Sell paid off home and rent?

[HostelDweller]

Hello, sorry in advance if this has been asked many times. Should I sell a modest paid off 20 year old home and rent? I have this desire to consolidate, downsize, simplify, avoid maintenance and Snowbird but cannot find any financial reason to do so. I've checked out other ownership options and rentals in the area but nothing seems to be cheaper than just staying put. Am I missing something or is there a calculator that can help? Thanks

[Sunset]

Interesting idea,

Generally owning is cheaper in the long run than renting (otherwise landlords would not do it).

However, if you are going to snowbird, then when owning you still have to pay for a place you are not using. If you rented 5 months up North and 7 months in South, you could claim Southern resident status (State tax free in FL).

Problems are: Who wants to rent to a short term renter like that, so the rents will be higher than normal.
Plus what are you going to do with your stuff, sell it all off and own a couple of suitcases worth of stuff plus pots to cook ?
You would essentially be moving twice a year, so mail would be a constant problem.
You would end up in different areas each more based on available rentals.

[brett]

Depends where you live I guess. We sold and then rented (after traveling for 7 months) for four years. It was very financially advantageous for us to do this. When we returned we found ourselves in a down market for real estate and for rentals. Our home equity performed very well in the interim.

We really did enjoy being renters for a change. Our fridge packed it in a one point. We called the owner and the next day a new fridge was delivered and the old one taken away. Same for some heating issues in the condo.

[Bamaman]

If you're going to stay put in the same area as where you now live, I'd say stay put.

It'd be nice to move to a completely new area/region and rent for awhile. You know--a complete change of scenery.

[RunningBum]

Consider hiring out the maintenance you want to avoid. That may work out better financially then paying condo/townhouse fees, or rent that is inflated by maintenance costs.

Any calculator I find for questions like this never quite covers my case as well as creating a custom spreadsheet does.

[bloom2708]

Are you single (sole decision maker) or married?

If it was just me (or my spouse was on board) I would be completely fine with selling and renting a lock and go condo.

Lock and go. Head south to warmer weather. Closing in on 50, I no longer have any desire to mow, shovel, snow blow, pull weeds and all the like. I enjoyed those things at one point, but checked the box.

[FreeBear]

Quote:

Originally Posted by HostelDweller Hello, sorry in advance if this has been asked many times. Should I sell a modest paid off 20 year old home and rent? I have this desire to consolidate, downsize, simplify, avoid maintenance and Snowbird but cannot find any financial reason to do so. I've checked out other ownership options and rentals in the area but nothing seems to be cheaper than just staying put. Am I missing something or is there a calculator that can help? Thanks

A couple of thoughts:


- If you can afford it, why not just "downsize", whatever this means to you, even if it doensn't save money? Think of it as a lifestyle decision, not an economic one.



- You don't have to rent to downsize or simplify. You can pick a townhome, condo, or even SFH in with an HOA that handles all the exterior maintenance. I know you said that you looked into "other options", but if you remove or at least loosen the financial constraints, you may have more options.



- With a username like "HostelDweller", I'd be inclined to travel most of the time and minimize my stateside footprint.

[The Cosmic Avenger]

One calculation I've seen others recommend here is to run a simulation/estimation of your house sale alone funding your future housing costs.

So, say you can net $500K selling your house. Look at your projected investment returns, and say you expect you'll earn an average of 7% over the next 40 years (or whatever your projection is for your survival). Then find your SWR for your home equity -- 7% will earn you $35K, or about $3K/month. That's without drawing down the principle, and you can also amortize that over the 40 years if you like. However, if you aim for 7%, you may need to cover for the down years, as your risk will probably be higher. You could probably find something safer for, say, 4%, but that reduces your annual housing budget to $20K (or more, if you want to spend the principle down).

Of course, you could just add your house sale to your total assets, refigure your SWR, and figure what sounds like a sensible housing budget out of that income. Both are educated guesses, that are only as good as your research (estimating your retirement budget, income, etc.).

[HI Bill]

Quote:

Originally Posted by HostelDweller Hello, sorry in advance if this has been asked many times. Should I sell a modest paid off 20 year old home and rent? I have this desire to consolidate, downsize, simplify, avoid maintenance and Snowbird but cannot find any financial reason to do so. I've checked out other ownership options and rentals in the area but nothing seems to be cheaper than just staying put. Am I missing something or is there a calculator that can help? Thanks

There are financial reasons, but yours is not that. You want to consolidate, downside, simplifiy, and avoid maintenance. To me, that means selling your house, downsizing your posessions, and buying a smaller condo/townhome. For those who want to do extensive travel, this is often far prefereable to owning a single family home, and repairs are limited to interior things that still go bad such as plumbing. Do it, even if it's a neutral swap, or even if the association fees up your monthly costs, as long as it's within your budget.

My goal for the first 10 years of retirement is to buy a condo in a gated community, lock the door, and travel at will. No need for a house at this point in my life, but maybe in a decade or so...

[Huston55]

OP-Have you thought about RVing?

[Helena]

.

Unless property taxes are outrageous, I'd stay with a paid off modest house. That way, you stay in control.

If you rent, your landlord is in control.

[Sunset]

Quote:

Originally Posted by bloom2708 Are you single (sole decision maker) or married? If it was just me (or my spouse was on board) I would be completely fine with selling and renting a lock and go condo. Lock and go. Head south to warmer weather. Closing in on 50, I no longer have any desire to mow, shovel, snow blow, pull weeds and all the like. I enjoyed those things at one point, but checked the box.

