Did you always picture yourself owning a charming home in retirement? Does renting seem like it just wouldn’t be the same, or wouldn’t make financial sense? Perhaps it may feel like that now—especially if retirement is still years into your future. But research shows that renting in retirement is actually becoming more and more of a desirable option.
From 2005 to 2015, the number of renters ages 60 to 64 nearly doubled, jumping from 1.3 million households to 2.5 million, according to Harvard University’s Joint Center for Housing Studies.
These statistics may confuse you if you’ve done the math and found that owning a home can be considerably more cost efficient than renting—especially if you’ve lived there for a lengthy period of time. But following are a few reasons why the concept of renting a home in retirement may be worth more than just a passing glance:
1. Hassle-free lifestyle
Think back to the last time you rented a home. Sure, you didn’t technically own that space. But you also never had to worry about providing maintenance or repairs to it. Owning a home can be quite time consuming—your weekends are often filled with yard work and/or home improvement projects. So think about how much time and energy you could save by renting and having all those things taken care of.
Other possible benefits to the lack of work you’ll have to put into a rental property are additional conveniences, such as an elevator to take you to an upper level apartment, or a doorman for extra security. Additional amenities could include maid service, food delivery, pool and gym access, and organized social events with other tenants within your rental complex.
2. Possibility to build up cash flow
Maybe you feel as if renting would be like throwing away money each month on a space you don’t actually own. But think of it this way: if you sell your home and invest those proceeds, it could actually significantly boost your savings and also provide a peace of mind during your golden years.
While it’s possible for you to still own your home and access home equity via a reverse mortgage (see previous blog for details), selling would still provide more upfront cash.
For example, 65-year-old with a $300,000 mortgage-free home could gain $275,000 from a sale, while a reverse mortgage would free up only $150,000, according to the industry site Reverse-Mortgage.org.
Yes, you’ll have to spend some of those proceeds on rental payments, but in the long run, the long-term cost of renting may be worth having that extra cash invested—especially if your retirement savings account needs a boost.
3. Low-risk opportunity to try out a new location
Perhaps you’ve always dreamed of purchasing a permanent home in your favorite vacation spot. But before you take the plunge, consider trying it out first via a rental home. While it may be everything you dreamed it would be and more, you may also be disappointed with the weather during certain seasons, the cost of everyday purchases, or other various aspects of that specific location.
If you rent instead of buy—at least at first—it gives you the opportunity to find out whether your dream spot vacation is in fact a dream place to live. If it isn’t, you can simply move after your lease is up, instead of dealing with the expenses (brokerage costs can be up to 5%) and headaches of trying to sell a property soon after you purchased it, and then trying to find somewhere else to live.
The bottom line:
You don’t have to own your own home to experience the comfort and convenience of the retirement lifestyle you’ve always dreamed about.
As evidence from the above examples, a rental can also be just as cost efficient—if not more so—than a property you own. So as you make your retirement plans, make sure the option of a rental is at least a part of the conversation. You may just find it’s the best choice for your situation.