"Tennis anyone? Or maybe a stroll down the beach is more your style. Or a hike in the mountains? Preferences like these are what many people are thinking about when pondering retirement. Gone are the days of just buying a rocking chair for the porch to while away one's remaining years.
With nearly 78 million boomers approaching their retirement years, the vast majority of buyers are looking to buy a lifestyle, if and when they decide to move. Developers are catering to the boomers, who are the wealthiest and healthiest generation ever. The focus of many homebuilders has been two-fold: to develop age-restricted communities that combine maintenance-free living with a myriad of recreational, social, and lifestyle opportunities, and to develop a second home or investment property purchase that buyers can visit on the weekend to get away and eventually turn into a retirement home. The purchasing power of this generation is flexing its financial muscle.
Last month, my husband and I drove south down Interstate 75 on an invitation from a good friend to look at his lifestyle development and maybe a possible retirement goal. Nestled in 400 acres adjacent to the Great Smoky Mountains National Park in Tennessee was a pristine gated community that focused on nature, hiking, fishing, and tranquility. As we drove up into the main entry, we were met by lush evergreens, cascading trout streams, sounds of wildlife, majestic mountains, panoramic views, and a peaceful silence that lulled you into instant relaxation. There was an instant feel of escape that represented the finest in mountain living without sacrificing the convenience of residing close to restaurants, shopping, entertainment and healthcare, plus limitless outdoor recreation in the Great Smoky Mountains. All home sites featured spectacular and protected mountain and wilderness views with green valleys and vistas extending for miles. No doubt, this is one of finest luxury developments in the area: extremely inviting, not inexpensive, and definitely encompassing a specific lifestyle.
This type of lifestyle community is not atypical. Many other communities are being developed around a preferred activity or amenity. It all comes down to personal choice and finances. According to a recent NAR survey, 57 percent of buyers bought to be near a beach, lake or water sports; 38 percent chose locations that would allow for boating (which can include mountain lakes), 21 percent chose properties near golf courses, 18 percent wanted to be near a theme park, 17 percent bought to be near winter sports such as skiing, and 32 percent purchased property near hunting or fishing.
Design elements are just as important a feature. First-floor living, limited steps, raised appliances, vanities and downstairs areas featuring guest quarters with their own kitchens when the grandchildren visit are just a few. Master controls at one's fingertips are also sought, for flicking on a fireplace, plasma television, stereo surround sound, intercom or glare free lighting. Elevators are even available — anything and everything to accommodate this sector.
Although the primary reason for purchasing a second home is lifestyle, investment consideration comes in a strong second. The National Association of Realtors (NAR) recently released a study that looks at the vacation homes and the investment market. Last year, according to the NAR, 40 percent of all homes bought were vacation homes or investment property. There is clearly a distinction between the people who buy vacation homes and those who buy investment opportunities.
Buyers of vacation homes are buying lifestyle opportunities and more than likely a place to retire. Investment property buyers mainly purchase property close to their homes. Both groups have entirely different motivations but both are serious buyers. Both are also seeking the second benefit to home ownership: tax incentives. Mortgage interest is deductible for first and second homes, making home ownership one of the best leverage investments. Any profits on the sale of a second home are subject to capital gains or, better yet, if you move into your second home and live there for at least two years, you can avoid any tax on the sale of your property.
Boomers believe in diversifying their assets, and most second homebuyers see their purchase as being a better investment than stocks. According to the NAR, the typical vacation owner is 59 years old, earned $120,000 last year, and purchased a property that is 220 miles from their primary residence, but 34 percent were less than 100 miles and another 34 percent were 500 miles or more. Eight out of ten drive to their property, and half of the vacation homes are located within the same state as the owner's primary residence. Eighty-three percent of owners are married couples. Three fourths of vacation homeowners purchased for personal use.
In contrast, two-thirds of investment homeowners purchase their property to generate rental income, and half view the property as a way to diversify investments. Their investment property is located close by, within a median distance of 10 miles. The median age of an investment owner is 55, with an income of $98,600, and 75 percent of owners are married couples.
So whether you are buying that second home for retirement or investment, it all depends on market conditions, interest rates, and local rental income and appreciation. AARP states the new trend is for the boomers to move to a new place. They have already moved five to six times in their lifetime, and they are okay with moving again for their retirement, And of course, lifestyle — what you want and what you can afford. Whether it's on the mountaintop or a small condo community that provides educational programs, arts, crafts, fitness centers, dance classes, spa and wellness treatments, the demand for good locations and quality homes will always be a necessity.
It looks like the boomers are a group who will rock on well into retirement. And it won't be in a rocking chair.
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