Should I Sell My House And Rent When I Retire? Pros And Cons

Ah, the golden years! As you think about your retirement, be it soon or far away, often an ideal scenario starts to take form in your mind. Perhaps there’s a beach involved? Maybe a few grandkids gathering around as you tell them a story or ten? Or maybe you envision focusing on some nonprofit work? Whatever your ideal retirement looks like, understanding how to set up your future finances to secure it is critical.

For most Americans, a home is their biggest financial investment. So, when it comes to retirement, the first financial decision domino to fall, so to speak, is usually your home. Should you keep it and live there until you can’t? Or should you cash in on the equity you have likely built into the home to help fund that retirement nest egg? When thinking about retirement, people often wonder, “Should I sell my house and rent when I retire?”

This starts with understanding the finances of selling, which is important at any age. Afterall, you can’t really make an informed decision about selling your home if you don’t know exactly what that will cost and bring back in the form of cash after a sale.

Should You Sell Your House And Rent When You Retire?

Well, that depends. The decision to sell your house and rent when you retire is unique to each individual. There are lots of pros and cons (more on that later) and the ranking of those pros and cons has to be done with your specific retirement plan in mind. It’s also helpful to ask yourself a few key questions (more on that to come as well).

For many, it can make a lot of sense to sell their house and rent when they retire. It provides a large lump of cash to help with retirement goals and becoming a renter provides a bit of flexibility in terms of commitment to a specific property or location. It also needs to be weighed against the many other options available, like keeping your current home, renting out the house or using home equity in the form of a new loan.

Pros And Cons Of Selling A House And Renting In Retirement

To make the best decision, information is power. So, let’s dive into some of the pros and cons when it comes to selling your house and renting when you retire.

Pros

• You’ll have fewer home maintenance responsibilities. As we get older, mowing, cleaning gutters and other general home upkeep projects really begin to lose their luster.
• You may be able to rent a new home that accommodates aging in place. If your current home is full of stairs, for example, renting a nice condo with an entry level primary bedroom might be an appealing switch.
• Renting offers greater flexibility, allowing you to relocate to a new city. Selling a home and moving out of it can take time. With a flexible rental lease, you can get up and go quickly.
• In some locations, rent may be more affordable than a mortgage payment. This of course depends on the locale and its housing market.
• You’ll no longer incur the costs of owning a home, such as property taxes, homeowners insurance, etc. When you rent, the landlord covers these costs.
• You can use your home sale proceeds for supplemental income or activities like traveling. The more cash you start retirement with, the longer you can have fun.
• You can rent a house closer to your doctor’s office, grocery store, family members, etc. Needs change as you age and so can the necessity to be close to certain places.
• If you’re an empty nester, you can downsize by moving into a smaller rental. No more need for all those empty bedrooms, so why not cash in?
• Some of the best places to retire offer retired renters multiple opportunities to socialize with other retirees. Senior living communities might offer more people in your age bracket to connect with compared to your current neighborhood.

Cons

• Rent may be more expensive than your monthly mortgage payment. Depending on where you live (or want to live) renting can be pretty pricey. Also, if you have paid down your mortgage (or paid it off completely) your current monthly housing expenses might be pretty reasonable compared to a new rental lease.
• You may be subject to capital gains tax. When you sell your house and make a profit, sometimes Uncle Sam wants to take a cut.
• You may face rent increases. As housing markets fluctuate, landlords can decide to charge more for rent. They could decide to charge less as well, but frankly, that doesn't happen.
• Paying rent means you can no longer build home equity. Rent goes to your landlord every month and helps them build equity in their properties. When you pay your mortgage, you’re building your own equity.
• You may need to follow the rules and regulations of a homeowners association (HOA) or another governing body. Don't like people telling you what color to paint your home or where to put a fence? Then being part of a HOA is not for you.
• You may not be permitted to make property renovations or home modifications to age in place. Rentals have a lot more restrictions about what you can change than your own home does. When it comes to aging, this can be tough. Adding a ramp or elevator for example, might not be in the cards when you’re a renter.
• You won’t have a home to pass down to your children or other family members. If a familial home is something you envision your children inhabiting someday, renting is probably not for you.

Tips On Deciding Whether You Should Sell Your House And Rent After Retirement

As mentioned before, the decision to sell a house and rent after retirement is unique to each individual and family. To make the best assessment for yourself, here are some tips to consider.

Evaluate Your Current Housing Expenses

Understanding your current housing expenses and how that will factor into your decision to sell your home and rent after retirement is a great place to start. Look at all your expenses, not just your monthly mortgage payment. Of course your mortgage principal, interest, taxes and insurance are important, but don't stop there. How much do you spend maintaining the home monthly? Yearly? Are there any improvements you have planned before or when you retire?

Think About Your Lifestyle

Do you like to travel or plan on doing a lot of it when you retire? Maybe you envision long stays with your kids and grandkids away from your home. Renting might be a good option so you can build up a travel fund with a big payday when you sell. On the flip side, renting your current home and using it as a source of income could make sense as well.

Assess Your Retirement Savings

Look at what you plan on having in retirement savings when the day comes to stop working. Will it be enough? Would selling your home or turning it into a rental income property help get that retirement savings up to where it needs to be to achieve your retirement goals?

Consider Where You Want To Live

Deciding where to live at any stage in life is a big decision. When it comes to retirement, it becomes even bigger. If you know you don't want to live in your current area, selling and then renting might make sense. If you never want to leave where you are, maybe not so much. Not sure? Research the best states for retirees before you decide.

Research Whether It’s Cheaper To Rent Or Own

Do the math on whether it’s cheaper to rent versus owning a house in the market you want to live in. This should be a big factor in your decision to sell your house and rent after retirement if you’re worried about having enough money to retire comfortably.

Decide If It’s A Good Time To Sell

Ask your favorite real estate agent about real estate market trends and conditions in your area and the area you want to live in. The best time for you to sell a house should depend partly on the current housing market.

Alternatives To Selling A House And Renting After Retirement

Selling a house and renting after retirement is only one of many options to consider. Let’s look at a few more:

• Rent out your house: If your housing costs are low and renting is cost prohibitive, you might want to keep your home and earn rental income by turning it into an investment property.
• Age in place: If you love where you are, why leave? Your house might be the perfect place to spend your golden years. Or perhaps it could be with a few affordable modifications?
• Airbnb your house: If you like to travel, consider the option to Airbnb a house. Afterall, if you’re out seeing the world (or even the grandkids across town) you might as well get paid while you do it.
• Take out a reverse mortgage: If you need some supplemental retirement income, a reverse mortgage might be a way to use the equity in your home to create a monthly stream of funds.

The Bottom Line

Selling a house and renting after retirement can be a great way to start a new path more conducive to the lifestyle change that retirement brings. It can provide more flexibility, the ability to age intentionally and a nice chunk of change to fund the next phase of your life. It’s not for everyone, but it’s certainly something to consider. Thinking of selling? You can start by matching with an agent using Rocket Homes^SM.