According to the results of a newly released study of nearly 2,000 American baby boomers — those born between 1946 and 1964 — commissioned by the National Association of REALTORS (NAR), ten percent of all boomers are considering buying real estate in the next 12 months and 15 percent of those respondents said they were considering buying vacation property. That’s in addition to the 25 percent of survey respondents who already own one or more kinds of real estate in addition to their primary residence.

Many baby boomers will likely be buying with an eye on retirement. (Four out of 10 surveyed who already own a vacation property said they eventually intend to retire to live there year-round.)

Baby boomers planning to retire in a few years may also be motivated to buy a second home now while interest rates are low, and before property values in their chosen location potentially increase. And by investing in a vacation property early on, they get a place where they can spend quality time with their children and grandchildren before they retire.

So what are boomers looking to buy? Some things boomers look for in a second home are:

Recreational property.

Boomers are living healthier and longer lives and desire vacation property where there is an abundance of leisure activities to enjoy such as hiking, golfing and skiing.

Small town or rural location.

Three out of five boomers surveyed said they’d prefer to retire to a small town or rural area. Only 12 percent said they’d prefer to retire in an urban or city setting.

A home in a Sunbelt region.

Florida and other traditional Sunbelt regions remain popular retirement locales.

Property close to home.

Boomers looking for a second home to enjoy for weekend escapes typically look for property within two hours’ driving distance of their current home.

The option to rent.

Vacation property that can be rented out to cover some of the expenses involved is considered desirable.

A suitable place to retire.

Access to quality health care and other amenities are important considerations in a second home that’s eventually intended to become a primary residence.

A tax advantage.

Those planning to eventually sell their primary residence and move into their vacation home can get a double tax advantage. They can claim a capital gains tax exemption on the profits from the sale of their first home of up to $250,000 if they’re a single home owner or up to $500,000 if they’re married. Then, if they purchase a second home which they subsequently convert into their new primary residence, and live in that home for at least two out of the five years before they put it on the market, that property will also become eligible for the same preferential tax treatment as their first home. (Consult an accountant or financial advisor for more information on the capital gains tax exemption and how it may impact your own personal tax situation.)

Baby boomers represent a large percentage of the population and have, for years, dominated the real estate market: Nearly four out of five already own homes. So it’s not surprising that now, having reached their peak earning years, many are regarding another investment in real estate as a way to achieve their retirement goals.

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Original publication:  June 14, 2007

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