I'd love to hear the experiences of people who rent (instead of owning their own home) in retirement. Pros? Cons? Difficulties you didn't expect? I hope to retire in 10 years, have never owned a home, and really don't want to. I currently live in Europe and my employer pays for my rent but I plan to retire in the US (not sure where yet).
Renting in retirement
- Thread starter movaly1
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It seems to me that owning is viewed in a positive light on this board because the monthly expense will be more stable. There have been convincing discussions that indicated that it very well may be more expensive, but on the surface, it seems to be less expensive because you are not paying taxes on the funds you don't spend (imputed rent).
Until recently, my parents rented. At first, they moved around a bit. That was enjoyable, for them because they got to try a few different things (condo on the beach, golf course community, retirement community, etc). More recently, they decided to buy in a place that 'fit' for them.
Because you're going to be moving to the US, I'd say renting is your best option, at least at first. The transaction costs for buying are very high, so you don't want to make a mistake.
Until recently, my parents rented. At first, they moved around a bit. That was enjoyable, for them because they got to try a few different things (condo on the beach, golf course community, retirement community, etc). More recently, they decided to buy in a place that 'fit' for them.
Because you're going to be moving to the US, I'd say renting is your best option, at least at first. The transaction costs for buying are very high, so you don't want to make a mistake.
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kcowan
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
We have rented for 19 years and been retired for 12. The main issue is that you get taxed on the money that would be used to buy a place. In our case, we live in a rent-controlled building and so the rate we pay is below market. We think this compensates for the extra tax paid.
daylatedollarshort
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Renting can make much more financial sense in many markets. The NY Times has a rent vs buy calculator -
http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0
I think from now on I am going to use the "would this make a good rental formula" before buying any house or condo for ourselves. That way if we ever did need to rent it out for some reason we wouldn't be losing money.
We have been purging our old papers and receipt files in order to downsize and it has been a real eye opener just how much our house has cost us in basic repairs and upgrades over the years, plus property taxes and insurance.
http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0
I think from now on I am going to use the "would this make a good rental formula" before buying any house or condo for ourselves. That way if we ever did need to rent it out for some reason we wouldn't be losing money.
We have been purging our old papers and receipt files in order to downsize and it has been a real eye opener just how much our house has cost us in basic repairs and upgrades over the years, plus property taxes and insurance.
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Major Tom
Thinks s/he gets paid by the post
I have only been semi-retired for a few years, so my experience will not be of much use. My part-time income is minimal so I am, for all intents and purposes, retired. I have rented my residences for the majority of my adult life.
Much of the reason for my ability to stop working early has been my willingness to live in small and cheap rented spaces. The rent I currently pay is well below the norm for this market (SF Bay Area). It is in a rent-controlled area, and the owner (an older gentleman) hardly ever increases the rent anyway, a fact which has worked out very well for the long-term residents here. However, it is an old house with much deferred maintenance and in the event of his demise, this property may well end up being torn down to make way for a more profitable piece of real estate. If this happens and I have to move, I will very possibly need to move out of the immediate area, depending on how my portfolio performs in the future. My plan B is to live in an RV - at least while I am still relatively healthy and active.
If I were living in a regular apartment building in a rent-controlled area, I would feel much more confident about the long-term stability of my living arrangements. However, much in life is not predictable, and I think that my best defense is to be adaptable, which I am.
Much of the reason for my ability to stop working early has been my willingness to live in small and cheap rented spaces. The rent I currently pay is well below the norm for this market (SF Bay Area). It is in a rent-controlled area, and the owner (an older gentleman) hardly ever increases the rent anyway, a fact which has worked out very well for the long-term residents here. However, it is an old house with much deferred maintenance and in the event of his demise, this property may well end up being torn down to make way for a more profitable piece of real estate. If this happens and I have to move, I will very possibly need to move out of the immediate area, depending on how my portfolio performs in the future. My plan B is to live in an RV - at least while I am still relatively healthy and active.
If I were living in a regular apartment building in a rent-controlled area, I would feel much more confident about the long-term stability of my living arrangements. However, much in life is not predictable, and I think that my best defense is to be adaptable, which I am.
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W2R
Moderator Emeritus
I have thought about this a lot.
For me, there are two main advantages to renting:
(1) If I was renting, I could just pick up and move to another location for a while and see if I liked it any better. I could do this immediately, on the spur of the moment, and that would be pretty cool. If someone likes travel, the ability to "lock and leave" would be another advantage.
