the Laughing Boomer

Hi:

 According to Money magazine, August,2006, 40% of the homes sold in 2005 were sold to people who already own one home.  That is a record, reports the National Association of Realtors.

 Well, although the column does not say how many of these homes are for rental purposes or for recreational purposes, it is safe to assume that many are second homes in small outlying areas.  These homes may indeed be rented now, but will later transition into retirement homes.  Planning for retirement includes buying the property in your dream location well before the retirement date.  Given the current rise in real estate prices, this seems wise on the surface.

 One woman from a small northern British Columbia town described how she and her husband had bought a home, almost on a whim, the year before.  She was visitng another small town that was much further south and easler access to the main city of Vancouver.  The price seemed right and they were able to arrange financing easily with the minimum down payment.  The real estate company arranged and manages the rental which covers the mortgage payment and taxes.  It was just so quick and easy they did it.  The house has increased in value 25% over the last year, far more than their northen home.

 In their late 50's, this couple will transition to their new home in a few years, after they have wound down from their jobs.  Although there may be tax implications in Canada with owning two homes, they will probably still make money. 

All over the United States and Canada  lake and ocean waterfront real estate  has escalated in price.  Many properties are simply out of reach for the average consumer.

The concept of moving to cheaper accommodation after retirement still has currency.  Depending on if it is a tiny cottage not suitable for full-time use or a regular home, other considerations need to be thought through. 

For example, I would rather travel and go to a variety of places rather than return to the same place year after year. 

If you plan on using your cabin now, keep an eye on the tendency to buy complete duplicate sets of everything for both your cabin and your house. This can be a considerable cash outlay.  Keeping two houses is also a lot of work, and some vacation property owners spend much of their vacation time working on their home. 

Another issue can be the potential cash flow problems if the property becomes extremely valuable.   Some lakefront properties incur yearly tax bills of $10,000 or more because they have increased so much in value.  This can take a bite out of current income.

 Think carefully about your personality and lifestyle choices before you invest in a second home.

Cheers,

Mahara