Perhaps it will be that darling cottage on Nantucket or sleek Miami high rise that you’ve dreamt about for years? More likely, it will be the “2” bedroom apartment (can you say flex wall?) that your recent college grad needs help securing. Either way, at some point there is an excellent chance that you will be navigating your next foray into real estate, and it won’t be in your hometown.
For Nest-ees (you)
It is an odd sensation; suddenly the kids are gone, or you are no longer working 12 hour days and racing for the express train. After a decade or more in the same home, usually a place of noise and mild chaos with all of the comings and goings, your house is quiet. While relief may be the first sensation that comes to mind, the reality is that changes like kids going off to college, or downshifting your career, comes with a lot of challenges.
While many of those issues are for you and your therapist to unpack, let’s talk about the real estate opportunities that come with “emptying the nest.”
The historic trend was to downsize to a smaller place, swapping a house for a condo, allowing for flexibility and less maintenance. Yet, that is no longer the case. Empty-nesters (aka. Boomers as our kids are want to remind us) own a bigger percentage of large homes (those with three or more bedrooms) than any other generational demographic. These valuable fixed assets, when correctly utilized, can easily allow for the purchase, or even rental, of additional property.
In today’s market, a spacious house that either carries an enviably low mortgage rate or is paid-off altogether is far less costly than downsizing (much to this real estate broker’s chagrin). This makes secondary homes more appealing and obtainable, as long as they are correctly planned for. Real estate advisors, accountants, and financial planners all play a pivotal role in these decisions, and can give you peace of mind as you pursue your dream of living on vacation.
A Pied-a-Two-bedroom?
When looking at a second-home, the process is easier from the start. First, you have a lot more time to look. Without worrying about moving before school starts, or needing to rush because your current home is closing soon, the search is usually more leisurely.
For clients looking at a second property, there are questions to consider:
-What are your hobbies? Are they indoor or outdoor?
-Do you prefer to walk, bike, or drive to most activities?
-Do you enjoy tinkering around the house, or do you have a handyman on speed dial?
-Is this new destination a community where you already have friends—perhaps somewhere you have vacationed before—or are you looking for a brand new adventure?
Though these may seem simple questions, they reveal a lot about how a person interacts with the world around them. Let’s take a look at hobbies.
Indoor hobbies are things that could be done at home (eg. gardening, crafting, woodworking, cooking, painting). For these clients, having a larger property will allow them to pursue their hobbies in their own house. Though a four+ bedroom home might seem much too big for a couple, only two rooms might be used for sleeping, while the others quickly convert to a gym, home office, or design studio.
Outdoor hobbies are things that cannot be done at home and are a very broad category (eg. swimming, tennis, hiking, golf, theater, museum hopping). In this case, a client requires proximity to their hobby. While a condo on a golf course or a pied-a-terre in Manhattan are wildly different properties, their proximity to your favorite pastimes (not to mention an airport!) is as crucial a priority as size or space.
Fantasy vs Reality?
While many people dream of a $1 house in a quaint Italian village where they can walk to the market each day, the reality of the everyday is worthy of consideration. Not just food, but sundries and household goods. Living on a remote island is nice, until you need a lightbulb.
A secondary property is less about school districts and more about dreams finally fulfilled, reaping the rewards of decades of hard work…it’s also about rubbish collection. Here are some of important things to consider:
-Where’s the store and how are you getting there?
-Come si dice “plunger” in Italiano?
-Is immediate availability of things important, or can you make due?
-Will you need to be near high-quality medical facilities? How soon?
I know the last question is one that might surprise clients, but I always bring it up as it is crucially important to consider. While it is difficult to anticipate the future, being honest about potential needs will ensure that a secondary home is the right one. Moreover, while Medicare provides coverage in all 50 states, Medicare Advantage plans, which are provided by private insurers, have different rules and eligibility requirements based on your home location.
If you are not sure about making the leap, you can always test the waters by renting. A seasoned local professional will help you make the right choice.
For the Fledglings
Of course, a secondary property might not even be a place for you. It could be the first rental apartment for your recent grad. This common scenario usually comes with the question “Mom, Dad, will you be my guarantor?” If you don’t know the term, I will save you a Google search:
Guarantor: a person who will guarantee a rental lease on behalf of a rentee, usually because the rentee has insufficient credit history or income (ie. your daughter who just moved 2,800 miles aways to San Diego—or is that just me?)
Helping your child navigate a rental market or first-time buyer market, let alone in an unfamiliar city, is stressful and downright daunting. If your college grad moved to an urban area that you have only visited a few times, it can be very difficult to understand each neighborhood. Remember, your child asked for help, not advice. The best help you can give them, and to give yourself peace-of-mind, is by finding them a real estate agent.
And do you know the best way to find a real estate agent in a new place? Ask the real estate agent you know and trust back home. If we’re worth anything as advisors, it is our ability to connect our clients to seasoned professionals in each market—ensuring that your experience meets our standards and expectations of care.
The Guarantor
If it wasn’t already clear, by signing a lease as a guarantor, you are financially responsible for the entirety of the lease being paid if your child decides to run off with a new love interest or move back in with you because they missed your cooking so much! If you do decide to guarantee the lease, you’ll need to gather some documents to ensure the process is smooth:
Proof of income: Most landlords, especially in New York City, will only accept a guarantor that makes 80x the monthly rent of the tenant they are guaranteeing. W-2s and pay stubs are the easiest but if you are nearing or already in retirement, that might not be possible.
Bank Statements: Often landlords will waive the income requirement if you can prove you have enough liquid assets to cover the lease.
Credit Check: As the lease is a type of debt, most landlords expect exceptional credit scores for anyone on the lease.
Bonus tip for your younger children: adding them as authorized users to your credit card (whether you hand them the plastic or not) is a great way to start building their credit history years before their rental woes begin.
Even with these documents close at hand, cities like New York see rentals “fly off the shelves.” In fact, it may be prudent for parents to consider purchasing an apartment as an investment opportunity, and having their child/children and their friends rent it back from them…everyone wins! Having a broker in place before you start your search is a great way to ensure success.
Expert Advice
At this point, you have surely come to the conclusion that there are things better left to the experts. Navigating the real estate market is one of those things. While searching for a beach home might feel like a leisurely stroll, securing a rental apartment in Georgetown in August is a sprint. In either case, you need advice and support.
For the 3rd year running, Compass is the #1 real estate brokerage in the country, and a dominant force in major cities, particularly NYC. Team JGB has partners—many of whom have become close friends in fact—in every corner of the country, so please reach out for recommendations and I will pair you with the perfect personality match.
If taking a bite out of the Big Apple is a possibility, either for your or for your young “adults,” I strongly suggest starting with this fabulous guide that one of my most trusted Manhattan partners put together on “Launching in New York,” which details the vibe, transportation access, and average pricing for both purchases and rentals of every neighborhood in Manhattan! It’s a don’t miss.
The real estate market, especially the rental market, changes on a dime, and that can be disconcerting for clients who haven’t looked at homes for many years. Yet, it doesn’t need to be stressful or overwhelming. A secondary property, whether it is a cottage in the woods, a shingle style rambler on the beach, a chic pied-a-terre, or a cool two-bedroom apartment that your child begrudgingly allows you to visit, is a vastly different experience from buying your primary home. Approaching the search with openness and curiosity might lead you to unexpected places. So, go have some fun!