Renting (maybe permanently) after FIRE?

[silvor]

Has anyone here rented after they RE?

I have FI'd, but am still working for a bit, but am thinking of renting - possibly for my entire retirement. I am 54, and would net $400k on my house. It seems when I run the extra $400k in FireCalc for 30 years it would make more sense to buy. But, my family is in central Florida 10 miles off the gulf. Renting a 1 bedroom is around $1700. But buying - well it's FL with all their issues. I figure my current house still costs me $700/month with taxes, insurance, maintenance etc.

Thoughts?

 

[PaunchyPirate]

I’m 62. Retired at 56. I still own my own house and will as long as my nearby mother is alive. Assuming I outlive her, I plan on relocating somewhere. Not sure where yet. But I’m strongly leaning toward renting somewhere. I really don’t think I want to deal with home maintenance any more. Whether I do it myself or otherwise. If I don’t rent, I will most certainly move into something that has virtually everything taken care of for me. So possibly a condo. My current house is paid for. I figure if I sell it, that chunk-o-change will pay for several years of rent.

 

[badatmath]

Well I'd certainly be interested in renting if I had the budget. . . I don't have any desire to do home maintenance forever.

 

[rk911]

We've been FIRE'd coming up on 20-yrs in August. We've owned two homes since 1975 (1975-1988, 1988-present). We have no desire to go back to sharing walls with anyone. We hire out lawn/landscaping, snow removal/salting and house cleaning. I take care of the rest.

 

[aja8888]

I'm selling the house this year and going into a rental (apartment). I don't need 3 rooms I haven't been in for months and grass to cut. Had enough, owned 8 houses in my life.

 

[Koolau]

I rent on the mainland. Since we spend 3 to 5 months there, it doesn't make a lot of sense to buy a 2nd home.

 

[Alan]

We rented for 12 years. It was great to be able to “lock and leave” for all the traveling we did in the first 10 years of retirement. We have since settled down and bought a house again. (Our 6th main house purchase since getting married)

 

[marko]

You could have 35 years ahead of you. What will that $1700 a month rent be in 20 years? Rents often go up faster and higher than regular inflation.

It does make sense to leverage your equity and this is a good plan but at your current age there are just too many variables, IMO. It's just too early...wait another 10 or 15 years.

 

[Morgan22]

Some potential issues to think about. (Many of which have already been mentioned.) Rent increases. Neighbors right next to you, or immediately above/below you. What if the landlord sells? You may be forced to move which could be very inconvenient when you're a lot older.

We owned previously, but moved and decided to rent in the new location instead of buy. Our first rental was nice, but the neighbors below us smoked, and next to us were partiers. Then we found a cute little detached ADU rental and thought we'd stay there forever. If our landlord didn't sell the cute property we were renting a few years back, we'd most likely still be living there. But now we own again. I don't believe I ever want to go back to renting again.

 

[ShadowBloom]

I've been renting nearly all my adult life, including 10 years so far in retirement, in a HCOL area. Rent is by far my biggest expense. It's also increased significantly over the years due to the housing market in my area. I have moved 2x in those 10 years, once entirely due to a large rent increase, once partially due to rent concerns. That may seem like a lot, but I'd moved every few years during my working life, as well. Moving does get harder as you get older, though. Because of market growth the past decade, Firecalc gives me a greater chance of success now than it did when I started, and other analyses suggest I can spend more than I currently do. One factor that adds to my comfort level, somewhat oddly, is that this is a HCOL; if I ever have concerns about my finances, I can slash my spending by moving somewhere less expensive.

 

[Bryan Barnfellow]

We have lived in Switzerland for 15 years now and have rented the same lakeside apartment since. Rent is stabilized in Switzerland, where 61% of us rent (78% in Geneva) because buildable land is scarce and buying is extremely expensive. We have paid the same monthly rent for 15 years and will likely do so into the future.** We consider it to be a good deal. We would never be able to afford to buy our apartment in this location, even if it were for sale.

Given that I am over 65, to buy an apartment (or a house) would require a minimum down payment of 35%, taken from our income producing assets. It's not economically viable for us. We are very happy renting--we don't have to worry about building maintenance and insurance, household appliances, heating, water, real estate taxes, etc.

** Landlords may only increase rents when they pay for substantial renovations in the apartment (not the building or common areas), or when the interest rates increase above a certain rate. Interest rates in this very stable economy are currently 0.50% and averaged only 0.62% during 2000-2025. It's a renter's paradise compared to many other countries.

 

[pjigar]

In America, monthly rent typically costs more than what it cost to buy the same size dwelling. This is simply because landlord has to make some money for their work/capital, and thanks to relatively free market that is true so far. A lot of people do apples to oranges comparison of 1 BR apartment/house/condo with their current larger house. If you want to downsize and you can't but something outright in that size then renting makes sense. If you simply want to pay more as a tradeoff to mobility, maintenance, etc. then also renting is a good choice.

One of the biggest downside I see with renting during retirement: Future rent inflation is unpredictable and can be high depending on where you live. Typically housing cost is the largest expense in a monthly budget. You will need to have extra cushion in your nest egg to avoid any risk of future high rent inflation case. I would rather own a house to remove any uncertainty about one of the largest expense in my retirement.

