Quote:
Originally Posted by doctorknow
My wife died a couple of years ago and I am living in a designer home (Iris) . I am thinking about selling since the market is good right now. However If I downsize I should like to buy a smaller home or cottage for myself and A second smaller cottage to rent for income. I am mortgage free so the sales price could possibly pay for the two smaller houses. Has anyone done this? What are the considerations?
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I can't blame you for wanting to downsize and do exactly what you're talking about.
The only issue I see is that while the market is great if you're a seller, it's not so great if you're a buyer and in this case, you're a 2x buyer.
Maybe buy one, wait a bit and buy the second. The market is cooling down some and the Fed is meeting in September to discuss rates. If they start the climb off 0%, housing will cool significantly. Inventory is coming back and fortunately this market is nothing like the 2008 market, so while it may pull back some it's not going to bottom out.
If you're concerned about the excess proceeds evaporating in a down market, put the money in a Vanguard Prime money market fund and it will at least hedge against inflation to some degree. I'd put it in VTI, but I have a lot of risk tolerance.
I do own a rental property and it's not without work. If you want to make money, you have to do seasonal rentals. If you want to earn money easier, a yearly rental works, but you're not making nearly as much. Since you won't be carrying a note on it, that may be the route for a decent amount of passive income.
Good luck either way but I think your idea is solid.