Renting Vs. Owning After You Retire

Janey Bishop
Janey Bishop
Published on May 27, 2021

There has actually been an increase in older renters over the last 10 years. Those over the age of 55 actually contribute to about 42% of the rental market now. This percentage is projected to increase as Baby Boomers presumably follow the same path.

It’s important to understand the pros and cons however of choosing between renting and homeownership. Let’s break each one down so you can better decide whether or not you should spring for that home after retirement.

Pro: Bye Bye Mortgage and Property Taxes

If you purchased your home or refinanced in the past 20 years you may still be chipping away at that mortgage. Whether you have paid off your loan or not our local Property taxes can be high (generally about 1.15% of the assessed value annually) so the monthly payments will be a few less things to worry about when you finally retire. You might even find a place to rent that has a lower monthly cost than your mortgage and/or taxes did. So you do have the potential to be saving money here.

With the current Seller’s market there may be a sizable profit from the sale of your family home. If you meet the qualifications (living in the home time periods,…) you can take advantage of the Capital Gains exclusion ( $500,000 for couples filing jointly and $250,00 for filing single). Please check with your accountant or tax planner before deciding to sell.

Con: Bye Bye Tax Breaks

Homeowners receive substantial tax breaks. There are deductions on the property tax as well as the interest on the mortgage. Saving on these taxes can add up significantly especially if your property taxes are significantly high. For 2021 Homeowners can deduct property taxes and interest up to $10,000 per couple filing jointly and $5000 per individual if filing separately.

Pro: Flexibility

If you’re really focusing on traveling after you retire then renting will be ideal for you. Renting gives you the flexibility to bounce around either on a 6 or 12 month basis. However, if you’re looking to stay in one city/place for a longer period of time, maybe near your family, consider owning condominium or smaller home.

Con: Bye Bye Home Owner Status

Most people have a sense of pride from being a homeowner. If you’ve lived in your home for a while you’re probably emotionally attached to it. So it’ll be important to prepare yourself emotionally if you’re planning on selling your home and downsizing your contents.

Pro: Reducing your responsibility for Maintenance

Obviously one of the most challenging things of home ownership is keeping up with the home maintenance. If you’re choosing to rent this isn’t an issue for you anymore. If you decide to sell your home and rent instead these worries can fall onto your landlord’s shoulders.

Con: Renting can be expensive

This one really varies depending on where you live. Typically however, it is cheaper to own a home than rent one. Also when you consider the low mortgage rates today it’s one of the best times to own a home. The mortgage rates have recently hit an all-time low. And with the new 2021 tax laws you can transfer your current property tax basis with you three times in California. Check with me or your tax advisor for the specifics and to be sure your purchase will qualify. 

Pro: Amenities

One of the big pro’s surrounding condo and apartment complexes is that most of them offer you a wide range of amenities. Everything from a nice gym to a pool and even game rooms and office centers. You may even have a concierge on staff and if you’re retiring that can make your life a little easier when it comes to the little things.

Con: The Landlord

You may not be accustomed to dealing with a landlord or property management company. Since it can be a little bit of a difficult task , I would recommend doing some in-depth research on the situation before you actually sign a lease. By that meaning speak to the previous tenants if at all possible and find out how quickly previous repairs and issues were resolved. There is also the potential for your lease to be raised so be prepared for that potential increase in your monthly expenses

Pro: Insurance Is Cheaper

Renters insurance averages around $180 and $360 a year, while your potential homeowners insurance cost is significantly higher.

Not sure which is the right decision for you? Reach out or leave me your contact info and I’d love to answer any questions you might have. Choosing to rent or own a home really comes down to your individual circumstances and it’s very important to consider all the pro’s and con’s very carefully.        

For a free consultation about selling your family home in Woodland Hills, Calabasas, West Hills or the San Fernando Valley      Call Janey Bishop   (818)570-1144     email [email protected]    or watch my videos at https://janeybishop.video/vacant-home or more videos at https://janeybishop.video/Empty-Nest-Downsizing-Playlist

Senior Real Estate Specialist     Probate Certified        Real Estate Collaboration Specialist – Divorce

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