(2) Also there would be no gardening or other exterior maintenance required.
The disadvantages of renting (for me) would be:
(1) possibly rising rent
(2) having to deal with possible noise from neighbors
(3) any restrictions on customization of one's living space, and
(4) a loss of the feeling of permanence that one gets with an owned, paid off home.
One reason I keep thinking about renting is that I can tell that I won't want to be weeding and cutting back overgrown bushes after a certain age and that age is coming up fast. I guess I should ask around about landscaping companies that could take over this type of chore for me. I am becoming a slacker when it comes to this sort of thing. I have someone to mow, but he won't do my weeding and bushes.
I do not like the idea of dealing with an HOA with an owned condo although a condo would rid me of the gardening responsibilities.
Actually, I suspect that the ideal residence for me would be a single family house with a completely paved front and back yard, but doing that to my present home would ruin resale and aggravate the neighbors.
For me, there are two main advantages to renting:
(1) If I was renting, I could just pick up and move to another location for a while and see if I liked it any better. I could do this immediately, on the spur of the moment, and that would be pretty cool. If someone likes travel, the ability to "lock and leave" would be another advantage.
(2) Also there would be no gardening or other exterior maintenance required.
The disadvantages of renting (for me) would be:
(1) possibly rising rent
(2) having to deal with possible noise from neighbors
(3) any restrictions on customization of one's living space, and
(4) a loss of the feeling of permanence that one gets with an owned, paid off home.
One reason I keep thinking about renting is that I can tell that I won't want to be weeding and cutting back overgrown bushes after a certain age and that age is coming up fast. I guess I should ask around about landscaping companies that could take over this type of chore for me. I am becoming a slacker when it comes to this sort of thing. I have someone to mow, but he won't do my weeding and bushes.
I do not like the idea of dealing with an HOA with an owned condo although a condo would rid me of the gardening responsibilities.
Actually, I suspect that the ideal residence for me would be a single family house with a completely paved front and back yard, but doing that to my present home would ruin resale and aggravate the neighbors.
nash031
Thinks s/he gets paid by the post
I am not retired, but interested in the topic. DW and I own our home in the San Diego area, with roughly 50% equity as of today. Even if we pay the mortgage off prior to ER, we would still owe $329/month in HOA, and ~$7000 in property tax, in addition to any home maintenance fees, etc. Now, HOA includes use of a pool, trash pickup, sewer, exterior maintenance to include electrical boxes, stucco, and roof as required, and even things like dog poo bags in public areas (important for dog owners!!), but still. That comes out to $900/month once the debt is paid off. Is it worth all that? Maybe...
Indeed, renting may make a lot more sense for us, particularly if we can live in an area that meets 100% of our desires, rather than our current 80% solution. Right now, the mortgage deduction helps keep us in a lower tax bracket, and we were fortunate enough to buy in at a relative low point, so we've made considerable unrealized gains.
We are considering renting out our current home (we would be easily cash flow positive provided stable renters (big assumption)), and renting elsewhere ourselves... then eventually selling the home and renting to our hearts content. That's in the SD area where renting has long been preferable to buying by all those online calculators...
My $0.02.
Indeed, renting may make a lot more sense for us, particularly if we can live in an area that meets 100% of our desires, rather than our current 80% solution. Right now, the mortgage deduction helps keep us in a lower tax bracket, and we were fortunate enough to buy in at a relative low point, so we've made considerable unrealized gains.
We are considering renting out our current home (we would be easily cash flow positive provided stable renters (big assumption)), and renting elsewhere ourselves... then eventually selling the home and renting to our hearts content. That's in the SD area where renting has long been preferable to buying by all those online calculators...
My $0.02.
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We rented in Florida for a few years while we decided whether we wanted to live in the area and then while we looked for our [-]money pit[/-] retirement oasis. The economics of owning are not always clear but as an owner one does have a certain sense of "supreme reign".
TallTim
Recycles dryer sheets
Also very interested in this thread. The NYT link from daylate-dollarshort is a great tool and we've used it alot the past 5 yrs. Bottom line if you live in a high COL area, then in many cases renting can be economical for many reasons. There have been long threads of debate on the forum between the own for peace of mind and certainty crowd vs. the rent and invest the $ that would otherwise be tied up in a home adherents. No easy or good answer to that one -- you could just as easily ask people their favorite color or flavor of ice cream
Also a very personal and emotional decsion.
