Rent or Buy in Retirment?
Annegriet
4 years ago
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Comments (38)
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Buy-ins for continuing care retirement communities ?s
Comments (9)My parents lived in a CCRC for 10 years and I worked in one for 3 years. I really like the concept, I'll be moving into one in 20 years or so. My parents moved through all the levels of care while they were there, both died in the nursing home (as they should have). They loved it there, and the system worked very well. Does she (or her estate) get all her buy in money back when she leaves? That actually depends on the kind of license it has, the best ones do give it all back (no interest though). She's young enough to get a lot of use out of the place. I would assume for her $900/month she gets a meal a day in the dining room? Usually, at that low monthly rate, she'll pay for extra services as she need them, which I think is a good idea. Make sure she understands what they are. Those extra services might include cleaning service, home health aide assistance, rides off the campus to social events, doctors' appointments etc. She'll probably love it, and have to pencil you into her social calender, she'll just be so busy! Good luck....See MoreNeed advice on buying vacation/future retirement home close to be
Comments (21)To clarify some things about our ideas to buy on Isle of Palms - while we're going to hold off on buying, and may not ever buy on the island itself, the area around it seems to be exactly what we're looking for our retirement years. The island is less than 13 miles to downtown Charleston, and only 20 miles to the Charleston Int'l airport. Even closer than Charleston is Mount Pleasant, about 4 miles away (across the Inter-coastal waterway and a marsh), which has plenty of shopping, restaurants, medical care including a decent hospital. In addition to wanting to live close to the ocean, we want to live near good medical care (this is most important), shopping (I'm not going to stop doing DIY projects on any home I live in until my body gives out - it's my hobby), airports, etc. I love the beach - every vacation we can we go to a beach - we've visited many of the east coast beaches over the years - I never get tired of it. My husband loves salt water fishing. We have a boat that he takes onto the Chesapeake Bay all the time to fish, and we go tubing on the Potomac River with our grown kids and grand kids (who are still very little). We've planned on retiring to as close to the (right) beach as possible for at least 20 years and I think it's safe to say that we're not going to change our mind about that between now and when we actually retire. And I definitely don't want to ever live someplace rural again - did that as child and have family still there - definitely not for me. Even if we were young I don't want to live in a place where there aren't plenty of doctors, including all types of specialists, and I don't want to live someplace, where if one of us was in the hospital, the other would have to drive over an hour back and forth. I'm honestly surprised at how many people I know who retire who don't care about that aspect at all. So - given what we know we want/need, we've been considering all the areas close to the Atlantic between Wilmington NC and Jacksonville FL. A few years ago we visited every place that even seemed to come close to what we want. But when we were looking before our income and savings were a fair amount less than they are now, and housing costs and interest rates were higher, so it limited where we would be able to afford to buy, so we didn't consider some of the areas we could afford now. And this is a retirement place we're talking about - being able to vacation in it before retirement is a bonus. We could wait until we retire to buy, but as I said in the original post, I don't want to miss an opportunity to buy while the prices are low AND the interest rates are low. But I do think we need to slow down and take our time - visit and stay there during different seasons, including the heavy tourist season, and make sure that it's what we want. We may find that living on an island/beach itself is not that great and that we should go back to what we always considered to be our only option - living on the mainland, but close to the beach. People seem to think that prices will be low for a while - I don't want to buy and then see prices drop even lower - and that interest rates will be low for a while too. So I realize that there is no rush - but I still don't want to kick myself years from now for missing any "deals of the century". I know this was long - sorry about that - but I think my first post gave the impression that the whole idea of buying at/near a beach, and this one in particular, was hurried and not thought out. While rushing into it right now is undoubtedly a bad idea, I don't think the concept of buying a home sometime soon for retirement in a few years, if the prices and interest rates are really low now, is a bad idea....See MoreOut of state move, rent or buy first?
Comments (13)We just moved from suburban Chicago to western NC 8 weeks ago. We'd been house/land hunting for over 2 years, making short tips to look around but didn't find "the one". As you said it's much easier to do the hunting while living in the new area so we are renting here and can take our time. For us, it made more sense to 1) have a year lease with option to extend month to month and 2) rent a house large enough that we did not need a separate storage unit - I want our possessions under our roof and in heated/cooled space. Dollar for dollar it made sense to put the $$ into rent as opposed to storage. We sold a great deal before moving but every closet here is packed with boxes, under the beds, the basement and the garage has items that don't need conditioned space. We are settled, roughly, but comfortably enough. In a perfect world I'd prefer to put the rent $$ into a purchase. But finding the perfect place to purchase is more important to us in the long run. We don't have school age children either, but I'm still somewhat concerned about school districts as they relate to resale. My husband would do as you plan and live within a nat'l forest if I'd agree! We're in for a big compromise which is part of the difficulty in finding the right place for us. Good luck in your search - and if you don't mind sharing, where are you planning to move?...See MoreRetiree - rent or buy home
Comments (36)jn3344 is spot on. I didn't want to go into it because it is far too much economic theory for this board and quite frankly not really necessary as people can prove it to themselves with the math and that way I don't have to talk about the theory. Assuming you are in an area without rent control, as a general rule you will find that buying houses are usually better than renting if the interest rate is low enough and you are planning to stay long enough. This is a function of the rental market. Although, the housing market is sporadic and unstable and has all kinds of fluctuations the rental market adds economic smoothing into the real estate picture. Before we go any farther a few assumptions. First, people who buy rental property do so as an investment, next, people who invest expect a return, finally, rental property requires higher annual maintenance than home ownership. I know that landlords can often get better pricing on repairs but they also must address things immediately and do repairs between tenants that homeowners would not. Given all these things we only need to know the return that landlords expect. In general, I am going to use the 20 year risk free rate plus 2%. Now this is both a lower than realistic interest rate and a lower than realistic time frame for most investors, it would probably be closer to 3% plus prime instead of RFR. But I am trying to be ultra conservative. This means that the rental market will set the rates at (real estate price + annual taxes and maintenance) * expected return. Using a $150,000 purchase price and $2,000 per year in repairs and taxes we get $8,840 / year. That is the total annual gain that is expected by a landlord for property he intends to rent out. This doesn't mean that he has to collect it all in rent, if the property is expected to appreciate then rent can be lowered by the amount of appreciation. All of the above means that we can largely ignore maintenance since they will exist for both landlords and homeowners. It also means that when the market rate of interest is lower than expected rate of return (which it certainly is now) then every payment will reduce the impact of transaction costs for home ownership. Over a long enough period of time (about 2.5 to 5 years currently) home ownership will overtake rental as a better financial decision. You also might be tempted to note that no landlord actually does that calculation and largely you will be right. However, you don't have to do the math. The market will push rental rates towards this. Also this only sets a floor for return, the economic equilibrium will establish the actual rental rates so long as they don't drop below these levels. But seriously, when interest rates are this low grab a 15 year mortgage, don't pay cash for your house. It is just a terrible idea right now....See Morearcy_gw
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