It seemed like a great idea 20 years ago. You'd buy that condo in Florida,
vacation there as often as possible, then someday sell your primary residence
and spend your "golden years" basking in the sun. But like so many Americans,
the nation's recent economic troubles have given you reservations about taking
on too much risk, so your golden years will have to wait. And though you'd hate
to sell your beloved getaway, keeping up two homes just won't be possible on
your recessionized budget. Is there a solution?
"Absolutely yes," says
Christine Karpinski, director of
Owner Community (www.OwnerCommunity.com) for
HomeAway.com. "Renting out your second home will allow you to keep it during
these tough times and sets you up with an easy business that will continue to
bring you profits long after the economy has gotten back on its
feet."
Many, many seniors find themselves in this position, she adds. A
good percentage of second homeowners fall into the "retirement age" demographic,
but because of recent financial troubles are finding that they need to continue
working and push back their retirement a few more years. Meanwhile, they have
these great real estate investments they made in better years. Rather than sell
those properties, possibly for a loss in today's tough real estate market,
Karpinski suggests they maximize these investments by turning them into vacation
rental businesses.
If you're a second homeowner, Karpinski offers
4reasons why you might consider renting out your second home:
·
Your fixed income hasn't kept up with your lifestyle. Admit it. Even
when you're happy to give up the daily grind of your job, losing the paycheck
that comes with it can be pretty painful. Factor in inflation, rising taxes, a
depleted 401K and unexpected "new" expenses, and you may find that what seemed
like a manageable cost of living five years ago doesn't seem that way anymore.
Your second home, even if it's paid for, may start looking like a liability due
to property taxes, homeowner's association dues, and maintenance costs. Not if
you rent it out, says Karpinski. Then it becomes a great source of
revenue.
"If you have a loan on your second home, renting it out only 17
weeks will cover your house payments for an entire year," she says. "If it's
paid for free and clear, only five off-week rentals will cover costs like bills
for your phone, power, cable, and association dues. All the rest is profit! When
you consider that in some markets you can earn as much as $30 to $40 thousand in
rental revenue per year from your second home, you're looking at a nice 'raise'
for yourself."
· You've decided to "retire" from retirement.
It is not unusual for people to test-drive retirement and find that
it's just not for them. Work can provide many rich rewards—structure, social
interaction, mental stimulation, a sense of purpose, and so forth—that people
keenly miss when they retire. And when they discover that quitting "the rat
race" isn't quite what they thought it would be, more and more people are opting
to return to the workplace. And (let's be honest), nowadays people simply can't
afford to quit the working world completely.
"When people decide to
postpone retirement, they may also postpone moving to their retirement home,"
says Karpinski. "Even if they do retire and then rejoin the workforce either
full-time or part-time, they may not want to live in the city they associate
with retirement. It's a psychological thing. And so, in these cases, it's better
to keep the vacation home a vacation home. Renting it out allows them to do
that."
· Circumstances have changed since you made your
retirement plans. Maybe grandchildren have arrived on the scene and you
can't bear the thought of moving hundreds of miles away from them. Or your
parents are in poor health and need you nearby. Or your spouse has passed away
and retiring in the Great Smoky Mountains was his idea, not yours. Regardless of
specifics, your life bears no resemblance to what you thought it would look like
back when you made your retirement plans.
"Life rarely turns out to look
like we thought it was going to look," notes Karpinski. "That's okay. Some of
the happiest, most successful people I've met during my years working in this
field never dreamed they would rent out their second home, and yet once they
tried it they loved doing it. It pays to be flexible and keep your options
open."
· You've suddenly realized there's no place like home.
Maybe there are no dramatic life circumstances keeping you from moving
to your "dream destination." Maybe you've simply changed your mind. You've
decided you like being near your friends, you don't want to leave your church or
synagogue, and your Tuesday lunch with "the girls" or Thursday Bridge night with
"the guys" is a tradition you just don't want to give up. Or perhaps you'd like
to stay in your hometown most of the year (you kind of like the change of
seasons) and spend the bitterest winter months in your beachfront condo. Renting
your second home out during the time you are not staying there makes it
financially feasible to keep both homes.
"Traditionally, many retirees
would sell the home they lived in for 40 years, downsize to a smaller house or
apartment, and split their time between that home and their getaway in, say,
Florida," explains Karpinski. "But there are drawbacks to doing that: you lose
your neighbors, you're no longer close to your familiar grocery store, and so
forth. And you don't get to pass the 'homestead' down to your kids. Rent out
your second home and you can have the best of both worlds. You can afford both
places. It's the perfect balanced solution."
"Renting out your second
home can make for a valuable revenue stream that will not only prop you up now
when you need it most, but could also make your golden years even more golden in
the long run," says Karpinski. "And if you're like most people, you'll find that
not only will you quickly get the hang of renting, it's actually fun. I've been
doing it for years and I can't imagine ever not doing it. It's more than a way
to profit from an investment. It's a richly rewarding way of life—at any age."