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Success Story: Finance

Jill and Joe: The Situation

Jill and Joe just inherited close to half a million dollars from a relative who passed. They are empty nesters who are both still working until they feel secure enough with their savings to retire. After putting four kids through college, they haven’t saved as much as they had hoped. They have a small mortgage at a fair interest rate on their current home that they have lived in for over twenty years. They have always wanted to have a second home near the beach.  They feel this is their chance to live that lifestyle, but worry that they will grow old with no money given that the economy has been fluctuating and inflation is on the rise. They want to enjoy the beach and still have some fun money to travel while they have a healthy, active lifestyle and have finally put their kids through school.

The Solution:

I use my referral base to investigate areas in a few of their favorite beach towns that would support a small cottage as a Short Term Rental (STR).  With the help of a popular STR feasibility calculator (AirDNA), I determine the projected profitability of the short-term rental so that a small annual profit can be achieved for Jill and Joe. In addition, they would still have certain holidays and lots of weekends blocked out and available for themselves in the beach home. Jill and Joe sell the big house in town and pay cash to get a smaller place… no more mortgage. The one-time capital gains exception applies and they incur little to no capital gains tax despite living in the home for over twenty years and realizing a good profit. Later, they can either sell the new home and semi-retire to the beach (where there is no state income tax) or rent it out for passive income. They sock the proceeds of the sale away into their retirement fund.  They get a small, low-interest-rate mortgage for the cottage at the beach. The mortgage payment and additional expenses will be paid for with the STR income while the owners get to use it when they aren’t traveling elsewhere. Jil and Joe’s kids and their families plan on coming to visit them on a rotating basis at the beach house. This is attractive to the kids as it is a no-cost vacation where the grandkids get to see family. Both the beach home and the primary home are located in good areas that are forecasted to rise in value. The yearly increase in value would add to Jill and Joe’s assets for retirement.


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