Forever Home
Forever Home
This Week's Quote:
You must be radically responsible for your life.
-Chris Norton
I am on my third “forever” home. Taste changes. Finances change. Health changes. Family members move in and out and away and back. Jobs change. Marriages. Births. Retirements. Life happens. Never say “Forever.” All these things and more are discussed in Beth DeCarbo’s WSJ November, 2021 article that follows. It is titled “Retirees Buy ‘Forever’ Homes. Then They Sell Them.”
-Mark Bradstreet
Retirees Spend a Lot of Time and Money to Buy Their ‘Forever Home.’ Then They Sell It.
It doesn’t take long for people to discover that what’s perfect now is far from perfect before too long. And it costs them.
To Rick Brown and Jeanne Brown, finding a forever home has seemingly taken forever.
In just five years, the couple—he’s 71 and she’s 72—bought or built two different houses that they planned to live in for the rest of their lives. But their tastes changed—so they decided to pick up stakes both times. Now they have settled on a third home that seems to be their final choice.
If there is one takeaway, Mr. Brown says, never use the words “forever home.”
Like the Browns, many couples near or in retirement embark on a quest to find the perfect place to spend their twilight years. Soon, however, some people realize that what’s perfect now may be less than ideal later. Poor health and dwindling finances are obvious reasons some seniors choose to move. Other retirees retool their priorities when they realize how much they miss the grandchildren or hate their new neighborhood.
In truth, most home buyers don’t stay in their homes as long as they think they will, says Jessica Lautz, vice president of demographics and behavioral insights with the National Association of Realtors, a trade group. “People may not want to move,” she says, “but they may decide to because life happens.”
The association released the results of a survey earlier this year in which recent home buyers were asked to list factors that would compel them to move. “Life changes,” such as a marriage, birth or retirement, was cited as the top reason by 25% of the respondents aged 56 to 65 and 16% of respondents 66 to 74. The second-most common reason was a household member’s health, cited by 14% of respondents 56 to 65 and 25% of those 66 to 74. The third top reason, for both age groups, was downsizing to a smaller house.
But moving multiple times carries a big price tag. Forever homes are often cheaper than current homes, because the couples are downsizing. But, like any other sellers, retirees may face losses on their current properties because of the fluctuating market—losses that can pile up with each move. And, of course, every move brings more expenses—closing costs, commissions, moving charges and more.
That’s why some experts urge buyers to learn as much as they can about a new location before shelling out for a home. “It’s OK to take a couple of years to explore other areas and don’t jump in immediately,” says Mike Leverty, a financial adviser in Hudson, Wis. He advises his clients to rent in the area where they think they want to live, even if it is only part time. “You really have to view it as a second home and not a vacation,” he says. “Factor in amenities like shopping and healthcare—things you wouldn’t think about if you just vacationed there for a couple of weeks.”
Finding ‘The’ One
The most difficult part of a home purchase is finding the right property, according to 53% of surveyed people who purchased a home between July 2019 and July 2020.
It just didn’t click
The Browns began their forever-home quest in 2011, when they sold a bed-and-breakfast in Annapolis, Md., that Mrs. Brown had operated since 1997. Cash flow had been good for a while, but in time, neighbors started listing their homes as vacation rentals, cutting into the B&B business. Then came the 2007-09 recession. When Mr. Brown retired from his full-time career in banking in 2010, the couple decided to close their business. They sold their B&B—purchased for $540,000 in 1996—for $925,000.
The Browns found their first forever home in Southport, N.C., near the Intracoastal Waterway. They paid about $200,000 for land and another $400,000 to build “the nicest place we have ever lived in,” Mr. Brown says. Still, the nearest big city was Wilmington, N.C., over a half-hour away. “We loved the area and our home there, but it was isolated,” Mr. Brown says. “We were accustomed to good restaurants and the theater, and the like.”
While living in Southport, the Browns traveled west to Asheville, N.C., for a tennis tournament. Driving around, they realized Asheville offered the best of both worlds—the trappings of city life and the outdoor activities in the beautiful Blue Ridge Mountains. So, they sold their Southport home for $480,000 in 2016.
