Recent estimates have found that nearly half of Americans approaching retirement age don't have enough money to retire.
If you're one of those Americans, don't get disheartened yet. There are a lot of options out there that can serve as financial safeguards. A condominium investment might be the best way for you to get some enjoyment out of your golden years and make some money while you're at it.
Here are some things to consider before you do it.
A Condominium Investment for Retirement
In order to make an investment in a condo, there are a number of things that you have to have fleshed out in your head before you take action. From location to practicalities like finances, try to take the following things into account.
Where Do You Want to Be?
A lot of people migrate to Florida to find retirement condos, and for good reason. Before you make an investment that you hope will sustain you through old age, you should make sure that the locale is to your liking.
Consider visiting places like Myrtle Beach and see multiple locations to get a good feel. This is the first thing you should do because the location is going to be the bedrock of all of the decisions you make beyond that point. Things like property taxes and rental value will be dependent on the area and quality of condo that you purchase.
Think About the Logistics of the Investment
Speaking of things like property taxes, it's time to consider all of the extra things that don't come immediately to mind when you think of investing.
Let's flesh out a simplified example of a condo investment to give you a good idea of how much money will be coming in and out. Let's say that you buy a condo for 100,000 dollars. We'll also say that the rent you charge will be 1,000 dollars a month.
That's will total out to 12,000 dollars a year, making the return 12 percent in the first year. That's going to remain fixed at 12,000 dollars a year, and your investment will be paid off in less than 10 years, which is pretty good.
That being said, there are a number of expenses that you have to take into consideration. You'll be faced with a real estate tax, which we'll say is around a thousand dollars per year. You will also have to pay insurance on the property, coming in at around 500 dollars per year.
You'll also have maintenance fees and things to take into consideration. These will depend on the quality of the condo and the attitude of the renters. You should also consider the idea that the condo won't be used every month out of the year so there are some losses there. Let's just say that the condo will be vacant for two months per year.
Condominium investments are still fantastic options, but it's important to look at the finances realistically before you jump into something.
Condo Association Fees
Many condos have association fees that are required at certain intervals. It's understandable that these would be required, considering the fact that there's a lot to be done around the property. Just like you would need to keep up maintenance on your home, the condo association has to maintain a lot of things as well.
Maintenances can include landscaping to keep the property value up, repairs on damages from weather, and parking and garage issues. The condo association fees are highly dependant on your location, but you can expect to pay two to three hundred dollars a month if you're choosing a mid-range condo.
More Locational Considerations
On top of finding a nice location and decent condo association to fit into, you need to consider some other external factors that could impact your investment. First, is the location one that will keep people coming for years to come?
A beautiful location can get a property far, but economic factors can cause people to be scared away or opposed to the idea of vacationing there. Properties near college campuses are typically in high demand. That's a factor that isn't likely to change, either, because older parents are likely to vacation where their children go to school and work.
Other factors to consider are natural resources, economic trends, and frequency of hazardous weather. These factors will give you an idea of whether or not the area is growing or declining in popularity, which is essential to the value of the investment.
If you find an area that is on the upswing, the odds are that your demand will increase as time moves on. In that case, you can raise the price of rent and improve the value of your investment.
One thing to look out for is a growth in popularity due to a major business. While general growth in city infrastructure and popularity is a good thing, you should be wary of those cities that grow as a result of one business.
What Could Happen?
Even though Disney shows no sign of ever losing importance, let's take Disney Land, for example. Imagine that Disney Land was located on the waterfront, surrounded by condos full of people who vacationed near the park to play and enjoy the scenery.
While the natural beauty would be great, that condo would not be quite as desirable if it weren't next to one of the world's most popular theme parks. Now imagine that you bought a condo near Disney Land immediately before the park went out of business.
What was a fantastic investment at first turned into a purchase with a poor rate of return. Few people would want to vacation to a place that had no notable qualities other than a beach. There are beaches everywhere, and people are likely to purchase where there is more to offer.
Research into the area and find out what the odds are that something is going to change drastically in the near future. Associations that have been long-standing are great bets because they show a consistency with the local economy.
