Retiring as a lifetime renter?

[RAE]

I think that the decision is a function of your personal preferences, the housing market/rental market where you live, and the return on investment funds that you would otherwise commit to a home purchase. And your time horizon of course.

+1. Where I live, it really makes no sense (financially) to rent. Housing prices are relatively modest compared to rental prices, which are really quite high. You can buy a modest house for the same $$ it would cost you to rent the same house for less than 5 years. The only way I would consider renting around here is if I was certain I was going to be moving within the next 2 years or so. And even then, you might very well come out ahead by buying and selling a house.

 

[Huston55]

+1. Where I live, it really makes no sense (financially) to rent. Housing prices are relatively modest compared to rental prices, which are really quite high. You can buy a modest house for the same $$ it would cost you to rent the same house for less than 5 years. The only way I would consider renting around here is if I was certain I was going to be moving within the next 2 years or so. And even then, you might very well come out ahead by buying and selling a house.

Wow!

There are likely some very good rental property opportunities in your area with this price/rental structure.

 

[RAE]

Wow!

There are likely some very good rental property opportunities in your area with this price/rental structure.

True, but I have no desire to be a landlord, for at least a couple reasons. First, it's a relatively economically-depressed area, and it can be hard to find the right renter. I've seen lots of rentals around here that are in pretty rough shape, as a result of abuse from previous renters. Secondly, although I do maintain my own home myself (for the most part), I don't particularly enjoy home maintenance/repair work, and I'm not very skilled at it either. And we are gone south for the winter, also. If I had to hire that work out every time there was a problem at a rental house, it would quickly eat up a big chunk of my profits. So, the landlord gig is not for me.

 

[Totoro]

Is is cheaper living outside from the large cities? My brother made the sacrifice of buying 30 miles away to become a home owner, he would have commuted 50-70 miles if he had to, that’s how important owning was for him.

Depends on your definition of large city and cheaper. Rental yields don't differ too much, but absolute prices are lower (so both rent and purchase price) by 30% - 60% easily.

However .. availability for renters goes down quite a bit as you move further away from the center area. In some countries that effect is smaller and in smaller towns or areas that are very touristy (ski areas for example, or near parks). In really cheap areas rental yields tend to go up a little bit, but still nowhere near 8% gross.

On the other hand, retail prices go up a bit while eating out prices go down.

 

[Dtail]

+1. Where I live, it really makes no sense (financially) to rent. Housing prices are relatively modest compared to rental prices, which are really quite high. You can buy a modest house for the same $$ it would cost you to rent the same house for less than 5 years. The only way I would consider renting around here is if I was certain I was going to be moving within the next 2 years or so. And even then, you might very well come out ahead by buying and selling a house.

We are currently renting a house. So in our situation, it would be up to the landlord letting us to continue to rent year by year and thus the rent/buy equation is not totally in our control.
However, we like the flexibility and also wish to have the monies in the market vs. a house, since I wouldn't take out a mortgage.

 

[Corporateburnout]

9 years ago we sold our home with a pool and a large backyard and bought a new 3 story townhome with similar square footage but without the exterior work. Although we like the place and love the area the home is getting too large as we age. Friends and family who visited in the past don't do so as often and in a few years climbing stairs will become harder on our knees.

When I ran the interactive NYtimes calculator I posted earlier, it tells me that renting a similar place for $2800 per month is financially better (based on 5% return on investment and 2% inflation). To rent a similar place around here the cost is around $3800 but we are evaluating whether or not we need such a large place and may consider leasing for one year a 1500 square foot one story luxury apartment with an elevator for around $3200/month. This would also give us the opportunity to try out renting after 40 years of home ownership.

DW is not convinced yet....

 

[Totoro]

Is is cheaper living outside from the large cities? My brother made the sacrifice of buying 30 miles away to become a home owner, he would have commuted 50-70 miles if he had to, that’s how important owning was for him.

Depends on your definition of large city and cheaper. Rental yields don't differ too much, but absolute prices are lower (so both rent and purchase price) by 30% - 60% easily.

However .. availability for renters goes down quite a bit as you move further away from the center area. In some countries that effect is smaller and in smaller towns or areas that are very touristy (ski areas for example, or near parks). In really cheap areas rental yields tend to go up a little bit, but still nowhere near 8% gross.

On the other hand, retail prices go up a bit while eating out prices go down.

 

[Huston55]

We are currently renting a house. So in our situation, it would be up to the landlord letting us to continue to rent year by year and thus the rent/buy equation is not totally in our control.
However, we like the flexibility and also wish to have the monies in the market vs. a house, since I wouldn't take out a mortgage.

