Buying an out of state retirement home which can potentially pay for itself, or wait? (physically, federal)

[dcfas]

We have considered this over and over and have come to the decision that we must spend time in the area first before we buy. We have been vacationing in potential areas for the last several years to get a feel for the locales. We also have family in one state that is high on our list which makes it more likely our choice. This makes it unlikely that we will buy similar to your (OP) scenario, though it sounds like a potential win.

[elliedeee]

Originally Posted by mathjak107

many who buy retirement homes ,. self included end up changing homes .. areas change , needs change and likes and dislikes change so it is always best to keep in mind nothing may ever be permanent .

so tax ramifications may end up pretty important. especially because in retirement so many things are linked to retirement income like aca subsidies , medicare premiums and getting your ss taxed

So true. As newly retired folks we're dealing with the above horror now but because of a different situation.



Mathjak, I love your posts and you're obviously very knowledgeable. While this post is easily understandable... sometimes you just gotta dumb down your other posts for those of us who confuse easily. like me, for instance.



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[odanny]

Originally Posted by M3 Mitch

I would go ahead and grab it. You can rent out the downstairs in the meantime if you want. No sense in letting it go empty. That would give plenty of cash flow to hire a local property manager.



One possible downside is if you got a bad tenant. Kind of depends on the demographic around the house, although this one seems like in a decent area, should be OK.


What's the worst possible outcome? You can keep it as a 2 unit rental as long as you want. If one of the tenants trashes their unit, you can eventually get them out and remodel, write off the remodel cost. I guess worst of all is if you have to sell it at a loss down the road. How likely is that? You can answer that much better than I can.

I think you nailed it here. It's not going to lose money, you'll be able to, at worst, break even, and that is with leaving the downstairs unit empty. You have a place all paid for and waiting when you're ready to move and it also allows you time to make improvements if you decide to before you move in.

Sounds like a pretty damn good scenario to me, low risk, high reward.

[elnrgby]

Originally Posted by katharsis

Wow -- I just want to say how VERY impressed I am with the fact that English is your second language!! I would say that you write better than 75% of those for whom English is their first language!!

Well, thank you, Katharsis (blush blush). I have been in the US since age 23, and am 59 now, so had a bit of chance to practice my English :-). My accent, though, is very noticeable - I guess one can't lose that if one moves to a different country after puberty, after about 15. Something happens to the language-processing part of the brain around that time, and an accent gets hard-wired forever (I suppose one CAN reduce it substantially, but it requires a lot of time and effort, which I didn't bother to make since Americans do not find my accent to be a barrier to understanding). Like all native speakers of Slavic languages, though, I will probably have some problems with articles forever, since Slavic languages do not have articles, so we basically don't know what they are for, and do not have any intuitive feel for using them. In English, you would say, eg, "I see a house, and the house is painted yellow", while in my native language we would say "I see house, and house is painted yellow". Trump's first wife, who was Czech I think, in one old interview famously called Trump "the Donald", which then became a permanent joke, but I am sure she was just sticking articles to nouns randomly (as native Slavic speakers tend to do for the first few years of being immersed in English-speaking world), did not intend it to be funny, and maybe still wonders what is so funny about it to Americans :-).


Anyway, back to the subject of this thread. I think some of the major things in life are not just a matter of finance, but also - and maybe even primarily - a matter of meaning of life. For me, a comfort of home combined with excitement of change, is one of such things, which is why I have small condos in multiple cities, and I would have had them even if there were even larger financial penalties for it. While a stock is something that will appreciate more than real property in the long run, I can't live inside a stock, or use a stock for any material purpose while it is appreciating. For me, the sensation that I can fly across the country, and there is my little other home waiting for me there at all times, is priceless - even had the value of it not increased 50% in the past 10 years (which included about 2 years of a 20% price drop - the lowest that property prices ever came down in San Francisco during the real estate market crash). Yes, I will pay increased taxes when I sell that second home, but so what, I'll be 90... plus, considering my lack of knowledge and desire about investing, I really don't know that I personally would have been able to do anything more financially favorable with the money that I paid for two little extra condos than buying those condos.


So, from my perspective, I can't see how having two homes for several years would be a problem for the OP (particularly if they can get good tenants for one floor of that second house - that seems like the ideal second home situation, actually).

[ReachTheBeach]

Originally Posted by odanny

I think you nailed it here. It's not going to lose money, you'll be able to, at worst, break even, and that is with leaving the downstairs unit empty. You have a place all paid for and waiting when you're ready to move and it also allows you time to make improvements if you decide to before you move in.

Sounds like a pretty damn good scenario to me, low risk, high reward.