Do You Plan to Buy With Cash?
You might want to buy a property with cash if you have the option. Most people don't have fifty to one hundred thousand dollars on hand to put toward an investment, though.
If you're looking further out and considering buying a condo a few years down the line, consider speaking with a financial adviser to discuss ways that you could save enough to pay for a condo in cash. If you're thinking more short-term, however, you may need to mortgage on your condo.
Mortgages shouldn't be something to deter you from making an excellent investment, though. Whether you've paid off a previous mortgage in the past or you've managed to avoid ever taking one out, the option is a valid one.
Optimizing Your Mortgage Situation
There are a lot of ways that you can improve your odds when it comes to getting a good rate on your mortgage. A lot of it has to do with your credit score and your history as a renter or homeowner. It's likely that you have a lot of experience with credit if you're considering retiring.
That being said, some things aren't set in stone yet, and you can still bump down your rate. One thing that significantly helps is having the ability to put down a significant amount toward the mortgage in advance. You don't always need to give a down payment but it can really help.
You should seek to have the ratio of down payment to mortgage at about eighty/twenty. So if your mortgage is going to be 100,000 dollars, you should try to give a down payment of 20,000. This can be difficult, but you'll find that the amount you save on interest is well worth it.
Looking at a mortgage will give you a good idea of where your finances stand and how much you can spend on a property. Getting pre-qualified can happen extremely fast, taking only a few minutes if you do it online, and will give you an idea of what kind of rates you will be able to get on different properties.
Doing this will give you a framework to use while you're looking for properties. It will save you from some heartbreak if you fall in love with a property that doesn't work out in pre-approval. Pre-approval is what you do when you've pinpointed a property and are looking to take out a mortgage on it.
When you get to the mortgage stage, you should certainly consult with a financial adviser and get quotes from different lenders. Lenders often have varying pros and cons, and you may find that some will work better for you than others. Don't pick the first one you find and go with it, make sure to scan your options.
How Do You Plan to Treat the Property?
What's the end goal for you in owning an investment property?
If you play your cards right and plan carefully, investing in a condo could be one of the best decisions you ever make for your retirement. Get a good idea of how much income could conceivably come in each month and plot that forward into the later years of your retirement.
If the numbers aren't adding up the way you need them to, there are some options you can consider. If you're looking at properties that are likely to increase in value, you should consider flipping yours to make a profit and invest in another.
Ever heard of the guy who started out with a cell phone for sale on craigslist, eventually trading his way up to lavish cars and properties? Your initial investment doesn't need to be the only one you ever make. There is certainly room for upward mobility in retirement, and it all depends on the investments that you make.
Word to the Wise: Get a Realtor
Realtors have an ear to the grindstone when it comes to specific areas, properties, values, and projected value. Finding a great realtor is a lot easier than it seems, and doing so will likely save you thousands of dollars in red tape and difficulties finding properties.
A realtor will turn you on to things that you may not have considered as well. The rental industry is changing in the modern age, with many people seeking not to stay in condos, but to occupy homes for short amounts of time. This is a result of the "Air B&B" craze, which is allowing people with extra space to make significant monthly income.
You can consider buying a home in a vacation area as well. This is a great option for those seeking to retire and make money while only owning one property. If you buy a property with significant guest space, you can isolate that space and rent it out for higher rates than you would a condominium.
These rates rise if you live in an area with high touristic value. Cities that host the Superbowl, for example, find that Air B&B rates often triple, with people renting out their homes for 70,000 dollars a week in some cases. This is an easy way to have a strong income and a stream of new, interesting people consistently coming through.
For those who don't like the idea of having strangers within their home, consider properties that have a guest house on the property. Guest houses hold a higher value than sectioned off living spaces because, understandably, people like to have their own space.
Looking for a Condo? Check Out Myrtle Beach
As we've discussed, a condominium investment is better in an area that people love to be. There's no better place for condos than Myrtle Beach. The town has a tried and true history of being able to draw people in and keep them there.
If you're interested in finding a property in the Myrtle Beach area, we've got you covered. We're sure you won't regret the decision.