The nice thing about the NYT tool is it attempts to take into account the costs of maintenance, upkeep and deferred large ticket items to arrive at an annualized (or really, amortized) amount. Useful input - regardless of whether or not it persuades someone to rent or buy -- at least the decision is made with more complete information.
To the OP ... and not trying to start another rent v. buy debate ... we have run the numbers and *for us* *at this time* we believe it makes sense to rent/continue to rent. COL is high where we live, and sinking a large chunk into a house impairs our FIRE plan to some degree. Also, with older (but still in good health) parents in the picture and kids heading to college soon, not only do we not know for sure where we might ultimately want (or need) to be, but we also won't need the larger space we have now in a few yrs ...
My MIL and FIL have done both and ultimately decided to buy after renting for a number of years to decide if their area was a good fit for them. Of DW's GPs, one pair rented in a retirement community/condo/assisted living after selling the family homestead and the others owned - each for > 30 yrs of retirement. Both were happy ... so it's really what works for you provided you understand and have real visibility to the costs involved.
Also a very personal and emotional decsion.
The nice thing about the NYT tool is it attempts to take into account the costs of maintenance, upkeep and deferred large ticket items to arrive at an annualized (or really, amortized) amount. Useful input - regardless of whether or not it persuades someone to rent or buy -- at least the decision is made with more complete information.
To the OP ... and not trying to start another rent v. buy debate ... we have run the numbers and *for us* *at this time* we believe it makes sense to rent/continue to rent. COL is high where we live, and sinking a large chunk into a house impairs our FIRE plan to some degree. Also, with older (but still in good health) parents in the picture and kids heading to college soon, not only do we not know for sure where we might ultimately want (or need) to be, but we also won't need the larger space we have now in a few yrs ...
My MIL and FIL have done both and ultimately decided to buy after renting for a number of years to decide if their area was a good fit for them. Of DW's GPs, one pair rented in a retirement community/condo/assisted living after selling the family homestead and the others owned - each for > 30 yrs of retirement. Both were happy ... so it's really what works for you provided you understand and have real visibility to the costs involved.
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Two years ago, we moved into a rental. After years of being a homeowner, I thought I would really dislike being a renter again. But it's been liberating actually. As a homeowner, I was spending a lot of time doing maintenance and yard work. Not anymore.
The main disadvantage of renting, as far as I am concerned, is the feeling of impermanence. I can only stay here as long as the landlord lets me and as long as I can afford the rent. If one lives in a desirable neighborhood, chances are rents will increase at a pretty good clip. I can't imagine being 70 and having to look for a new place in a hurry because my rent has become unaffordable. If I was squeezed out of my old place by higher rents, I may have to look for smaller living spaces in the same neighborhood or, more likely, move to another neighborhood where rents are lower (probably for good reasons - higher crime, lack of amenities, etc...). On the other hand, if the neighborhood takes a turn for the worst, then the renter has the edge over the homeowner.
When we are ready to settle down, the answer for us will probably be owning a home in a good neighborhood.
The main disadvantage of renting, as far as I am concerned, is the feeling of impermanence. I can only stay here as long as the landlord lets me and as long as I can afford the rent. If one lives in a desirable neighborhood, chances are rents will increase at a pretty good clip. I can't imagine being 70 and having to look for a new place in a hurry because my rent has become unaffordable. If I was squeezed out of my old place by higher rents, I may have to look for smaller living spaces in the same neighborhood or, more likely, move to another neighborhood where rents are lower (probably for good reasons - higher crime, lack of amenities, etc...). On the other hand, if the neighborhood takes a turn for the worst, then the renter has the edge over the homeowner.
When we are ready to settle down, the answer for us will probably be owning a home in a good neighborhood.
Birdie Num Nums
Thinks s/he gets paid by the post
A related discussion is here: http://www.early-retirement.org/for...ip-essential-to-the-american-dream-66342.html
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Why? At least an HOA is run by people elected by the homeowners. As a renter, your landlord can just say 'No' and you have no recourse assuming she keeps within the law and the rental agreement.
W2R
Moderator Emeritus
HOAs can be wonderful, but they are not always so. A quick Google search on "why I don't like HOAs" came up with 31,500,000 links. The first one gives some examples of control-freak HOAs, for example.
9 Examples Why You May Want To Avoid Homeowners Associations Like The Plague – Consumerist
If I was just renting, I could move in a heartbeat so I guess a landlord might be more reluctant to indulge any of his possible control freak tendencies.
