Choosing The Ideal Real Estate Option for Retirement
Real estate can be a difficult aspect of retirement but it doesn’t have to be. You’ve worked hard for retirement and you deserve it. So, it’s wise to know what you should avoid in regards to real estate to enjoy your retirement as much as possible. There isn’t a cookie cutter solution that works for everyone, so you’ll decide whether you want to downsize, buy another property or keep your home.
Assess the fact that your opinions may change and consider what is best for the future you, not the you right now. With this in mind, speak with a professional that has sound financial judgement in order to determine what options will be best for you. This way, you’ll be happy with the outcome of refinancing a 15 year mortgage in order to lower your interest rate or supplement your retirement income with house equity. Consider all of the pros and cons. Accessing the equity built up in your home by opening a home equity line of credit or HELOC. This will help you develop a net of safety so that you can cover expenses such as medical bills on a regular basis.
Take advantage of multifamily leasing technology to purchase your second property in your 30’s or 40’s, even if you feel that may be a lofty goal. There are many gains to be had by purchasing a second property. For example, if you decide to rent out your initial property, you can use this to pay down the principal while using the profit to build equity. When you’ve arrived at retirement you can sell the initial property and keep the home equity to purchase a home wherever you like. Multifamily leasing technology has been and continues to be the best option for retiring comfortably.
Don’t just retire in Florida because it seems like the right thing to do. Really assess what’s right for you, it may not be retiring in Florida. Take at least an entire day to visit potential neighborhoods, including the restaurants and travel routes. Look into the local taxes, healthcare, transportation, activities, and any other locations that are important to you.
It’s not the wisest decision to use your retirement funds towards paying off your mortgage. While it is tempting to expedite the homeownership process by doing this, consider that it comes at the expense of your retirement. A financial advisor, Pedro Silva advises that you shouldn’t use pretax money such as an IRA, to pay your monthly mortgage. Paying tax on every dollar that comes from that account and then using the net funds to pay the mortgage can cut significantly into your income. If you happen to have a mortgage in retirement, you can refinance to get the monthly payments lowered. It may serve you well to get a guaranteed rate locked in place before they increase.
By deeding your property to your children, you miss out on any profit you could have made on selling the home. Plus, you may be giving your kids a tax bill while you miss out on a tax break. There is a $250,000 exclusion on capital gains which doubles if you’re married. Therefore, you could be missing out on $500,000 in profit by not selling. Your kids inherit the base price of the property when you deed it to them. They will have to pay a tax that is the difference between the home’s current value and its basis value. If your property appreciates, they could face a large tax bill. It’s best to consult with a tax specialist that can work with you on the best option.