It would be cheaper to buy an apartment condo, than rent one.
That is what my Mom did, she loved that she could lock the door (Medco lock) and leave.

[CaptTom]

Quote:

Originally Posted by The Cosmic Avenger One calculation I've seen others recommend here is to run a simulation/estimation of your house sale alone funding your future housing costs.

I've gone down this path as a thought experiment. I keep hitting a wall at the end. We both assume we'd like to live out our last years in a house we own, health permitting.

If we financed a more nomadic lifestyle with the proceeds from selling the house, even just the interest, we wouldn't be able to buy a comparable house when we're ready to settle back down. I assume property values would increase with (or above) inflation, so just maintaining the principal wouldn't be good enough.

The way out, of course, is to buy in a lower COL area. And traveling around, presumably we'd find a place we'd like to live, where we could buy for a lot less than here in the Northeast. But we're not quite ready to take that chance yet.

[Huston55]

Quote:

Originally Posted by Sunset It would be cheaper to buy an apartment condo, than rent one. That is what my Mom did, she loved that she could lock the door (Medco lock) and leave.

As an absolute, that is simply not true. It depends on many variables: where you live, your time horizon, etc. You have to run the numbers, then there is the non-financial aspect of the decision.

OP-check out these two links for some help with the financial aspects.

https://www.nytimes.com/interactive/...alculator.html

https://jlcollinsnh.com/2012/02/23/r...-some-numbers/

[Teacher Terry]

We lock and leave our house for a month with no issues. I would not rent as I see it as a hassle.

[brett]

We rented a condo for four years after downsizing.

After running the numbers, including the after tax income on our home equity, it was stunningly clear to us that renting was far less expensive. In our market. This was a surprise.

The added bonus..in our the real estate market condo's were overbuilt. When we returned from months of travel the economy and the market had tanked. Not only did we save money each and every month, we paid less than expected when we bought four years later.

Renting a hassle? Not unless you consider doing a bank transfer once a month to the owner a hassle. We enjoyed not having the responsibility after 35 years of home ownership. Besides, during our tenancy there were two cash call by the condo board-one of them substantial and equal to several years worth of rent on this supposed high end unit.

We travel for two months at a time, sometimes more, twice a year. We live in a cold climate. Fortunately we have a neighbour who can check our home from time to time. For our own peace of mind and more importantly, to meet the requirements of our home insurance t's and c's. I think that the bottom line is really the real estate market in your area and your personal preferences. There are too many variables for a clear cut standard response to the issue.

Apart from the financial and the easy lifestyle of renting there was another intangible benefit. What we thought we wanted in new home actually changed over several years of renting, watching the local market, and travel.

[HostelDweller]

All, great advice, thanks for your input and it's interesting to see that there is no clear answer because of all the variables. I will check out the articles mentioned and take things year by year. To make it even more complicated, my happy place is Oahu where I would most likely never buy a home.

[Teacher Terry]

One of my 3 kids has had to move once a year for the past 3 years. This is because the owners decided to sell. They are sick of moving and it’s expensive.

[Sunset]

Quote:

Originally Posted by Teacher Terry One of my 3 kids has had to move once a year for the past 3 years. This is because the owners decided to sell. They are sick of moving and it’s expensive.

Yes, when I rented, I hated that the owner sneakily tried to sell the unit, AFTER getting me to sign a new lease, promising I could stay.

[gwraigty]

Quote:

Originally Posted by HostelDweller Hello, sorry in advance if this has been asked many times. Should I sell a modest paid off 20 year old home and rent? I have this desire to consolidate, downsize, simplify, avoid maintenance and Snowbird but cannot find any financial reason to do so. I've checked out other ownership options and rentals in the area but nothing seems to be cheaper than just staying put. Am I missing something or is there a calculator that can help? Thanks

I can somewhat empathize with you on cost. We built our current home 23 years ago in a small urban area that has steadily been on the decline due to continued job losses. We are only a couple of miles from my husband's work (the main reason we built here), so moving is off the table until he retires (or gets downsized). We are in the nicest neighborhood in the city, but prices here haven't appreciated compared to neighboring communities.

Once you go outside the city limits, prices are at least twice as much for comparable homes, both existing homes and new construction. There is a huge building boom going on throughout the rest of the county, both commercial and residential. I'd love to move from my 2 story home to a 1 story home someday, preferably in a community that isn't on the decline. I know already that it will cost much more than what we could get for our house, at today's pricing.

For example, we built our 1900 sq. ft. home for $130K in 1996. Today it would sell for $180K to $190K. To buy into one of the many new developments going up around here, would cost $260K minimum, and that would be for a 1 floor home without a basement! I heard it cost $15K extra 20 years ago for people who wanted a 1 story with a basement in our development. It's got to be much more than that now.

Quote:

Originally Posted by Teacher Terry One of my 3 kids has had to move once a year for the past 3 years. This is because the owners decided to sell. They are sick of moving and it’s expensive.

My daughter has friends in their mid-20s who have moved more than I have in my entire life because of crappy landlords. They've rented in apartment complexes, where you'd think that wouldn't be as much of an issue, but it sure has been for them. Happily for them, they become first time homeowners this week and are moving in this weekend.