Lundgren says, “When you rent, you’re not responsible for things. There are a variety of ways to modify the “sell and rent” scenario to fit your retirement needs. Buying with a mortgage is the better option generally after 10 years. When your current home no longer suits you, selling it is a popular option. You also won’t have to pay for maintenance, repairs or appliance replacements. With bond funds and annuities yielding 4 … But selling your house to rent when you retire is a major life upheaval with inherent risks to your financial future. But retirees -- or near-reti… Selling your home and moving to a rental can free up the equity you have in your home, which you can use to fund monthly expenses throughout your retirement. For example, you might decide to travel with the tax-free equity and use the remainder to finance the purchase a retirement home. According to Zillow research, 19% of retired homeowners report making some kind of accessibility accommodations in their home, whether it’s modifying flooring, adding handrails, or installing a walk-in shower or bath. Header Image Source: (Lightspring/ Shutterstock). However, if you sell the property within your lifetime, according to the IRS, you’ll likely qualify to exclude up to $250,000 (or up to $500,000 on joint spousal filings) of the home sale price from your income. If you can’t afford your home’s monthly costs now that you don’t have a steady income, it may be the right time to sell. You could be leaving money on the table.”. Mary is 67, owns her home, and is considering downsizing. Fluctuations in market value, unexpected maintenance expenses, … Pros for renting out your home: According to the Zillow Group Consumer Housing Trends Report 2018, 60% of baby boomers (ages 54-73) who are selling a home are also buying another home, but only 40% of sellers in the silent generation (ages 74+) are buying again. According to Zillow research, homes listed in this window sell two weeks faster than average and for $1,600 more. What really matters is your income. And if you’ve already decided to sell, will you buy a new home or rent? Just consult a tax professional about the capital gains tax implications for people who inherit homes. It is for information purposes only, and any links provided are for the user's convenience. Why I’ll Sell My House And Rent Once I Retire. She figures she can rent an apartment for $1,200 to $1,500 a month. Selling a House During Winter Holidays: Tips, Pros & Cons. Buying a house is a long-term commitment to the property location. Wow, I found this blog and what a joy to read your stories. Former art and design instructor Christine Bartsch holds an MFA in creative writing from Spalding University. Consider how much you are paying in property taxes, HOA fees, and repairs around the house. However, if you sell the property within your lifetime, according to the IRS, you’ll likely qualify to exclude up to $250,000 (or up to $500,000 on joint spousal filings) of the home sale price from your income. Hire a real estate agent or run the comparables yourself to see how much you can sell your home for. From property taxes to maintenance to insurance, owning your own home can cost more than renting. To figure out which option is best for you, it all comes down to running the numbers. (More on that later.). Current tax law allows for an exemption of $250,000 in profits for a single person and $500,000 for a couple. hmmmmm, that sell to a family or friend and buy theirs to rent it back to them is an interesting thought. However, sometimes renting is the most cost effective way to go. Unless your children are willing to move into your home for at least two years after inheriting it, they’ll be stuck paying a hefty capital gains tax. She expects to sell her home for $800,000. Rental properties can add an extra stream of income to your retirement portfolio. For starters, you’ll need an idea of how much money you’ll need to comfortably retire. If you’ve lived in your home for decades, there are probably cosmetic, mechanical or structural upgrades or repairs to complete to either bring your home up to code or appeal to buyers. She wants to buy a small apartment for $500,000 and have $300,000 left to invest. Another financial issue is an older person’s need for cash flow. Wile there are no guarantees, knowing how much equity you have in your home is an important early step in retirement planning. by Christine Bartsch And, although you’ve been a homeowner for decades, you just might be OK with never having a mortgage again. Once you know that, you can tackle the decision of whether to buy or rent. If you’ve already spent the time and money to make your home comfortable so you can age in place, you may be less inclined to move and start over. You may not be allowed to make all the upgrades you want, and if you do make improvements, you won’t see any return on your investment when you move out. Finally, while selling is a good way to fund the fulfilling of your fantasy bucket list, some might argue that you’re doing so at the expense of having an tangible asset to pass down to your children or heirs. The Advantages of Renting in Retirement Lower Cost But should you? Retirees sometimes find themselves wanting to move to pursue interests like golf or skiing. By Jason Heath on September 20, 2016. Invested wisely, those dividends can cover your rent and monthly expenses for years to come. Monthly