“Where we got clobbered was the purchase price of the lot,” Mr. Brown says, which the couple had purchased right before the recession of 2007-09. “When we left, the value of the lot had fallen about 50%.”
The couple spent about $470,000 to build their second forever home, situated on the side of a mountain about 15 minutes from downtown Asheville. To stay busy, both Browns took part-time jobs, volunteered and pursued their hobbies. “But despite being a nice area, we had a tough time breaking into the social arena,” Mr. Brown says. “I didn’t click with the different types of groups. I thought, ‘Maybe this isn’t the place for us.’ ”
That realization led to their third—and current—forever home. In 2019, the Browns sold their house in Asheville for about $570,000 and moved to the Villages, a sprawling 55-and-older community in central Florida. There, they bought a modest three-bedroom home for $408,000. Mr. Brown plays golf, softball and pickleball; Mrs. Brown golfs, belongs to a book club and teaches pottery classes. Together they foster puppies.
Mr. Brown says he and his wife have no regrets—their experiences in Maryland and North Carolina helped them realize why Florida is such a good fit. To them, an enjoyable retirement is more about the lifestyle and less about the house. “Right now, we’re saying we’re going to stay put.”
Insane prices
Michele A. Peters says she moved out of Ridgewood, N.J., because “the cost of living was totally insane.” Ms. Peters, a 68-year-old retired attorney, was paying $18,000 a year in property taxes and another $12,000 annually for health insurance. In 2015, she sold her New Jersey home for about $860,000 and moved to Newport, Ore. Choosing the state seemed natural—she had been born there, and remembered her father saying he was happiest when living in the Pacific Northwest.
She bought her first forever home in a rural area, paying $487,500. In time, however, she realized that the location was too remote, she says. So she sold that house and bought her second forever home, a condo on the coast. Ms. Peters spent about $460,000 on the unit and another $100,000 on renovations. In terms of nature, the place was perfect. “To wake up in the morning and see an eagle floating on the air currents outside my window, it’s gorgeous.” In other ways, however, her forever home was less than perfect.
“What they don’t tell you is that there are freezing winds that come down from Alaska,” she says. “During intense storms, the windows are bowing from the wind.” There were also difficulties connecting with the locals. “I didn’t have anything in common with the people around me,” she says.
Living in Oregon also convinced Ms. Peters that she’s “an East Coast person,” she says. “Just being back here, I was happy. I felt more at home.” So, in November 2019, she loaded her cat and dog into the car and moved to Fort Lauderdale, Fla., where she could live in her mother’s vacation condo before finding her own place.
“But once I got there, I found out that I hated it,” she says. Visiting family there was one thing, but living there full time was entirely different. Then the pandemic struck, which only deepened her disdain. “Nobody would wear a mask. People would gather together in large groups,” she says. “One doctor told me, ‘This Covid thing is nothing. It’s going to pass.’ ”
It was time to leave. In March 2020, Ms. Peters packed up again and moved to St. Petersburg, Fla., a Gulf Coast city a friend had told her about. She paid $480,000 for her third forever home, a roughly 1,500-square-foot bungalow in a charming, historic neighborhood. “I love it,” she says. “This was what I was looking for in Oregon and couldn’t find.”
Still, the journey that eventually landed Ms. Peters in St. Petersburg was pricey. Selling her home in New Jersey cost her 4% in real-estate commissions plus about $10,000 in moving and storage fees. When moving from Oregon to Florida, she paid 4.5% in commissions and about $2,500 for a shipping container that she packed herself. Moving from Fort Lauderdale to St. Petersburg cost another $2,500. She handled many of the legal aspects of the real-estate transactions herself, which reduced some of her expenses.
For now, she plans to stay put in St. Petersburg, persuaded in part by the kindness of a neighbor who helped her when she fractured her ankle. “But in my head, I’m still open,” Ms. Peters says. “Who knows where I’m going to end up?”