This one of the reasons I am looking at doing something similar. I think it is entirely possible, maybe even probable, that I will rent and/or sell the whole thing when I move for good. One reason for that is that once I am down there if I take over the whole residence it will still be cut up. I am actually not sure if that's a good or bad thing and won't be until the time comes. It would be nice to give visitors their own unit and if there is an interior door connecting them, it wouldn't be so bad. But it might be bigger than I want. I could also be swayed by where it is easier to keep a renter or by a really good deal that isn't really where I want to be but close enough to be okay until I am full time. Where I want to be may change once I start doing frequent visits.

[Submariner]

Originally Posted by marino760

... Should I let this house go and wait, or buy it since it's an opportunity that probably won't happen again? I would just like to get some opinions.

I would do it.

I have owned rental real estate while I lived on-site, and I have done it while I was living out of country.

I have moved into my rentals, the 'conversion' process with the IRS is not difficult.

Buy it, rent out both units. Then when you are ready to move into yourself bump out one tenant. No big deal really. Be nice and give them plenty of notice.

[M3 Mitch]

The more I think about this, I am just not seeing any realistic downside to purchasing this house now. I have rolled it over in my head several times, and I don't see how it could go wrong.



That said, I am not omniscient, and can be wrong. There could be a downside that I am not seeing. But I have looked carefully and didn't find one.

[Nightengale212]

Originally Posted by marino760

I have an opportunity to buy my retirement home a little early and would like some honest opinions because there's a twist.
There's a house located in the town I'm going to move to which is on the market. It's in the historic district, easy walking distance to things including the bus stop, food market, church, opera house, museum and restaurants. It's located almost exactly where I was hoping I'd find a house for sale.
The house was recently renovated and turned into 2 apartments, one upstairs and one down. The upstairs is already rented to a single person. The rent would almost cover all of the small mortgage including taxes and insurance for the house.
My dilemma is that I still have a couple of years before I was planning to fully retire and move. I could buy the house now, let the upstairs rent pay for it and then in a couple of years pay the mortgage off if I wish to and then decide if I want to rent out the upstairs or use it myself and keep it for when friends or family come to visit. If the tenant moves out for any reason before I move there the mortgage would not be a hardship for me to pay without it being rented. In the meantime, I would hire a property management company to collect the rent and do basic maintenance.
Being a small town, there's not a lot of houses that come on the market located where I would find ideal, maybe 2-3 a year if that.
My concern is that the house is located in another state and I really did not intend to buy one quite yet, but this one has most things I want, and will pay for itself for the most part before I move there.
Should I let this house go and wait, or buy it since it's an opportunity that probably won't happen again? I would just like to get some opinions.

I live in a town similar to what you are describing, and my childhood home was just past the historic district which was in walking distance to the things you mentioned about the home you are interested in. I could never afford to buy in that area of my town and still can't which I would have loved, and when those historic homes in my town do come up for sale which is not often they are scooped up real quick. All that being said, if that is your dream town and the home is in the ideal location you want to live and you can afford it even without renting it, I would lean very heavily towards making an offer.


Best of luck.

[ohio_peasant]

Originally Posted by M3 Mitch

The more I think about this, I am just not seeing any realistic downside to purchasing this house now. I have rolled it over in my head several times, and I don't see how it could go wrong.

The only potential downsides are (1) undiscovered catastrophic flaws in the house, and (2) a declining market. The first, one hopes, would be either so rare as to be negligible risk. The second, one supposes, can be discerned by looking at the history of the local market. I don't mean oscillations, of the sort that occur say in Houston or Los Angeles, but persistent stagnation/decline, of the sort that occurs in the Rust Belt.

[StealthRabbit]

As with all purchases... If the home and price is right, and you can afford it now... nab it. 2 yrs is peanuts as far as finding the right house goes.

I have homes 2000+ miles apart and bought before retirement domicile is known (and will likely change)
+
1) deductible travel and food for next 2+ yrs if active managing props
2) Locking into local RE market (if the price and location / home is right)
3) Income / tenants paying off new home.
4) Chance to determine how you want to improve it
5) Deductible improvements as allowed as rental
6) Depreciation (recapture when selling LONG time from now)
7) Potentially a free place to stay when visiting in next 2 yrs
8) Opportunity to have work done while you are absent (will be ready when you arrive)
9) 24 months to develop interests friendships while managing new place.
10) Opportunity to move stuff as needed over next 24 months

"-"
1) buying wrong place or price
2) Plans change
3) Price deflation (possible)
4) adding complexity to life (Consider mitigating this, hiring someone to mow / care for...)
5) Added travel time (managing)
6) costs / spending while away (for fix-it-person / services / renting...)