Maybe it’s just my age (I prefer “mature” or "grown-up" to "old") but I spend a lot of time thinking about what lies ahead in the next 20 years. How do I want to spend my free time? Where do I want to spend it? How do I want to live?
I find that many of my baby boomer clients are facing the same dilemma, and I know many lifelong Seattleites who still love the city, but daydream about an escape from the city’s grey winter drizzle and the increasing traffic congestion.
These clients may have lived in their homes for a long time (or not) but regardless of time, everyone has significant equity given the monumental value appreciation our housing market has experienced over the past few years. Maybe the house is too big, with bedrooms that are rarely occupied or a large yard with upkeep and responsibility that occupies too much time. And what about the places that you want to visit before the knees go out?
It is clear that Seattle has a housing issue: there is not enough supply to meet demand, particularly as an influx of new residents have arrived in the Emerald City with good jobs and a desire to take root in our community. As Realtors, we feel the pinch in our inability to provide homes for our new inhabitants. Tiny homes are going up on sub-divided lots that increase density, which can characterize a neighborhood. The few homes available are generating multiple offers and have pushed urban-loving dwellers “into the burbs.”
In helping you consider your future and take advantage of today’s seller’s market, I propose a few possible next steps:
1) Stay in Seattle and downsize. “Sure,” you say, “this sounds good in theory, but where should I go?” Well, after a dearth of no new condo buildings over many years, Seattle and Bellevue are finally building condos that will be available in the next few years. I will be marketing some exciting options that will provide urban amenities, state-of-the-art technology, and walkability in Downtown Seattle, West Seattle, and the International District. These options will allow residents to age in one-level units that provide amenities such as concierge services, spas, and workout facilities. Condos also provide a “lock and leave” lifestyle that many Baby Boomers crave, especially when they choose to flock to warmer locales during Seattle’s chillier seasons.
Many of these buildings are under construction now, and only require a fee of 5% of the purchase price to secure tomorrow’s home at today’s pricing. Given that the median price of a resale condominium in downtown Seattle rose 19-percent in 2017, the savings can be significant when planning ahead. In the Seattle area, waiting a few more years will undoubtedly result in less selection and higher price points. The reservation/presale method also affords you the opportunity to take a year or two and get organized before undertaking a downsize move, not to mention the value appreciation your home will continue to gain before it is sold a few years down the road.
2) Plan to put your home on the market…but before you do, get a home equity loan. This is fairly easy to do and many banks (where you already have a relationship), offer them at little or no cost. An appraisal may be required, but use those funds for flexibility--a deposit on a smaller home here, a down payment for a home in a sunny spot (that sounds wonderful right about now), or check something off of your bucket list. Consult with your real estate agent and designer, and use some of that windfall for making home improvements that will benefit you now and at the time of sale. You don't have to pay interest on that loan until you use it.
3) Explore whether building an ADU (Auxiliary Dwelling Unit or “Mother-in-Law”) or a DADU (Detached Auxiliary Dwelling Unit) may be an option for you. Can you live on one floor of your home and rent out the lower level? Is it possible to build over the garage or put a modular home on your lot? Our local zoning laws are changing to allow more urban density. Think about a mini family compound or deferring some of your mortgage payment, taxes and insurance with rental income. Not only can an ADU or DADU provide additional income, they are also highly desirable features for millennial buyers, and will add value to your home when you decide to sell.
4) Sell your home and buy a multi-family building in which you will reside in one unit. Check with your tax advisor, but much of the gain on your current residence can be tax-free or a 1031 exchange, which can allow you the flexibility to move that equity into something that will gain in value while your renters pay for your living cost. Already own rental properties and don't want the hassle, but also don't want to take the tax hit? Ask your financial planner about DSTs (Delaware Statutory Trusts).
5) Sell your home now and rent. Time to experience the floating home lifestyle to see if you will like it? Do you want to try high rise living for a year? Craving a more rural setting with privacy and room to roam? This is the time to explore options while you have money in your pocket and the ability to be nimble when the right situation appears.
So, you might wonder, what am I doing to complete my roadmap for the future?
• My husband and I have already purchased a multi-family property in an up-and-coming Seattle neighborhood. We are renting it out now and will consider moving into one of the units in the future.
• I currently have a floor plan for converting our two-story home to a top unit for us and a lower rental unit, allowing us to remain in our neighborhood while offsetting expenses.
• We also have a deposit on one of those new high-rise buildings in downtown Seattle, which will give us walkability and a vital community…should we choose that direction.
• I am looking at options for a second home, preferably somewhere that’s affordable and with plenty of sunshine! Palm Springs is at the top of our list, but we still haven’t decided on a preferred location.
• My husband and I recently secured a home equity loan that gives us the flexibility to move quickly, without a home sale contingency, so we’d be prepared if the right home were to come onto the market tomorrow. In the meantime, we’re taking care of improvements that we can enjoy now, and will also add value when we are ready to sell!
We aren’t sure what the future will hold, but we are ready for whatever comes. And you can be too.
Please don’t hesitate to contact me if I can help with your Real Estate Roadmap.