Trading down
Bill Fonshell and Claudette Fonshell decided to downsize from their five-bedroom, 4,400-square-foot house after their youngest child went off to college. They were living in what they already considered their forever home in Haddonfield, N.J., but the house, built in 1905, wasn’t getting any younger either. On the horizon were pricey projects that involved replacing the roof and the heating/cooling systems. “We got to a point where we realized we can’t stay there forever,” Mr. Fonshell says.
The Fonshells, both in their mid-50s, decided to move to Philadelphia’s historic Center City neighborhood, where Ms. Fonshell works in healthcare. In their new home, the couple wanted two to three bedrooms and a garage or designated parking, since Mr. Fonshell travels for his sales job in the restaurant trade. Very quickly, they realized that their $400,000 budget couldn’t buy them everything they wanted.
Then, all of a sudden, a 2,200-square-foot townhouse that was less than a mile from their house in Haddonfield came on the market. Even though it was built in 1834, it had a new roof, a new gas burner and air conditioner, “literally all the things that were going to fall apart in our old house,” Mr. Fonshell says. It was also within budget, at $382,000.
In 2018, the Fonshells moved to their new old house. And because it is smaller and lacks a yard, they are saving $7,000 a year in taxes. Overall costs for things like upkeep, utilities and lawn care are 40% lower than their previous home, Mr. Fonshell estimates.
They are also happy to remain in a town they love. “It’s a little storybook community,” Ms. Fonshell says. “We’re friends with the [former] mayor, have our church community and the friends we made when our kids were in school.” The Fonshells still go to high-school football games.
But having once sold their forever home, the couple is reluctant to commit to their new house for the rest of their lives. “It’s a comfortable house, but it has stairs. It might not be good when we’re elderly,” Ms. Fonshell says. Plus, she adds, if they have grandchildren down the road, they would want to live close to them. “At the end of the day, you want to see your grandkids.”
Credit Given to: Laura Saunders. Published November 29, 2021 in the Wall Street Journal.
Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.
This Week’s Author, Mark Bradstreet
-until next week.
This Week's Quote:
No one is perfect - that's why pencils have erasers.
-Wolfgang Riebe, Keynote Speaker/Magician
Some people believe that living in another country may offer less unrest than here in the US. Living abroad may also offer the possibility of lower taxes and a lower cost of living. For example, Grenada has no foreign income tax, no wealth tax or estate tax so many people view this country as a tax haven. Many countries offer programs allowing Americans to purchase a residence in their country. This residency-by-investment program offers Americans a chance to live in their country as a major and often easier step in obtaining a permanent citizenship in another country. Many of the countries do have a minimum dollar amount for your home investment. Caveat emptor!
In November, 2021, Robyn A. Friedman authored a WSJ article, “A Foreign Home That Gets You Residency.” If you are interested in living abroad, she offers examples and advice of how to best buy a residence.
-Mark Bradstreet
Marjorie Garrett loves the 3,500-square-foot custom home she and her husband built. The couple designed it for indoor-outdoor living, allowing them to slide open their window-walls from https://www.expertsashwindows.co.uk/ in the morning and enjoy the breezes all day.
Of course, Mrs. Garrett, 67, occasionally has to relocate a scorpion. That’s because she and her husband, Jim Garrett, 70, live in Ojochal, Costa Rica, where they moved after retiring from the air-conditioner manufacturing business they owned in Frederick, Md. The two obtained temporary residency status in Costa Rica through the country’s residency-by-investment program by purchasing their home there, and they’re on the path to becoming permanent residents.
Although Mrs. Garrett declined to say how much they paid for their new home, similar models at the Ventana Costa Rica development in which they live sell for about $1 million, according to Craig Studnicky, chief executive officer of Miami-based ISG World, which handles sales and marketing for the project.
“There’s a lot of grumpiness going on in the States, and a lot of divisiveness, and I don’t sense that as much down here,” Mrs. Garrett said. “We also looked at moving to Portugal, but Costa Rica just fit the bill, and it’s been a great decision.”
The Garretts are among the many Americans who are opting to become expatriates, seeking residency or even citizenship in other countries to lower their cost of living, receive tax benefits, add to their passport portfolio or improve their quality of life. According to the Association of Americans Resident Overseas, nearly nine million Americans (excluding military) live abroad in more than 160 countries.
