RISMEDIA, September 2010. 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 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 4 reasons 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.
· 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.”