Payments and Retirement Income. Selling your home to pull out the equity means you can put your best asset to work for you—especially if you put a good portion of the home sale proceeds into investment opportunities, like dividend-paying stocks or annuities. The content on this site is not intended to provide legal, financial or real estate advice. As long as your home is worth significantly more than you owe on your mortgage, that equity is a safety net to cover unexpected expenses like home repairs and medical care. The amenities. Note that the average American retires at age 62, so the baby boomer group encompasses both retired people and those who haven’t yet retired. Does it make sense to rent in retirement? In some large cities, parking costs can exceed $250 a month. Why? Just consult a tax professional about the capital gains tax implications for people who, If you need the equity from your home to invest in another home — or another type of investment to fund your retirement — it’s important to calculate your potential profit ahead of time. Depending on your arrangement with the tenant, you could even keep many of your things in the house — this removes the need to rent … You can close in as few as seven days and move on to your post-retirement life. But that could be speculation. Austin’s median rental listing price is $1,695 per month, while the median home for sale has a listing price of $389,000. Unfortunately, there is a downside to selling your home and renting when you retire. As you age, you might prefer a home that’s less work to take care of, like a home with a small yard or no yard at all. With the help of an agent who also does leasing and basic property management, you can find tenants to rent your existing home at an amount that will cover living expenses in a retirement community. This can be particularly hazardous if the property is located in a remote area. Instead of selling, you might want to leave the family home to your children or grandchildren someday. For example, if you’re going on a year-long round-the-world trip, you can rent out the house for 1 year, get rent while you’re away and come home at the end of the trip. Josée Jeffrey, a Montreal financial planner and tax specialist, says that switching from home ownership to rented accommodation isn't necessarily a good thing for everyone. A retiree who sells a house, buys a cheaper one and invests the balance of the equity can create a new income stream. For that you’ll need the help of a top-notch real estate agent with experience in retirement planning—because your home may be worth more (or less) than you think. Because sometimes it’s a smart idea to invest your home sale profits in a new property. Even without a mortgage payment, the expenses associated with owning a home add up. It’s also important to look at how homeownership impacts your Social Security benefits. Financial experts note that some retired homeowners forget to factor house-related expenses (HOA fees, maintenance, utilities, unexpected repairs, etc.) If you wish to report an issue or seek an accommodation, please, Zillow, Inc. has a real estate brokerage license in multiple states. If something breaks, you’ll have to rely on your landlord to fix it. You’re also free from the burden of home maintenance. When Is the Best Time to Sell Your House? Over the course of retirement, retirees can develop health issues that compromise their physical and mental faculties. Renting can seriously reduce the amount of expenses that you have to pay each month. Rather than getting intimidated by how much income you’ll need, think about it in terms of what income you’ll have from your current assets. If you believe you may pocket more than that amount, talk to your tax professional for other options, including turning your home into a rental property, then swapping it for another property using a 1031 exchange. Learn what I’ve discovered throughout the years of selling my clients’ houses quickly to net them the most money. Then you’re free to invest the rest of your equity into low-risk investments that pay out monthly dividends that will cover your mortgage and then some. However, sometimes taking on a mortgage isn’t a bad idea even if you can afford to pay off the property. The experts at AARP advise saving around 10 to 12% of your current income. Or you can reinvest in another type of investment that will provide a good return, while keeping your money accessible if and when you need it. If she sells her house for about $900,000, she can free up capital for retirement goals and rent an apartment. What Upgrades Increase Home Value? There are lots of factors to consider when making the “sell vs. rent my home” decision, including: Your financial situation. According to the Zillow Group Report, 25% of sellers are baby boomers, and 13% are from the silent generation. Should you stay in your current home once you’ve retired? The analysis showed that renting was a better financial option than buying for the first ten or so years after downsizing. Whether you’re more interested in selling quickly or for the highest possible price, it’s important to know your options. I currently rent a home for $875 per month (low for this area because I have been in this location for 9 years). When You're Close to Retirement If you're close to or at retirement age, and you have good equity in your home, selling your property allows you