But rather than traveling on a tourist visa, which limits how long a visitor can stay in another country, residency acquired by Americans through a residency-by-investment program allows them to live, work or study in another country and may even include access to the local healthcare system. In some cases, it enhances visa-free travel as well. One of the easiest ways to obtain residency or citizenship is through the citizenship-by-investment or residency-by-investment programs offered by numerous foreign nations.
Early in the Covid-19 pandemic, when international travel was limited, those with multiple citizenships and passports found they had more options to enter foreign countries or relocate. “A lot of our clients talk about passport portfolios, where they have a few passports that give them the ability to not only travel visa-free but to settle,” said Mehdi Kadiri, managing partner and head of North America at Henley & Partners, a residence and citizenship advisory firm. “When you acquire citizenship in the European Union, for example, it gives you access to live, work and study in the other 26 European Union countries in addition to the country in which you acquired citizenship.”
Mr. Kadiri said that the most popular countries now with his clients are Portugal, which offers a residency-by-investment program that requires a minimum real-estate investment of €280,000, about $320,000, depending on the type and location of the property, and St. Kitts and Nevis, which offers citizenship by investment.
Developers are capitalizing on the increased interest from Americans in purchasing homes abroad, often offering assistance to those seeking permanent residency or citizenship. While Bahamian law does not specifically provide for a minimum investment to make a buyer eligible for permanent residency, under government policy the minimum real-estate investment required is $750,000, according to Khaalis Rolle, president of Sterling Global Advisory Services, an affiliate of Sterling Global Financial. Sterling Global Financial is the developer of Montage Cay, a mixed-use development in the Bahamas that will include 48 residences starting at $5 million and a hotel. Mr. Rolle, who previously served as minister of state for investments in the office of the Prime Minister of The Bahamas, said that an application for residency will not be advanced to the immigration board if it does not meet the $750,000 minimum threshold.
According to the Government of Grenada’s citizenship-by-investment website, the country’s program is open to those who spend at least $220,000 on a home in an approved project there. Citizens of Grenada can travel, visa-free, to more than 140 countries, including China.
“Grenada has no foreign income tax, wealth tax or inheritance tax, so a lot of people look at Grenada as a tax haven,” said Kandace Douglas, sales and marketing director for Silversands Villas in Saint George’s, Grenada, where pricing starts at $7 million. Sales launched in April 2021.
According to the U.S. Department of State, a U.S. citizen may accept citizenship in a foreign country without risking his or her U.S. citizenship.
Here are some things to consider if you’re interested in obtaining residency or citizenship in another nation.
Rent before you buy. “The biggest mistake I see people making is they think they are going to run away from their problems by being down here,” Mrs. Garrett said of living in Costa Rica. “This is a Third World country. We may lose electricity periodically or have to drive miles out of our way because of a mudslide. You have to understand the culture. Do your due diligence, and take your time.” Consider renting a home for several months or more before moving ahead with a purchase.
Expect to pay cash. Mortgages in a foreign country may be hard to come by. According to Mr. Studnicky, conventional mortgage financing is impossible to find in Costa Rica. Mr. Kadiri said that to qualify for residency-by-investment in Portugal, financing is available only for the portion of the purchase price over and above the minimum investment required for residency.
Beware the consequences. Establishing residency or citizenship in another country may have legal, tax and estate-planning consequences. Mr. Kadiri said he heard a horror story in which an American worked directly with a real-estate agent in Portugal to purchase a home and then found out the property didn’t qualify for the residency-by-investment program. Property rights are another issue. Americans cannot own real estate outright in some countries, said Mr. Studnicky, who also suggests looking into import taxes for vehicles and personal belongings, which can be steep. And remember that just because you reside in another country doesn’t exempt you from paying U.S. income taxes.
Credit Given to: Robyn A. Friedman. Published November 12, 2021 in the Wall Street Journal.
Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.
This Week’s Author, Mark Bradstreet
-until next week.