Last Time Home Buyers - Things to Consider
Posted by Niels Madsen on
There is plenty of information and focus on First Time Home Buyers, understandably so as it is a big milestone and achievement in someone’s life. But something that doesn’t get spoken about too often is the idea of a Last Time Home Buyer.
Of course you don’t always know for sure when your last home will be purchased, however there are some life decisions and stages that can make the distinction clear.
Usually, a last time home buyer will be in their golden years of life, and will have to make decisions about downsizing, renting out a house, who will get the house in the will, or even how and when to move into an assisted living or retirement community. All these decisions are big and daunting, but here are a few things to consider.
Buy or Rent
If you want to move, the big decision is whether to buy or rent a new house. If you’re retired, you should realistically think how long will you be in this house. If you are planning on staying any longer than two or three years, buying may be the better option. During that time, there is a good chance your property may gain enough equity to make a profit when it comes time to sell.
Buying can come with a larger upfront price tag, and include home inspection fees, deposits, appraisals, lands survey feeds, legal fees, mortgage fees, and home insurance (just to name a few). However, once you sell you can make back these costs. You just have to consider if it is worth it for you and any beneficiaries to go through the process.
Renting can be easier, but generally you will have far less control over the decor and other aspects of the house. And if this is somewhere to spend your golden years, you’ll want it to be exactly how you like! But once you move out there is little in the way of legal obligations, so it can be a much smoother process.
Downsizing means moving into a smaller house, possibly selling or putting things in storage, and adapting to a more minimalist lifestyle. This is usually done if the house is too big to maintain or isn’t worth the cost of upkeep.
When searching for a smaller house, make a list of all the amenities that you absolutely need. If you’re used to cooking in a large kitchen, moving into a condo with only two feet of counter space won’t be comfortable.
Downsizing also means potentially packing up your things for sale and/or keep them in storage:
Catalog your items as you put them into boxes. Write details about what’s in each box and attach it to a clear pocket that sticks on the side. This will help ensure the contents are seen and don’t get obscured if they get wet during transfer.
If your things will be in storage long term, it’s a good idea to invest in plastic tubs instead of regular cardboard boxes. Some have locking lids and they’ll be able to withstand the elements a little better than the average box.
If possible, hire a moving company to bring your things to storage. It’s an added expense but they’ll get the job done faster and more efficiently than any of your friends or family will. Take photos of what’s in each box and make note of how many boxes are put into the truck, along with the furniture.
When choosing a storage facility, consider one that has temperature control, especially if your items will be in storage long term. The last thing you want to worry about is your photos or other memories being damaged because of things you can’t control.
Consider how long items will stay in storage. Is it indefinite and will be left in your will? Are they going to your kids when they have the space? Will they be sold off if no one collects them? Make sure there is a reason to put things in storage instead of having a garage sale.
Rent Out Your House
Just because you downsize or move away, does not mean that you have to let go entirely of your old home. You can just rent out the property on a temporary basis. Just consider:
Are the systems in your house up to date? This includes HVAC (heating, ventilation, and cooling), plumbing, waste removal (like sewer or septic systems), gutters, drainage, and anything else that has to do with general maintenance. You’ll still have to deal with these things as the homeowner and it will be more complicated if the renters find the issues instead of you.
What is the market rental rate in your area? Make sure you know what a fair price is so that you’re not overpricing your renters or underpricing where you won’t make any profit. The aim would be to cover utilities and any mortgage left on the house and make some income for yourself. Do you want this to cover your rent on a condo or do you want to make a little extra? Know these numbers before you set your price.
Is it legal to rent out your house? Know the zoning laws, rental laws, and any property restrictions for your area. Hire a real estate lawyer to be sure you’re handling everything properly.
Ensure that everything is legal and fair to your tenants before renting. You can outsource the managing of the property, but this ensures that your home remains in your hands while you downsize.
Plan Your Will
It might be a bit morbid to think about, but planning for your future and your loved one’s future is very important. If you do not have a will your assets can go to the wrong people, and it adds complications to those left behind.
As with any other real estate transaction, it’s important to move past emotions when deciding what will happen to your house in the future. Carefully plan things with an estate planner. If you’d like to leave your house to someone in a will, you need to be very specific about your wishes. You can tell the estate planner what you want and even leave a message for the beneficiary in your own words. Leave nothing to question.
You can also add stipulations like age, income, or even achievements like a university degree that must be met before the beneficiary gets the house. In the event that the beneficiary hasn’t met these stipulations or will not be of age at the time of inheritance, you may be able to set up a trust that handles your estate until the beneficiary is able to do so on their own.
Of course unless you want the inheritance to be a surprise, discuss it with the beneficiary so that they know what they’re getting into before they get the house. Ensure that they even want it! Will they plan to live in it once they get it? Will they sell? If it’s being rented out, will they take on the responsibility, or legally evict the tenants as soon as they can? Be clear about why you want them to have the house, and why they want it.
Moving to a Retirement Community
Eventually old age can catch up and you might no longer be able to stay independent in your home. In this case, you might have to move to a retirement community or assisted living facility. Plan whether you will sell your house at this point, in order to help finance it, or rent out your home and use these profits.
You can discuss with any beneficiaries about what they think. There are several options to transfer ownership of your home while you’re still around, which can make things easier for everyone.
Whether it’s to downsize or just a change of scenery, we can help with buying your last house. Just get in touch to get the process started.