to free up capital to invest in more liquid assets. A large single-family home requires a lot of maintenance, so many retirees decide to move into a smaller apartment or condo so they can spend their free time on other hobbies. In fact, it may be costing you more than you realize. Las Vegas had the highest year-over-year rental increase at 7.8%. One is a guy we'll call Joe. According to, If you’d rather skip the listing process entirely, sell through, Unlike a fixed-rate mortgage, your rent can (and likely will) fluctuate yearly, based on the market and your landlord. Downsizing into a smaller home, like an apartment, can save money in monthly housing costs, utilities and furnishings. According to our latest. Unless you can afford to buy your smaller retirement home outright, buying means signing on to another lengthy mortgage. Here are a few key reasons retirees decide to rent instead of own. A Primer, Fireplaces Don’t Add Value Like They Once Did, But You Can Still Enjoy One, How to Improve the Air Quality of Your Home, an Increasing Concern Among Today’s Homebuyers, Should I Remodel or Move? A growing number of seniors are opting to rent during their golden years. According to, If you’ve lived in your home for decades, there are probably cosmetic, mechanical or structural upgrades or repairs to complete to either bring your home up to code or appeal to buyers. Get free, objective, performance-based recommendations for top real estate agents in your area. Unlike a fixed-rate mortgage, your rent can (and likely will) fluctuate yearly, based on the market and your landlord. A recent study by the National Association of Realtors found that around 54% of home sellers are over the age of 52. According to our latest rental market report, median rent rose 2.6% ($38 based on median rent) year over year, reaching $1,477 in April of February 2019. Curious how much you stand to make selling your home? There are plenty of benefits to renting, but there are downsides, too. How to Navigate This Major Housing Decision, How to Sell Your Eccentric Charmer of a House Fast in New Orleans, Renting also offers you some flexibility in housing styles. A list of our real estate licenses is available. In order to use your home as part of your retirement income strategy, you must be willing to tap into its equity. Upon selling your home, you can move into a rental that aligns with your close date, rather than worry about buying another home and timing it just right (or carrying two mortgages at once). So if there’s a leak in the kitchen, it’s just a matter of contacting the manager and then it’s their obligation under the lease terms to rectify any problems.”, Renting also offers you some flexibility in housing styles—whether it’s a townhome, single-family single story, or apartment that you’re eyeing. When you sell the family home, it might be worthwhile to rent … That’s a lot of money, but luckily everyone’s retirement needs are different. Homebuyers with good credit can take advantage of low mortgage rates which are currently between 4-5%. Q: I am a 66-year old single female. Let’s say your house is in a rapidly gentrifying area; if you hold on for another two years, then you might increase your value by 10%. If you do need to sell you are at the mercy of realtors, buyers, and market conditions, plus selling takes time and effort. You can find places to rent that fit all of these different property types, just make sure that if you go for a house, it comes with an HOA or professional service (if that low-maintenance lifestyle is important to you.). When you’re not the owner of a property, you’re no longer the decision-maker. Retirement is a big life change, and one big life change sometimes leads to another. Make sure to factor these additional costs into your monthly budget. However, renters don’t earn equity in their apartments like homeowners do, which can make buying a smarter choice in the long term. You may have to pay for things you never considered when you were a homeowner, like parking or pet fees. Deciding if it’s better to rent or buy a house after retirement requires careful planning. Find out what cash buyers are willing to pay for your home right now. These retirees may want to be able to walk to the movies, or take public transportation to evening dinners without having to drive busy suburban roads. As you’re deliberating “Should I sell my house and rent when I retire?”, just remember to weigh the impact your decision will have on all aspects of your life and financial situation, including your monthly income and your benefits. Mowing the lawn, cleaning the pool, changing the HVAC filters — being a homeowner takes up a lot of your free time. When you rent, you’re essentially spending down your home’s equity to finance in your twilight years. If you assume a 20% down payment ($77,800 upfront), plus closing costs and a 4.3% interest rate, you’d pay $2,049 per month as a homeowner — an increase of $354 over renting. Retirement communities or planned communities for seniors can be a great place to connect with other people in your same stage of life or with similar interests. Here are some of the common reasons why people in these demographics decide to sell in retirement. 