Updated Saturday, November 3, 2012 at 10:01 PM
Q: My wife and I would like to retire in three to five years (I am 60 and she is 56).
We are wondering if we can buy a home in Corpus Christi, Texas.
We would then rent out the home, either short-term or long-term, with the goal of eventually moving to the area and making this our retirement home.
We stayed in this home during our summer vacation.
We really enjoyed the house and location.
In the process, we got to know the owners (a retired couple with three rentals in the area), and it turns out they would like to sell the house we rented to buy an additional beach property. (This house is not on the beach, but inland about 15 minutes away.)
The selling price is $130,000.
It is very well maintained, fully furnished and is fairly priced based on area comps.
They also have a guest list of previous renters/vacationers via VRBO (Vacation Rentals by Owner) that they would share (the home has been a rental for about a year).
My main concern is that we live in Dallas. They live in the area and perform the major-property management duties.
If we did buy it, we would look for a long-term rental versus short-term vacationers.
We would also look for a reliable property management company.
We have modest assets: 401(k), $260,000; IRAs, $80,000; emergency fund, $60,000.
Our home is paid for and worth about $300,000. I make $125,000 per year and my wife about $20,000.
We save about 25 percent of our income, and the only debt we have is $14,000 on a new Prius.
Do you think buying this house to diversify and eventually relocate is a good idea?
A: Yes, I do.
The basic facts here suggest that you are hoping to do what many retirees do — move from an expensive area to a less-expensive area and a less-expensive house.
Moving from a $300,000 house to a $130,000 house will liberate $170,000 to use as income-producing financial assets while reducing your shelter expenses at the same time.
That’s a big and positive lever on your retirement living expenses.
Buying the house now may pinch your savings rate unless the rents cover the operating expenses (unlikely), but the deal is probably a good bet, as long as you understand that it is a bet, and that you’ll need to tend your other resources very carefully to have enough assets to retire.
If the numbers don’t work in five years — when your wife will still be under minimum age to collect Social Security — you can finesse things quite a bit by working longer. You won’t be alone.
If a mortgage on the house is hard to come by, you can use part of your emergency fund for the down payment and finance the rest with a home-equity credit line on your primary home, but a first mortgage on the home you are purchasing would be better.
Copyright, 2012, Universal Press Syndicate