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Key Takeaways:
- Early retirement means leaving work before the traditional age of 65 and has grown with the FIRE movement, but it still requires disciplined planning beyond finances.
- Top upsides include freedom and flexibility, more quality time, personal growth, lower stress, and the chance to pursue a new career or venture.
- Major downsides include financial stress, potential loss of identity, social isolation, boredom, and reduced mental stimulation.
- Plan carefully for inflation, healthcare costs, and early withdrawal penalties, which can strain savings if you stop working too soon.
- There is no single right answer; weigh both sides and choose the path that aligns with your values and desired lifestyle.
You deserve a good retirement life.
After all, you’ve worked hard, and nothing should stop you from living the life of your dreams.
To help you do that, a trend that’s becoming popular for retirees and pre-retirees is to purchase a second home and even become a landlord in retirement.
We’ll take you through some of the ins and outs of the type of second home to purchase, if taking on a second mortgage makes sense for you, and how to be a successful landlord.
But first, let’s start with why you’d buy a second home.
If you’re someone with more disposable income who wants to travel and change your scenery frequently, a vacation home may be up your alley.
If you’re someone who wants to earn more money in retirement and don’t mind a bit of extra work, you may want to consider the rental property route.
Either way, when buying a second home, make sure you’re comfortable with both the commitment of a new mortgage and maintaining the property.
To help you make that decision, let’s first answer the big question about buying a second home in retirement as a rental property.
A major gap, right?
Rent rates aside, though, if you properly manage your rental property, you can often make an income that is well above your expenses as a landlord in retirement.
Here’s the breakdown of property expenses to figure out if your rental income more than covers your costs:
Which means you can have a second home that doubles as both a rental property and a place to get away and enjoy yourself on vacation.
Put another way, you can be a part-time landlord in retirement.
It’s worth noting that for vacation homes, finding clarity first on the type of retired life you want to lead makes a massive difference in your happiness level during your senior years.
It’s also important to consider your passions and purpose and to make sure your second home accommodates them.
For example, if you’re an outdoorsy active person, you may want to buy a vacation home near the water, or in the mountains, or close to fishing spots.
For city lovers, you may want to be a part-time landlord for a home that’s close to theatres, or music venues, or bustling restaurant life.
You get the gist.
And in case you’re curious, here’s where several seniors are landing in the US.
Cities like Denver, Carlsbad, and Cape Coral or known for easy access to healthcare services and bustling senior communities.
All in all, no matter where you spend your retired life, make sure your second home is a place that supports your vision of your ideal retired life.
Once you figure out the answers to these questions, you’re ready to decide whether buying a second home is right for you and your ideal retirement lifestyle.
Why Should You Consider Buying a Second Home?
Whether or not you choose to buy a second home depends a lot on what your lifestyle goals are for your retired life, and, of course, your financial situation. There are two main types of second homes that older adults are purchasing these days:- A second home as a vacation home
- A second home as a rental property
If you’re someone with more disposable income who wants to travel and change your scenery frequently, a vacation home may be up your alley.
If you’re someone who wants to earn more money in retirement and don’t mind a bit of extra work, you may want to consider the rental property route.
Either way, when buying a second home, make sure you’re comfortable with both the commitment of a new mortgage and maintaining the property.
To help you make that decision, let’s first answer the big question about buying a second home in retirement as a rental property.
Does a Second Home Make Sense for You in Retirement?
The first thing to think about is whether or not a mortgage on a second home is financially right for you. Whether or not you can retire on rental income, of course, depends on your individual situation – like how much your new mortgage impacts your monthly budget, and if it aligns with your retirement goals. The good news: financially, it is entirely possible to have a comfortable retirement lifestyle off of rental income. Wondering how much you can make? According to TurnKey Vacation Rentals, for every $100,000 you invest to purchase a vacation home, you can expect to target $10,000 to $12,000 in annual rental income. So, let’s say you purchase a home for $500,000. That would mean, from that rental, you can target $50,000 to $60,000 in annual rental income. Of course, there are a lot of factors that will determine how much you can charge in rental fees, like location, how long you rent for and the average rent price in the neighborhood for similar properties. For instance, US cities with the highest and lowest rents range from to $583 per month in Toledo, OH to $3,452 per month in San Francisco, CA.
A major gap, right?
Rent rates aside, though, if you properly manage your rental property, you can often make an income that is well above your expenses as a landlord in retirement.
Here’s the breakdown of property expenses to figure out if your rental income more than covers your costs:
- Purchase price and mortgage payment
- Property taxes
- Property insurance
- Maintenance costs
- HOA fees (if applicable)
- Property management (unless you want to manage it yourself DIY)
Which means you can have a second home that doubles as both a rental property and a place to get away and enjoy yourself on vacation.
Put another way, you can be a part-time landlord in retirement.
It’s worth noting that for vacation homes, finding clarity first on the type of retired life you want to lead makes a massive difference in your happiness level during your senior years.
It’s also important to consider your passions and purpose and to make sure your second home accommodates them.
For example, if you’re an outdoorsy active person, you may want to buy a vacation home near the water, or in the mountains, or close to fishing spots.
For city lovers, you may want to be a part-time landlord for a home that’s close to theatres, or music venues, or bustling restaurant life.
You get the gist.
And in case you’re curious, here’s where several seniors are landing in the US.
Cities like Denver, Carlsbad, and Cape Coral or known for easy access to healthcare services and bustling senior communities.
All in all, no matter where you spend your retired life, make sure your second home is a place that supports your vision of your ideal retired life.
Questions to Ask When Buying A Second Home
It’s important to ask all the right questions before signing papers and buying a second home. Below, we break down key questions to ponder during the process.
Initial Questions to Ask Before Buying a Second Home
- What is the main reason I’m buying this home?
- Can I afford to buy this home as-is?
- Can I afford to upgrade this home if needed?
- What am I looking for in a second home?
Questions For a Vacation Home
If being a part-time landlord in retirement sounds appealing to you, think about what you want in a vacation home, by asking yourself:- Will my vacation home need a lot of updates or renovations?
- How much time will you spend in your vacation home?
- Are there any special rules for owning your home, like land covenants or HOA rules?
- Will you be comfortable living there for extended periods?
- Will it accommodate your social life?
Questions For a Rental Property
A full-time rental home will be somewhat different than a vacation home. Consider these questions for a rental property:- Who is going to manage the property – you or a paid property manager?
- Will you need additional insurance?
- How easy will it be to attract renters?
- What are the average rent prices and will that provide enough profit?
Once you figure out the answers to these questions, you’re ready to decide whether buying a second home is right for you and your ideal retirement lifestyle.
