Building (not buying) your retirement home early
Building (not buying) your retirement home early.
Some of the top experts agree that for many it makes great sense to secure the place you’ll live out your retirement years before you actually retire. Why is that, and why is custom home building in northern Michigan the better option?
Just for the fun of it
One of the most obvious benefits to building your retirement home early is to secure a permanent vacation home. You can enjoy it for recreation and relaxation before retirement. Many of our clients find themselves around five years out from retirement. It often starts with a love, or a longing to return to the area. Northern Michigan captivates the soul, for some it becomes a lifelong dream to return. Vacations eventually turn into a quest for the right parcel of land – a site to build the perfect home for your golden years. In some respects, we can use the terms vacation home and retirement home interchangeably.
Building for the future
Build for the future you want. The best custom home builders can help you hone in on exactly what features and amenities you’ll want. From the modest single level, designed specifically for aging-in-place to an elaborate family compound where every generation loves to come and visit – custom home building gets it right the first time. After a lifetime of owning and renting spaces, you know exactly what you want. Your retirement home is the chance to finally get it all right in one space. No more renovating to get it closer to the mark. Some renovations (like aging in place features) are much easier to incorporate into a new build than a remodel.
Where do you want to live?
Many retirees that live in the greater Traverse City area didn’t work here. They spent their best earning years in a place they ultimately didn’t want to retire too. But the decision of where you want to live includes choices about the recreation opportunities and health care amenities you’re looking forward to, or will statistically need. Securing a home for retirement early allows you to select the particular amenities you want to locate near both geographically, and at a lower price than when you’re actually ready to retire. Building that home prevents rehab or maintenance costs that diminish both your funds and enjoyment.
Savings vs investment
While some people may view owning a vacation home as a cost-savings to rentals and hotels, the math often disappoints. The compelling financial reasons for owning a second or third home in desirable destinations like northern Michigan are investment-driven. As an investment, your second or third home is a place to retire – or an asset you can sell to supplement your retirement income. Common wisdom says that home prices in desirable locations tend to appreciate better. According to Forbes, looking at median home prices over the last then years can provide an indication (not a guarantee) of future appreciation. Take a look at median home prices over the last ten years. According to BestPlaces, homes have appreciated nearly 85% in Traverse City, versus just over 28% nationally. Taking a longer view, Neighborhood Scout cites Traverse City appreciation at nearly 71 percent since the year 2000.
What about rental income?
Renting your vacation home to others prior to retirement can provide a nest egg with dividends. Forbes cites an average rental period of about 15 weeks a year, netting an average of $26k a year. That might service the mortgage on a $360,000 home after expenses. But according to Kiplinger, half of all second-home buyers don’t have a mortgage – they pay cash. While these numbers are skewed by home equity draws, the fact remains that mortgages on vacation homes do come more sparingly with strict guidelines about down payment and debt-to-income ratios. If you’re interested in renting your northern Michigan vacation home, there are plenty of professionals to help you keep the process clean, screened, and profitable.
Getting started
We’ve illustrated why so many experts encourage you to secure a home for your retirement years early and why building that home is a sound decision. The first step in building a custom home is to get to know your builder. Give us a call. You’ll notice we ask a lot of questions to understand your needs thoroughly. Call Today!
