Buying a second home

[Rob]

Hi-
I recently retired early at the young age of 66. I'm single. I have a pretty good monthly retirement income of $5000+ (including social security). It's a secure income, and rises a little every year. I also have about $250,000 in additional investments, including my bank account.

In addition to all that, I purchased a house in Washington state, and put 2/3 of the cost down, so my monthly payment (including mortgage, taxes and insurance) is $560.

Here is my question: I may have made a mistake in buying my house. I am finding that the yard work might become more than I can handle in the future. Also, I want to travel, and closing a house for months at a time might be foolish.

I'm actually contemplating buying a condo or townhouse in a nearby small city of Bellingham. It would be small, and the cost might be as much as $200,000. I could put 2/3 of the cost down. or even buy it outright. My reasons for doing this is that eventually I would want to live in it full time, but perhaps could rent it out in the meantime. I would eventually sell my house, but not be in a hurry.

Do you believe that this is risky? Is it any more risky to have my money in the stocks and bonds I currently have? Many of you have far more expertise in this that I have.

Regards,
Rob

[bizlady]

I think the answer depends in part on your spending. Can you support yourself very comfortably on 60K a year, including taxes and health care?

Then consider that you may have only $50K left in the bank. If you homes need a major repair, your car dies, or you need more money for your trips, where does that come from?

If I were you (which I am not) I would want more money in the bank as a cushion. Why not consider selling your current place- which you think is a mistake anyway, THEN buy and use the smaller home as your base?

[Meadbh]

Quote:

Originally Posted by bizlady I think the answer depends in part on your spending. Can you support yourself very comfortably on 60K a year, including taxes and health care? Then consider that you may have only $50K left in the bank. If you homes need a major repair, your car dies, or you need more money for your trips, where does that come from? If I were you (which I am not) I would want more money in the bank as a cushion. Why not consider selling your current place- which you think is a mistake anyway, THEN buy and use the smaller home as your base?

+1

Bizlady knows what she is talking about. She has lots of real estate experience.

[NW-Bound]

Interest rate is low enough now that I would not mind carrying a higher mortgage on the 2nd place. I would not exhaust my cash. I would then sell the 1st home ASAP.

I myself do not mind carrying two places for a few months, as it would make it easier to move. Else, you have the hassle of putting things in storage, or to rent or move into an apartment for the interim. I hate moving, so the fewer moves, the better. Of course it all depends on how much "stuff" one owns.

[Rob]

I appreciate the response. Bizlady, I agree that it is perhaps better to have more reserve money, and buying a second home will not allow that. However, NW-Bound has a point about buying the second home (condo) first and then selling the firsthouse. It might take some time to sell it. I don't want to have two homes if that causes problems financially, but just wondering if it is the smart to buy a condo/townhouse first (and very carefully) and then sell the house after I've moved in.

Thank you again

Rob

[treeofpain]

I would sell the house first, then buy the condo.

[Dog]

I agree with treeofpain. Any tax implications involved that may impact your decision?

[panacea]

Sell house one before buying the condo to maintain your cash reserves and minimize unexpected expenses. You might be able to swing two, but IMO yes, potentially too risky.

[Meadbh]

Why not sell the house and rent a condo? This gives you breathing space, and you have the option to continue renting if you wish. Less financial risk too.

[kcowan]

I think you need to decide what you want to do when retired first. Yes the jobs required with home ownership can interfere with a retirement lifestyle. I would convert your home equity into cash, invest it and rent. You can rent an apartment or even a condo. You can even sublet a rental apartment when you travel. We do that every year when we go south. Often straight rentals are more flexible than condos for subletting. Ours is pet-friendly so we have no problem renting it.

The key thing is to not get tied down until you decide what kind of lifestyle you want.

(And BTW 66 is not early retirement!)

[Rob]

I will not rush to sell my house, but instead looking for a plan. My house is brand new, and therefore, the maintenance is low. It's only 1450 sg feet, and the lawn is very small. It still requires more time than I'd like to put in. It's the first house I've ever owned, since I worked overseas the past 40+ years.

I think I should try to stay in the house for at least another year and see how it goes. I will travel for 3 or 4 months this winter, close my house up and taking care to make sure it will be fine while I'm gone. If that is a success, then I might even continue to own it for a few more years. Does that sound like a plan?

Kcowan, I know 66 is not early retirement. Just a little humor.

Rob

[Animorph]

Quote:

Originally Posted by Meadbh Why not sell the house and rent a condo? This gives you breathing space, and you have the option to continue renting if you wish. Less financial risk too.

+1. This is what I would do, and recommend.

Certainly staying where you are is an option. You might look into hiring someone to do the yard maintenance for you. I wouldn't worry about closing the house for a few months.

[W2R]

Rob, how about hiring somebody else to do the lawn? It might be cheaper than trying to carry two homes. Even here in New Orleans where the grass grows so fast you can nearly hear it growing, and with a relatively expensive lawn guy, it only cost me an average of $104/month last year. In your area, there might even be months when the lawn doesn't need mowing at all.

[rodi]

My BFF lives in Bellingham, and I lived there for several years in the early 90's. I love that city. I have one friend who lives in a medium rise condo downtown, near the bay. And another acquaintance lives in a condo in Fairhaven. It's an excellent lifestyle. Both are in very walkable neighborhoods.

I can't comment on the sell current home first, or own two homes idea... You'll have to make that decision. I just wanted to support the idea of a condo in Bellingham, in general.

[Ronstar]

I would sell the house first. While waiting for the house to sell, explore the condo/townhouse market. If you know the area very well and find a condo you like and fits your needs, then buy the condo after you have sold the house. If you're just learning about the area where you're considering buying a condo, then rent for a while until you get enough background info to make the buying decision. You don't want to repeat a "mistake" of buying something that doesn't suit your needs.