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To Buy or Not to Buy

It can be tempting.

I recently checked RealtyTrac to find bargain homes in our area of Mesa, Ariz. This site shows pre-foreclosures, auctions, bank-owned homes, and For Sale by Owner homes. There were many to choose from, ranging in price from the low-$100,000s to $300,000 and up. I asked myself the question: "Is this the time to buy?"

Even though we have a respectable place in the picturesque American Southwest, we do not own our land, and from time to time we are lured into the idea of settling down into a bricks-and-mortar home. After traveling for 18 years, and with the prices of homes being so attractive, maybe now is the time to purchase.

Then I ran the numbers.

Currently, the amount we pay to lease our land is less than $4,000 annually. Even if we assume that figure will go up over the coming years to $5,000 or even $10,000 a year, it's still hard to justify paying $200,000 for a home with land. For that price, we could pay an annual lease of $5,000 for 40 years. Even at $10,000, it would still be 20 years of lease payments. At our current age of 55, we no longer need to utilize a home for an investment, and who knows where we'll be in 20 to 40 years? Also worth considering, these purchase prices do not include the property taxes which one pays on a home -- taxes that are sure to rise as cities grapple with ways to increase revenue for services or to pay for the pensions of city employees.

Missing out?
People like to challenge this line of thought by saying, "Homes always appreciate in value." In the early 1990s, we experienced a real estate market downturn in California, so we already know firsthand that this can happen. Then with the latest nationwide -- or perhaps global -- real estate bust, here we are once again with declining real estate prices. All markets are cyclical, even housing markets.

But for sake of discussion, let's say that houses always appreciate at the rate of inflation or a little more. Even if that's true, numerically, buying a home still doesn't make sense at this time in our lives.

In the community where we currently live, we have many amenities. We have lighted tennis and shuffleboard courts and a billiard room with six tables. Our clubhouse has complete kitchen facilities, including four outdoor gas grills, an activity room, library, and entertainment room with an immense TV, DVD system, and the full range of cable channels.

On top of all that, we have access to a swimming pool with hot tub, a workout room with the latest machines, a computer room with eight new flatscreen computers, and a craft room complete with kiln. We also have free WiFi service, trash pickup, and water.

All of these amenities are covered in one annual charge, and the best part is that we do not personally maintain any of them. If the pool filter or heater goes out, we notify the maintenance crew or office and it's taken care of promptly. If the 300 palm trees in our neighborhood need pruning, a service is called and I don't have to climb a ladder to cut them myself.

If we want to leave for Thailand, Mexico, or other parts of the world where we often spend months or even a year at a time, we simply lock our doors and go. This community has private security as well as security cameras in place to watch for potential problems from intruders.

If we left, the dues at a local country club alone would easily equal our current rent. And we have more amenities!

Built-in community
When we last owned a traditional home, we rarely had contact with our neighbors. Sure, we would wave to them as we drove by or as we pulled into our driveway, but we did not get together on a social or friendship level.

Everyone was far too busy working and raising their families. Here, our community has a stream of planned activities, dining events, movies, or "executive meetings in the swimming pool" as we like to call them, to arrange for the next social gathering.

If a neighbor has difficulty with plumbing, installing a water purifier, or building a deck, there is always someone around that can give you a hand in solving a problem.

Life in these active adult communities is easy, the benefits high, and the costs low.

It's may not be utopia, but it works for us.

Fool contributors Billy and Akaisha Kaderli retired in 1991 from the brokerage and restaurant businesses to a life of international travel. Visit their website at RetireEarlyLifestyle.com, and check out their new CD book, The Adventurer's Guide to Early Retirement.


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