Should I Buy a Home Now That I Can Live in When I Retire?

Published

April 5, 2023

Karin Price Mueller is an award-winning writer and money expert. She's the founder of NJMoneyHelp.com, a new website that offers smart and objective advice on everything money. She also writes the Bamboozled consumer affairs column for The Star-Ledger. Mueller has won several national and local journalism awards, including nods from the Society of Business Editors and Writers (SABEW), the New Jersey Press Association (NJPA) and the Financial Planning Association.

Q. I have 10 years before I retire and I’m thinking about buying a property that I’d rent out until I’m ready to retire there. I’d need a mortgage but rates are low and I think I can afford the payments even without rental income. What should I consider?
— Planning ahead

A. What you’re suggesting can make sense, but use caution and make the move with your eyes wide open.

There are lots of issues to consider, including bad tenants, repairs and maintenance, vacancies, and rental property tax rules, according to Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette, New Jersey.

He said you need to remember that whether the property is a rental or not, you need to take into account all the carrying costs, and it’s not just mortgage payments. You’ll have to pay for insurance, utilities, property taxes and repairs.

“My suggestion is to run the numbers so you have a full understanding of the economics of owning a second property,” Maye said. “I would also recommend finding a good CPA to discuss tax implications of owning a rental property which include passive activity rules, mixed use property (rental/personal use), and conversion from a rental property to a personal home in 10 years.”

Bottom line? Do your due diligence, understand the implications and then move forward, Maye said.

[Editor’s Note: Before you buy a house, it’s a good idea to check your credit so you have an idea of what you may qualify for when applying for a mortgage. You can see two of your credit scores for free, updated every 14 days, on Credit.com.]