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