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Should You Rent Or Buy A House When You Retire?

Many people choose to rent their homes as they enter retirement, and that is a great choice if you plan to move often or just want complete flexibility in where you go and what you do. However, for those of us who want to stay put and plan to stay put, can we afford to retire in the home that we love?

If you are like most Canadians, your home is likely the largest asset that you own. This means that when it comes time for retirement, one of the most important life decisions that you will make is whether or not to rent out your house or sell it and downsize to something smaller (or move in with family).

This decision can be difficult in that it is not always obvious which option will give you the most financial security in retirement. Some people choose to sell their homes because they want to move closer to family, or to a warmer climate, for example. Others keep their houses and rent them out (or use their houses as vacation rentals) when they retire in order to help pay the bills on a consistent basis.

What are some reasons for choosing each option? And what are some of the financial implications? In this article we will explain how these questions can be answered so that you may make an informed decision about whether or not you should sell your house when you retire.

Buying a house can be a great investment

After all, if you are buying at a time when real estate values are rising, you could pick up a bargain. There are a number of different things to consider when buying, such as what you want to do with the property, where to put it and how much you want to spend.

Owning a home is the obvious choice for those of us with children. It is something that you can pass down from generation to generation, and it allows everyone the freedom to finish high school and go off to college. It is also a place where you can have social interactions with your friends and family. Many retirees choose to buy a house instead of renting.

But let’s face it; even when the economy is improving, there are some downsides to owning a property. If the housing market does not recover, retirees may find that they are stuck paying way more for their properties than they would have paid in the good days.

Should You Rent Your Current Home?

There are other options when it comes to retirement. Retirees can look into renting out their homes, which is becoming more popular with families as they can rent out part of the house as an apartment or lease the whole thing. If you do this it is important to remember that you will have less room in the house (if you continue to live on one of the floors and rent out the other), but you will have a much smaller financial investment at stake.

Renting can be an excellent financial decision. Here are some items to consider in the decision of renting your home when you retire:

  1. Potential rental income. The decision whether or not to rent your house out will likely be influenced by how much income it could generate if you choose that option. When you consider the costs of maintaining and repairing your home as well as the taxes and insurance associated with homeownership, renting out your house (or using it as a vacation rental) will give you more control over your monthly cash flow because those costs will be shifted to tenants for payment.
  2. Property value. If the property appreciates a little bit, you can ask for more rent when you renew the lease, or if it doesn’t appreciate, at least you have a tenant locked into a lease that is predictable income for you.
  3. Neighbourhood changes. If your neighbourhood is in flux or if the area is redeveloping, you may want to consider renting out your home for extra income while the property value appreciates.

Conclusion

In conclusion, it’s never too early to start planning for your retirement. Think about what you want that period of your life to look like and take steps towards making it a reality now.

Where you decide to live in your retirement years is a very personal decision, and an important one. Know your options! Speaking with a Certified Financial Planner will help give you a new, unbiased perspective.

We specialize in assisting people in preparing for retirement. Allow us to evaluate and review your retirement income sources and assist you with retirement planning. Call us at 1-888-554-6661, or click here to book a virtual Zoom meeting.

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Chat with Certified Financial Planner, Bruce Youngblud. He can advise you on pensions, retirement planning, tax planning and estate planning. Plan to enjoy retirement to the fullest!