Is It Worth Buying Your Future Retirement Home Now?
Buying a retirement home to downsize into your future retirement in say 15-20 years’ time can be a great strategic option for the right person. Most of us are not there yet, but some could have thought about settling into for example a 2 bed – single-level house, villa, or a ground/first-floor apartment, and renting it out in the meantime. So essentially buying an IP for a long-term hold and moving into it down the track.
Let’s look at the pros & cons of this strategy:
Pro:
- well-located properties are scarce and the population is aging so there should be increasing demand for easy-access locations from an owner-occupier and investor perspective, 5 min a walk to the shops and medical facilities and transport, so it makes sense to lock in that property for the future retirement home.
- you don’t want the stress of finding a downsized property in your late 50s or 60s as your health is failing while also having to sell your PPOR to downsize (assuming you don’t want the maintenance of a larger house). If you already have an IP that is downsize-worthy, all you have to do is vacate tenants, sell PPOR, renovate the retirement home property, and move in.
Cons:
- It’s hard to predict where you want to live in your retirement. Needs change and where you think you want to live in your retirement now, may not actually be where you want to retire in 20 years’ time. Better to retain the flexibility to choose a retirement home to live closer to retirement age e.g. 5 years time.
- Potentially pay land tax for 15-20 years into the future that eats into your cash flow that could be better invested elsewhere e.g. equities/ETFs without the associated property costs, and liquidate those investments when you are ready to downsize.
- Suburbs that are desirable areas now may change in the future. Locations can gentrify but also deteriorate.
“If you are wanting to buy an investment property or retirement home why not buy one you might want to live in some future date could be a great strategy because you can then sell the original main residence CGT free if you do it right, and by that time you should have a very low debt relating to the property you will move into and you can pay that off and have money left over.”
Paddy Boyal is the author and is a mortgage broker & was a licensed financial adviser. M: 0420 589 194 E: paddy.boyal@southeastwealth.com.au
Disclaimer: – Articles in this blog are just the personal opinions of the author or authors.
It may or may not be correct. Pls do your own due diligence and pls seek professional advice according to your own personal circumstances. The author or authors cannot be held responsible/liable for any content in this blog.
