waiting until a desirable house comes up for sale in my price range even if it takes a couple of years. Since I have 4-5 weeks vacation time a year, I can use that time to travel there a couple of times a year and work on the house and get it move in ready. Also, at what point in all this would you contact a realtor to find a buyers agent?
Does this make sense to anyone or am I over thinking all of this or not thinking it through enough?
be careful doing this . we tried this and had two negatives .
we realized a few years in that most of the things that were suddenly coming up on the radar that would be important to as as we age were lacking . things like public transportation systems if we couldn't drive , choices in medical care was lacking ,specialists , there was little to do all winter , if i wanted to work there were only low pay touristy jobs . so we sold 5 years later .
the bigger issue is this: the tax code was revised around 2009 or so . if you buy a non primary residence and use it as a 2nd home or rental then the 250k exclusion if you are single or the 500k if married gets prorated if you decide to sell aftyer making it a primary home ..
own the place 6 years and if it is your primary for 3 years then you only get 1/2 the exclusion on any gains .
that was another issue . there were power outages in the dead of winter . storms that ripped the electric service off our house , and all while we were here in ny .
i hated the calls at 2am from our temperature monitoring box
Who is going to take care of this house in "another part of the country?" Do you want to deal with renters?
No, no renters. I want to be able to go there as I please and work on the house and make it move in ready on a gradual basis. I had the thought of possibly hiring someone maybe through the realtor as a "property manager" to keep the yard up, and keep an eye on the house and keep me informed of anything I need to know about.
be careful doing this . we tried this and had two negatives .
we realized a few years in that most of the things that were suddenly coming up on the radar that would be important to as as we age were lacking . things like public transportation systems if we couldn't drive , choices in medical care was lacking ,specialists , there was little to do all winter , if i wanted to work there were only low pay touristy jobs . so we sold 5 years later .
the bigger issue is this: the tax code was revised around 2009 or so . if you buy a non primary residence and use it as a 2nd home or rental then the 250k exclusion if you are single or the 500k if married gets prorated if you decide to sell aftyer making it a primary home ..
own the place 6 years and if it is your primary for 3 years then you only get 1/2 the exclusion on any gains .
This is regarding the second home correct, not the first. It would not affect my primary residence taxes when I go to sell that, or am I missing something about the taxes. Never say never, but I would make that house my last house, my final retirement home with no plans to sell it. After I die, I won't care.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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If you have the extra capital, and are SURE this is your desired location, it is fine.
Remember that small towns that are not within commute distance to jobs / schools / medical can be very difficult for resale.
Know your neighbors, a retired neighbor will be you best advocate for finding bargain properties that are desireable, and for watching it while you are gone. Get a good handyman / maint person that can do your stuff on a flexible schedule. House / plant / pet sitters can help.
Be aware of logistics of commuting back and forth. Mine are very close to airports, and I keep cheap cars at each, but.... Still need to commute from airport to home, cuz my homes are all rural. I have lots of repair projects, so have tools at each place. I fly SWA as 80# of tools fly free, and free date changes if needed. Cheap minivan is a great option for spare car, but I prefer diesel, as they can sit for yrs without fuel problems. If you use GAS, use additive (marine grade stabilizer). My car insurance agent allows me to change policies using a spreadsheet of my travel plans.
Finally.... Consider retaining property of some type in CA to keep your prop 13 alive. My co-workers were CA transplants and many returned to CA at some point. Those who had retained Prop 13 were very happy campers.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,705 posts, read 58,031,425 times
Reputation: 46172
Quote:
Originally Posted by mathjak107
it won't effect the current primary but it would effect the new home if at some point you wanted to sell it .
any home bought now that starts life as a rental ,2nd home or investment property and later becomes a primary is subject to the prorating .
You can later fully convert a previous investment home to primary, if you follow the rules to do so. (Longer residential requirement, + recapture). For a 'keeper' house this would be a simple solution. But... Stuff happens, even AFTER retirement, and the longer residency requirements may not get met. Plan accordingly.
Don't get in a big hurry, be CERTAIN you can deal with living in the new house / location. I assume you have done that.
BTW: I wouldn't be contacting a realtor for anything. You can dig up better deals, and not dink with the hassles of closing with a realtor. I did a purchase and closing on a USA rural home while I was in Thailand all within a week. No hassles, no expenses, no one besides me and buyer negotiating or complicating the deal.
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