46% of retirees own their homes free and clear, and could feasibly use the proceeds from selling that home toward the purchase of a smaller, more manageable residence outright. Moving even a small distance could lower property taxes or put a retiree closer to newly desirable amenities such as a senior center. If you’re a longtime homeowner, you’ll want to remember what it’s like to be a renter and get used to this lifestyle change. If your home is eligible, we’ll give you a cash offer. An alternative to selling your home when you retire is to rent it out to tenants instead. Baby boomers are a bunch of house huggers, but there are exceptions. A house is a fantastic appreciating asset to have, but it’s not exactly liquid. If you’ve owned your home for a long time and gained significant equity, you may be on the hook for capital gains taxes when you sell. For some people, selling the house is a necessary way to help fund their lifestyle in retirement. Zillow Group is committed to ensuring digital accessibility for individuals with disabilities. You know you’ll be moving at some point to cut back on space and the demands on your time and body, one way or another. Then, while you’re touring the world, you can temporarily lease the property to cover the mortgage. This means you’re free to travel and test out potential retirement locales through short term leases. After retirement, many people find they don’t need as much space as they once did or they don’t want to maintain a big single-family home. Here’s How Much Money You Need to Build Your Dream Home. You can eliminate property taxes and costly homeowner's insurance -- just make sure you get renter's insurance. In many markets, renting is cheaper each month than owning — at least in the near-term. Housing costs will be part of your retirement budget, whether you rent or own. According to Nile Lundgren, a top New York agent and Bloomberg TV commentator, who was named Executive of the Month by the New York Real Estate Journal: “It’s really important to understand where the market is in comparison to what your expectations are. Get a cash offer from Zillow. Don’t forget to factor in any remaining mortgage balance, and be sure to account for commissions, closing costs, repairs and buyer concessions. into their budgeting plan. If you’re moving from a single-family home into an apartment, your new place may come with great amenities, like a pool, gym or tennis court — all without paying HOA dues. Find top real estate agents in these similar cities, HomeLight has an A+ rating with the This decision is an important one as housing often makes up about 30% of retirement expenses. Retiring to an apartment does require some financial planning. If your current mortgage is fully paid off, you may even skip selling. Hire a real estate agent or, Nationally, the best time of year to list your home is a Saturday in the first half of May. Whether you plan to spend your golden years traveling the world or settling into a cozy cottage in some sunny southern state, you’ll need funds to fulfill your retirement dreams. Launching her writing career in 2007, Christine has crafted interior design content for companies including USA Today and Houzz. Local market conditions for rental homes. In year 11, the couple who bought with the mortgage had more in total assets than the renter—and the gap widened as the years went by.”. Our team is composed of professional and experienced individuals including accountants, lawyers, and lenders. Zillow defines empty nesters as homeowners who are 55+, have lived in their current home for 10 or more years, and have no children of any age living at home. Reasons to Sell a House During Retirement For many retirees, the opportunity to save money drives a decision to sell their house and rent. It all depends on timing. Instead of selling, you might want to leave the family home to your children or grandchildren someday. You can … Austin, Texas, was just ranked as one of the best places to retire, according to U.S. News & World Report. If you sell without investing in another property, you’re losing your best “In Case of Emergency” asset. Real Estate Comps: How to Find Comparables for Real Estate. Posted on August 21, 2018June 22, 2020, Retirement’s so close you can taste the salt of a margarita and feel the breeze of the ocean on your skin. And those sellers aged 52+ are typically buying smaller homes. You can be in a community where there is an on-site property manager. You love your house of 30 years but it comes with too many stairs, and too much maintenance. If you’d rather skip the listing process entirely, sell through Zillow Offers and free up the equity in your home sooner. If you live in or are planning to move to an area with high property taxes, renting can help you avoid large tax bills. Our house is not that much bigger than the apartment but it has high ceilings, lots of character a big garden. He e-mailed a short while ago to ask for some feedback on his idea of selling the family house … According to hypothetical retirement analysis conducted by Kiplinger, a leader in personal finance news and business forecasting: “Renting tops buying in the short run. A property, you can always keep modifying as your needs change with your home. “ in Case of Emergency ” asset, owns her home for a long time sell house and rent in retirement! Alternative to selling your home ’ s also important to know your options of NextAvenue, Costa Rica is of. Best “ in Case of Emergency ” asset based on the rise, and lenders career in 2007, has. 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