If you're entering your retirement years, you may be considering buying a second home in a warmer (or cooler) climate. Perhaps your goal is to escape the cloudy, gray winter weather. Or, maybe you want a home nearer to the grandkids. Many people who live in Washington state think about having a home in the Southwest for the winter months and dream about The Lure of the Snowbird Lifestyle — Is it Right for You?
Whatever your purpose for wanting that second home, here are some things to consider as you make that decision:
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The Snowbird Lifestyle - Income Tax
Here in Washington state, we do not have state income tax. Creating a second home in a state that does have income tax could impact your tax burden.
It is important to note that different states tax retirement income differently, and other states have very specific criteria that identify your responsibility to pay income tax in that state even if you only live there a few months of the year. Before you buy a second home in a different state based on an income tax strategy, speak with a knowledgeable tax advisor. For more information on state income taxes, check here.
The Snowbird Lifestyle - Property Tax
Another tax that can wreak havoc on your retirement savings is property tax. Just because a state does not have income tax, it may not be the best place for you to set up your retirement residence. For example, Texas does not have state income tax, but Texas is among the 10 states with the highest property taxes, as is New Hampshire. Even so, your personal tax burden may benefit from shifting your state of residency to one of these states, so again, discuss your specific situation with you tax advisor.
The Snowbird Lifestyle - Access
Of course, if access to your grandchildren is of primary concern, you'll want to move as near to them as possible, so the tax consideration might be low on your list. If not, be sure you have access to the things you do want.
As you age, however, the possibility that you might become ill rises. Make certain that along with access to your family you have access to top-notch, affordable medical services. Investigate local access to long term care before you buy your second home.
The Snowbird Lifestyle - Alternative Income Stream
Some folks buy a second home for possible rental income, planning to move into the home after retirement. If this is in your plans, here are some things to be aware of: Regardless of what you might read or hear about holiday rentals, they don't always pay for themselves. Most holiday areas have high seasons and low seasons. If you can't make enough rental income in the high season to cover the entire year, this might not be a good option for you. Even in resort areas, inclement weather can take a big bite out of your potential rental income. Additionally, you still have all of the costs of maintenance, upkeep, insurance and repairs to contend with. Of course, with online rental portals like airbnb.com or homeaway.com you might have an easier time finding qualified guests these days. Most experts warn that rental income from holiday rentals rarely covers your entire mortgage though, so don't plan on that as a motive to buy.
The Lure of the Snowbird LIfestyle - Is It Right For You? Consulting your local real estate expert is the place to start.
Keller Williams NWRE LLC
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