Buying More Real Estate Near Retirement -- Good or Bad Idea?

[CestMoi]

I’d like thoughts about whether it makes sense (and cents) to buy real estate with my BF at this point in my quest for FI.

I own a studio coop in a very nice building. My BF moved in with me about a year ago.  While the situation is liveable, we'd like some more space. We figure we have three options: Stick this out in order to sock maximum retirement money away; buy a bigger apartment together and I’ll rent this one out; or have him purchase/rent his own apartment and I’ll live with him and rent my apartment out.

Is it too financially risky for me to buy another apartment (and with someone I’m not married to) this close to the time I’d like to retire? I was hoping to leave full time work in a year or two. We’d be looking at 120k - 180k to purchase a one-bedroom apartment in this area.

My net worth is $750K with no debt. My BF’s net worth is $320K with no debt. My current apartment could rent for at least $1200 monthly, judging from the rental ads I'm seeing. Its maintenance fee is currently $540 per month, including heat and hot water. The renter would pay their own electricity, gas, phone, and parking.

My main concern is acquiring too much debt for retirement. Yes, I’d probably be able to rent my current apartment out, but I’ll need to put some money into updating it first. Renting one apartment out and owning another with someone I’m not married to will complicate my taxes. Is it worth it for the extra investment or rental income down the line once I’m retired, or could owning/renting more real estate in this situation be more of a hassle than it’s worth?

[Catbert]

Okay, I'm old school and certainly much older than you to my perspective might be different.  I suggest never buying RE in partnership with someone you're not married to.  That advice goes double if it's a personal residence rather than investment property.  Too much can go wrong.  If you break up one of you need to buy the other one out or sell to a third party.   Not fun especially if you no longer are cooperative with each other.

Of the three alternatives I'd get BF to buy a larger place and you rent out the studio.  That assumes the finances work on renting. 

[CestMoi]

I suggest never buying RE in partnership with someone you're not married to...If you break up one of you need to buy the other one out or sell to a third party.   Not fun especially if you no longer are cooperative with each other.

Thanks mary w.  I can understand your trepidation of buying with a non-married partner. I have no experience with either, but I realize not being married would require property agreement contracts beforehand. I'm going to do more research on it.

[Gone Fishing]

If BF has $250k, he probably has his head on straight, but given your larger net worth, I would insist on a prenumptual agreement prior to getting married.  To the original question, if you are going to need the space, and buying is the way to get it, buy it before you retire.  Once earned income drops to $0, it can become exceedingly diffcult to borrow money, even if you do have $1 million in the bank.

As far as the rental question goes, how much is your studio worth?  Are taxes and insurance included in the $540/month fee? Depending on what you can get for it, you might be better off selling and taking on a smaller mortgage.

[frugaliknowit]

Let me start by saying I honestly hope your relationship with your boyfriend lasts forever!

You say you have been living together for a year, but not how long you have known your bf. 

Do not buy property together!  This is a huge risk with a limited potential reward (owning versus renting:  not a big deal).  If the studio is not working for you, either sell it or rent it out and rent a place together.  You've only lived together one year.  This is too soon to be buying property together. 

[CestMoi]

Thanks for all the replies. They're giving me a lot to think about.

So Close, yes, a prenuptial agreement is something I would require if we marry.

By the way, I updated my BF's net worth. It was more than I originally figured.

To answer some questions: Monthly maintenance includes taxes, but not insurance. I've known BF for ten years, and we've dated for much of that time. In regard to what my apartment is worth: Less desirable studio apartments are going for over 100k in this area.

[arebelspy]

Runs some best and worst case scenarios, and compare it to the baseline (not buying more) and see if the potential upside is worth the potential downside and how it affects your FIRE plans.