Smart Moves by Ellen James Martin

Tips for Buying a Second Home in Retirement

Early this year, an engineer in Minneapolis lost her job at a large tech firm. But at age 67 and ready to retire anyway, she wasn’t crestfallen. An extrovert who relishes sociability, as well as tennis and golf, she soon plotted an active retirement in which she could indulge her favorite pastimes.

But COVID-19 threw a wrench in her plans. As a single woman living alone, she’s spent months in isolation, rarely able to see friends and family. Fed up with the restrictions and anticipating early access to a COVID vaccine, she’s now accelerating her plans for 2021 to make up for lost time.

What does the engineer have in mind for a robust retirement? Though her house is paid off and she never expected to buy more real estate, she’s now pondering the purchase of a second home in a large Florida retirement community. That way she could escape to warmer weather when the Minnesota winters prove too harsh.

“I’m exhausted with the limits I’ve gone through with COVID. It’s time to reinvent my life,” she says.

One reason the engineer can buy a second place is because her lakeside Minneapolis place, located in a popular suburb, has skyrocketed in value. That will allow her to tap a small portion of her equity with a new low-rate mortgage to buy a Florida place.

Obviously, not all Americans have the luxury of buying even a first home due to the economic issues now facing the nation. Many renters are now facing the very real prospect of eviction, and many retirees who own homes but depend on fixed Social Security payments must sell their homes to simply maintain their standard of living.

“The economic rebound has been sharp but is by no means complete. It has created distinct winners and losers among sectors in the economy,” says Danielle Hale, the chief economist for Realtor.com, the national real estate listing company.

Margie Casey, a real estate author and broker, says that in seeking a second home, many retirees want to retain the original place where they raised their family.

“A retiree’s primary place is usually near their base roots -- ideally close to family and longtime friends. The second is often just a small condo or a detached ‘villa’ in a resort setting like the beach or mountains,” Casey says.

Years ago, ownership of two homes was solely for the wealthy. But now more middle-class retirees are able to buy a second residence in a separate state.

“These aren’t rich people. Many were teachers, nurses or government workers. Yet many have traditional pensions that give them enough income to support homes in two parts of the country,” Casey says.

Here are a few pointers for retirees considering a second home purchase:

-- First, seek out advice from a financial planner.

Casey, who reviews retirement communities on her website (realestatescorecard.com), says anyone considering two-home ownership should first discuss the financial implications with a professional adviser.

In theory, it should be no more expensive for retirees to own two homes, as long as their mortgage payments are limited. But in reality, dual homeownership can have hidden costs -- after taking into account homeowners' association fees and travel costs.

Property taxes are also a key element, especially if a local government is running a budgetary shortfall and may have to raise taxes.

“Once you investigate the taxes, you may decide to live one state away from your grandchildren, assuming that lowers your cost of living,” Casey says.

-- Make sure you’d be comfortable with condo living.

Michael Crowley, a real estate broker and past president of the National Association of Exclusive Buyer Agents (naeba.org), says buyers contemplating the purchase of a condo as a second home should exercise caution.

“Compared with living in a standalone house, a condo-apartment is a big change. It’s just personal taste, but some people never adjust well to condo living,” says Crowley, who’s worked with buyers since 1993.

As he notes, there are other options for small-scale living that provide many of the worry-free features of a condo.

For instance, in many “planned unit developments,” you can buy a one-level detached unit that comes with exterior maintenance, including lawn service.

-- Don’t overlook transportation access before buying a second place.

Many a retiree has selected a second home without taking into account airport access, which can be a major error.

Depending on an out-of-the-way airport makes it harder to travel to distant locations for vacation or to see your kids. It can also add to your airline bills.

“Try to live near an airport that’s a hub for one of the major carriers. That can save you a ton on travel costs,” Casey says.

Another transportation factor to consider is proximity to major roadways, including interstates.

“Many retirees hope to live within a two-hour drive from their children,” Casey says.

-- Temper your expectations about visits with your offspring.

“Living near the grandkids is a top consideration for lots of retirees,” Casey says, but she advises realism about how often you’ll see family, no matter how close they live.

“Your kids have busy lives. ... Sure, you hope to see them often. But don’t focus your whole retirement on this factor. What’s equally important is to choose a lifestyle that works for you,” she says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)