There us only one sure way to avoid a bad tenant, crappy landlord, insufferable HOA or the neighbor from hell, and that's to go live alone on a desert island. Otherwise, in addition to all the good advice we can get here, we also need a bit of good luck. The one real advantage of renting is, if something doesn't work out, it is easier to just pick up and more somewhere else.
NYEXPAT
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I generally prefer to rent unless I am in a fast appreciating market (NYC in 2001 & Lima in 2007) in which case I rent my apartment and I buy an investment property to capture the appreciation, while renting it out generating a return
on my investment. Currently, I am sitting on 300% appreciation but am loathe to sell as banks only pay 7% and my cap rate is higher and the market may appreciate more.
on my investment. Currently, I am sitting on 300% appreciation but am loathe to sell as banks only pay 7% and my cap rate is higher and the market may appreciate more.
I'm not retired but in my case a house is a must. I swore off from ever living in apartments again several years ago after having many bad experiences. The cardboard walls of the newer apartments and the constant foot steps drove me nuts. Additionally I love tinkering with cars and have a garage full of tools/machine shop. I purchased my current house in 2009 in an older neighborhood (no HOA, or melo roose etc) but a desirable county in SoCal, the neighbors are a mix of older and younger as well as middle and upper middle class families. I love having my own house without shared walls or wasteful HOA stuff. The best part though, with the tax write off my mortgage is about what I would spend on renting a 2 bedroom apartment around here. The negatives would be feeling anchored sometimes (but only in my head, I could move if I really wanted to) and the occasional upkeep expenses (ac, water heater, roof etc).
Now if I could rent a house (not an apartment) that might be different. Though if I think about it I am renting a house since I have a mortgage on it which i won't be paying off anytime soon
Now if I could rent a house (not an apartment) that might be different. Though if I think about it I am renting a house since I have a mortgage on it which i won't be paying off anytime soon
mathjak107
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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we have owned and rented at various stages of our lives. at times renting was better financially. we rent right now .
i got to have a bunch of cash not tied up in a house for investment in real estate deals here in nyc that turned out just fabulous.
but now that we are liquidating things and i am far less an aggressive investor lowering housing costs through retirement by owning may be the better way to go for us.
i am watching the lines start to get close where the money i didn't spend yet on a place is earning conservativly about 14k a year.
if we buy a co-op here in nyc with that money ,income will take a 14k hit but housing costs will drop to only 12k a year instead of the 22k we are paying rent.
renting is still the better deal but a few more increases and we have to re-evaluate
i got to have a bunch of cash not tied up in a house for investment in real estate deals here in nyc that turned out just fabulous.
but now that we are liquidating things and i am far less an aggressive investor lowering housing costs through retirement by owning may be the better way to go for us.
i am watching the lines start to get close where the money i didn't spend yet on a place is earning conservativly about 14k a year.
if we buy a co-op here in nyc with that money ,income will take a 14k hit but housing costs will drop to only 12k a year instead of the 22k we are paying rent.
renting is still the better deal but a few more increases and we have to re-evaluate
We've been renting 10years now, retired 4.5 years. We've moved 3times in that time and that is one thing that is very easy indeed when renting.
We rent in managed complexes so it is very easy to lock and leave (we are in Canada now on vacation). I enjoy there being no maintenance issues, or yards to keep up.
We have been fortunate to have had no noise issues, and live in the top floor of a 2 floor building with our outside door on the ground floor next to our garage, so no issues with noise from folks walking above or past.
It suits our current lifestyle very well, and we had been house owners since 1977, owning 5 houses in that time, with few issues.
We rent in managed complexes so it is very easy to lock and leave (we are in Canada now on vacation). I enjoy there being no maintenance issues, or yards to keep up.
We have been fortunate to have had no noise issues, and live in the top floor of a 2 floor building with our outside door on the ground floor next to our garage, so no issues with noise from folks walking above or past.
It suits our current lifestyle very well, and we had been house owners since 1977, owning 5 houses in that time, with few issues.
Oops! When I saw the title, I thought the thread was Ranting in retirement. We have enough of that already around here. 
We currently own our home outright and plan on staying in it for the foreseeable future. However, our plan at about age 75, is to sell and most likely rent a much smaller place, closer to town, at that time to avoid all of the maintenance/upkeep issues. We believe this will provide us with the maximum flexibility to deal with health issues if applicable. We saw with our parents that a change in health status can happen very quickly and a home sale under those conditions can be much more onerous (as well as less profitable).
heeyy_joe
Thinks s/he gets paid by the post
If your money is green an American landlord will likely take it. Absolutely no need to buy a place.
