I'm still years (OK, decades) away from retiring, but I was wondering the other day about whether or not I should start paying towards a retirement property (a place to call home when I retire).

I have had a mortgage in the past but got burned pretty bad from the crash in 2008. This has left me wary of purchasing a home/getting a mortgage, but at least has given me some experience in what it is like (I had the house for ~5 years).

I am single and renting an apartment in the US (and plan to retire in this country, but most likely not this state).

I was thinking perhaps I should buy a property in a place in which I'd like to retire, and just rent it out until that time comes.

I know there are plenty of variables still unknown, but in general, how bad of an idea is it to retire without having a retirement property mostly (or completely) paid off?

  • This is basically the same "buy versus rent" question as at any other time in your life. Your own house and be modified for improved accessibility so you can stay there longer. On the other hand, if you eventually move to an assisted living facility the house is illiquid wealth potentially taking a long time to sell and costing you upkeep expenses until it does sell. A house, like investments, maygain value but may also lose value, and it isn't always the best financial choice. You really need to run the numbers and consider your own needs; there is no universal amswer.l
    – keshlam
    Commented Jan 7, 2017 at 5:39
  • I think you need to ask yourself whether you really want to retire to some place other than where you live now? Indeed, it seems from the way you phrase your question that you really don't know much about wherever it is that you'd be buying this retirement property, which leaves you with a good chance of being disillusioned when you do move there. I think it'd be much better (assuming you're not planning to spend all your working life as a transient) to buy a house you can live in now, then sell it later if you want to retire elsewhere.
    – jamesqf
    Commented Jan 7, 2017 at 6:02
  • @jamesqf I have a few locations in mind of where I'd like to retire (really just somewhere warmer, the time I spent in the southwest did grow on me and I miss it). I am still in my early 30s so I have some time to think about it, however with a 30 (or even 15) year mortgage I imagine I should make a property decision sooner before later. Commented Jan 7, 2017 at 6:21
  • @PawnInGameOfLife I am curious how you got burned in 2008 by having a mortgage
    – JohnFx
    Commented Jan 7, 2017 at 16:51
  • @PawnInGameOfLife: Another thing to consider, especially if you're looking at urbanized places like Las Vegas (as you mention in another comment) is that a lot can change in 30 years or so, so the place you buy today may have turned into a slum. (Or vice versa, of course.) Bottom line is that few people seem to buy "retirement" properties decades in advance. Even as rental property, you'd have all the problems of an absentee landlord. I think you'd be better off investing the money elsewhere.
    – jamesqf
    Commented Jan 7, 2017 at 18:18

1 Answer 1


Either way can work. It really depends on your personal goals. You say that you probably won't retire where you are now. Do you know where you do want to retire? If not, buying a property in a particular place will lock in a decision you may not feel ready to make.

Do you want to own or rent in retirement? Owning has advantages. There's no landlord to tell you what you can and cannot do with your property. You don't have to make a rent payment each month although you do have to pay property taxes each year. A paid-off home is a kind of savings. It saves rent expenditures later. It's an inferior form of savings, as you can't spend it on other options. Which is why many won't view it as savings at all.

Renting is an option though. You need to save enough money to support your rent stream. Remember to allow for the possibility that your rent will increase in the future. Note that this is in addition to the money that you need for other expenditures.

One option that can help you is a Real Estate Investment Trust (REIT). This is advantageous here because you want to put your rent savings in something that will increase in parallel with rents. You generally won't be able to invest 401k funds in a REIT, but you can invest IRA funds in a REIT.

You had suggested buying a place that you'd rent out until retirement. Another option is put the money in a REIT and use the accumulated value to purchase a home at retirement. Note that to do that, you wouldn't put the money in a retirement account with limited distributions. You could just put the money in a regular investment account, or there may be retirement options that support a one-time distribution at retirement. In any case, this would be an alternative, more flexible way to save for housing in retirement.

If you find your dream home in the perfect retirement community, buying and renting out a place can work. But it's not the only approach. Renting in retirement or saving for a retirement purchase can also work. Regardless, you are correct to start thinking about it now. Decades gives you time to adjust if your strategy looks to be falling short of your goals (whatever those may be).

If you do purchase, don't expect to make money on the rent. It is often true now that rent is only 60-65% of the money needed to service the mortgage. Either don't rely on the rental income or do thorough research on what comparable houses are charging in rent before purchasing.

Real estate prices collapsed in the 2006-2008 period. They have since rebounded. Note that this may mean they are overpriced again. If you're thinking purchase, consider waiting until the next recession to make a move. If these prices are the new normal, you haven't lost much (you will probably get a better mortgage price with more money down). If not, then you're ahead.

Renting as a landlord can be complicated. You have to maintain insurance and reserves to handle extreme situations. For example, if the tenants burn the house down. Or if they trash the place. You'll need someone to collect rent, find new tenants, clean between tenants, and keep up the maintenance on the property. Expect to sometimes have to buy new appliances or to repair a roof or toilet.

Try to avoid getting stuck with a mortgage in retirement. You can get mortgages of different lengths. So don't buy a thirty-year mortgage if you're retiring in twenty years. Get a twenty or better yet, a fifteen. Then you have some room to adjust before actually retiring. Shorter mortgages have higher monthly payments, so include that in your planning. If you're not taking the mortgage now, you can still save for the house purchase. The more you pay up front, the less your loan will cost.

  • Thank you for your answer. I am not too familiar with REITs, but I feel I am pretty set on my investments already as far as maxing everything out. I agree about not expecting the make money on the rent, I would expect it to be more of a subsidy on the mortgage itself (any rent money I made would just get thrown right back at the mortgage). One idea I was thinking was a condo in the Las Vegas area (not on the strip or anything, but maybe close enough that I could rent it out on for people vacationing). Not sure if that info would affect your answer. Commented Jan 7, 2017 at 6:28

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