Ask for a longer lease.

This can benefit both Tenant (T) & Landlord (L)-
+T: improved stability/control
+T: housing cost is known (and maybe even fixed since not all leases have annual escalation)
+L: reduced vacancy
+L: less hassle
+L: retain a good tenant (assuming you are one)

 

[brett]

Five years ago we returned from a seven month trip with the intention of buying another home.

We started to look. And I ran the numbers. It quickly became apparent that for us, where we were living, and given the market it was far better to rent a condo. We rented for four years. It was very much to our advantage financially from both a pre tax and an after tax perspective.

I do not believe that there is a set rule for anyone. Apart from personal preference, the housing market varies by location and the financial markets are always subject to change. And whether the buyer buys more home than they really need or can upkeep

I think that there is this notion that owning is always better than renting is false. Too many variables.

 

[Huston55]

9 years ago we sold our home with a pool and a large backyard and bought a new 3 story townhome with similar square footage but without the exterior work. Although we like the place and love the area the home is getting too large as we age. Friends and family who visited in the past don't do so as often and in a few years climbing stairs will become harder on our knees.

When I ran the interactive NYtimes calculator I posted earlier, it tells me that renting a similar place for $2800 per month is financially better (based on 5% return on investment and 2% inflation). To rent a similar place around here the cost is around $3800 but we are evaluating whether or not we need such a large place and may consider leasing for one year a 1500 square foot one story luxury apartment with an elevator for around $3200/month. This would also give us the opportunity to try out renting after 40 years of home ownership.

DW is not convinced yet....

This is similar to what DW & I recently did immediately before and after FIRE; sold a 5,000 sf house (way too much house for us, we bought for the location), and moved to a rented condo/flat. We’ve loved renting; especially DW who’s loved both places. The first unit (rented 4yrs before moving @ FIRE) was a downtown luxury condo (single level unit w/ elevator). The second unit (where we live now after FIRE) is in an historical building & we have stairs. Had we remained in our pre-FIRE location & in that unit, it could have been a ‘forever’ place physically & logistically. The current one (w/stairs) is not likely a forever place but, hopefully, where we’ll stay until we move to a CCRC.

I think your idea of renting a luxury condo for a time to test it out (presumably renting your current house) is a great idea. A baby step might be doing a VRBO/Airbnb for a month in a similar place.

ETA: For us, the process of downsizing & purging has been very positive.

 

[gretah]

Another housing choice for later years is a Continuing Care Retirement Community (CCRC). These communities have independent living, assisted living, and nursing home all on the same campus. Sometimes they are in the same building. As you need more care, you don't have to move to a new retirement community. And you don't lose your friends as you are all on the same campus.

The kind I have been looking into for has a substantial entrance fee ($80K or more) and then monthly fees for room, 2 daily meals, and utilities (except phone and cable TV). Assistance and nursing care is additional.

In these CCRCs, the entrance fee is a guarantee that you will always have a home and care, even if you do not have enough money to pay increased monthly fees.

I've been planning to help a 76-year-old friend when she is forced into retirement next year. I'll pay the entrance fee. Her monthly income and small savings (from being an elementary school teacher then a part-time librarian) will last for awhile. Then medicaid will help with the nursing home when that is needed.

I ran the numbers and this scenario is much cheaper than buying her a cottage next year and her using the equity in that when she sells at nursing home time. She is in Oregon where she wants to stay as her daughter lives a few hours away.

CCRCs vary. Some require you buy your condo / cottage. Other CCRCs operate on a monthly fee only with no guarantees.

If you want to read more about CCRCs and view the website of one with a solid endowment (so the capital is not touched) here are some websites:

Info
https://www.mass.gov/service-details/continuing-care-retirement-communities

A modestly-priced CCRC in California
https://www.hollenbeckpalms.com

 

[Offgrid Organic Farmer]

I have had tenants who were retired.

They simply had to have enough monthly cash flow to cover their rent. No big deal.

In my mind, it is a lot less expensive to own a home, than it is to rent. I own, and I have rentals. So I see both sides.

 

[kcowan]

We have been retired for 15 years. We have rented the same penthouse up north for 20 years. For the last 10 years, we sublet it for the winter months. We have owned in Mexico for 10 years and owning is definitely cheaper than renting. This is partly because rentals in a resort area are high. It is also because we have a network of Mexicans that will help us keep things going. We do not sublet for tax and security reasons.

So I am living proof that the answer is "It Depends!"