Buy Now, Move In Later
Got some extra cash? It’s never too early to snag your postretirement home.
THE FIRST THING Jeff and Liz Stonehill noticed when they toured the 100-year-old duplex on Queen Anne was its condition. “The people who had owned it were meticulous in their upkeep,” Jeff says. “I walked in and said, ‘Man, this is turnkey. I don’t even have to paint.’ ” This was it, the character-rich home they’d been hoping to retire in. They made an offer last June, closed in July, and then promptly rented out both units.
Oh, they still plan to move in, but not until they’re actually ready to retire—in another five years or so. Goosed by plummeting real estate prices and a booming rental market (and in the Stonehills’ case, a sizable inheritance), some aging boomers are getting a jump-start on their retirement plans by buying now and finding someone else to pay the mortgage in the meantime. “Some people have been so worried about the stock market that they’ve been hoarding cash,” says Peter Hedly, a John L. Scott broker who recently helped an Issaquah couple in their late 40s find a beachfront retirement home in Ocean Shores. “And those are the people who are in a great position right now.”
Thinking of going the proactive-purchase route? Consider a few things first: Unless you can afford two mortgages, you’ll have to follow the Stonehills’ lead and rent out your new place. And although interest rates for non-owner-occupied second properties are historically low—in the 5 to 6 percent range—that’s still higher than the 4 percent rates that buyers searching for primary residences were landing late in 2010. It can be harder to qualify for those loans, too.
"When the hot water heater breaks on Christmas Eve, you want to still be happy you bought the place."
But more important, you have to prepare for life as a landlord. “The advice that I give everyone is to not buy something unless you’re passionate about it,” says Jim Brown, the Stonehills’ Windermere broker. “When the hot water heater breaks on Christmas Eve and you have to fix it, you want to still be happy you bought the place.” But don’t get too passionate; you have to accept that your post-retirement refuge will get a little beat up. “No matter how good your renters are, they’re going to do stuff to the house,” says Jeff Stonehill, who’s owned several rental properties in the past. “They just don’t treat a house the same way as they would if they owned it.” By the way, when he said it was turnkey, he meant it was turnkey as a rental—he plans to remodel the bathroom to his and Liz’s taste before moving in.