 

[Surewhitey]

We rented from 2007-15 in LA and Mexico during our roaming days of the late 30-mid 40's. Didn't mind it & made it convenient to try living in different places and take advantage of renting opportunities along the way.

We're better with owning since 2015. A simple cottage with updated designs (mostly in the 1st year of ownership). Maintenance is minimal after the first year & costs are only increased by insurance and taxes as we do most of the maintenance for now.

I can see a future with renting, but not soon. Financially, the appreciation offsets (outpaces since 2015) the inflation of costs associated with ownership in our experience.

 

[marko]

Some potential issues to think about. (Many of which have already been mentioned.) Rent increases. Neighbors right next to you, or immediately above/below you. What if the landlord sells? You may be forced to move which could be very inconvenient when you're a lot older.

We owned previously, but moved and decided to rent in the new location instead of buy. Our first rental was nice, but the neighbors below us smoked, and next to us were partiers. Then we found a cute little detached ADU rental and thought we'd stay there forever. If our landlord didn't sell the cute property we were renting a few years back, we'd most likely still be living there. But now we own again. I don't believe I ever want to go back to renting again.

Yeah. For me, I don't like can't deal with uncertainty. I like not having to worry about someone else determining my where, what and when.

 

[ShokWaveRider]

Our home is currently for sale, we put it up this year as we had made an offer on another home. We since decided that the home we made and offer on was not for us and cancelled it withing the inspection period for a full refund of our deposit. We have since decided to concentrate on selling our home and we will rent for a while after that we decide what to buy. We are in Florida and have 2 years to transfer our RE Tax advantage (Tax Portability) before it expires. I am sure we will buy again in the area that we are or close to it, as we do like it. Mainly for the weather and Healthcare access, the quality and abundance of the top notch hospitals, docs and specialists. We may take a year off home ownership unless something super comes up. I am 71 and DW is 66, it is about the right time to do this. While our home is in top notch condition, it does need maintenance that for the most part I do. I look forward to not having to.

 

[kevink]

See the first section of this post by Cullen Roche on understanding the buy vs. rent choice through the lens of temporal investing:

Buy vs. rent

One obvious takeaway from Roche's piece is that the older you are, the less sense home ownership makes from a purely financial perspective. But of course home ownership is rarely based on such considerations in the U.S. Other wealthy counties (Europe especially) values experiences over things much more and also has laws that protect renters since they're the majority of the population.

There could be a lot of other considerations, depending on your location and how certain are you're staying put. For example:

"Climate change could erase $1.47 trillion in U.S. home values, according to a new report from the climate risk research company First Street. A combination of severe weather exposure and rising insurance costs will dramatically increase the overall cost of owning a home over the next 30 years, the report said."

Size of nest egg and how much of it you can afford to have tied up in an illiquid asset with no return until and unless you sell it decided the issue for us. A cheap home in our relatively low-cost part of the country would be ~$300-400K. That'd mean foregoing ~18-24K a year in income (using a 6% annual return). YMMV.

 

[pjigar]

We are in Florida and have 2 years to transfer our RE Tax advantage (Tax Portability) before it expires.

FYI: Capital gains ($250K/single, $500/couple) from primary home may be tax free if you never rented the house and lived there as your primary home 2 years out of the last 5 years. The gains used to roll-over to the next primary home prior to August 5, 1997, but now it is tax free.

Topic no. 701, Sale of your home | Internal Revenue Service

Topic No. 701 Sale of Your Home

www.irs.gov

 

[FLSUnFIRE]

I like the idea of renting but don't feel secure as a tenent-sure is nice calling the landlord when there is a property issue though. I thought of renting for a while but felt a bit vulnerable to inflation, I'm glad I did and bought in '19 before covid supercharged FL RE appreciation and rents and, also, before my homestead portability timed out. I couldn't/wouldn't be able to afford my lifestyle now. Owning is an inflation hedge and the reduced cash flow needs (no mortgage) gives me lower cash flow needs making tax management easier as well as reducing the amount I have to pull from my portfolio. Having a townhouse/condo can offer some of the benefits of renting as the maintenance is less and, if well run, budgeting for maintenance/repairs should be easier.

 

[kcowan]

We downsized to a rental PH 5 years before retiring. Put all or savings in S&P500. Rent controlled luxury building in West Vancouver BC. Five years later bought a snowbird property because it made more sense than renting for 6 months yearly. Upgraded the snowbird property 12 years later because we could! No regrets. One month per year traveling. Usually Europe.

 

[Crewer]

I think the answer to the question of rent or own depends in part on where you live and the housing stock. In my area the rental market is aimed more down market or is older homes closer to the city except for some very high-end apartment complexes. As far as I can tell there aren't rentals with the type of place I'd like to live in. Technically I have a condo though it looks like a 3-bedroom single-family home. It means HOA fees cover lawn-care (not flower beds though), snow shoveling, and exterior painting every few years. At 16, it's starting to show its age but fortunately the builder is much younger than I am and so far he's pointed me to great people for whatever I've needed for maintenance.

 

[surprising]

To counter rent inflation worry, there is also property tax increases to consider when owning. My property taxes have gone up about 40% in the last 5 years since I bought my house.

 

[brett]

Yes. We rented for four years. After retiring we downsized, sold our home, put what was left in storage and travelled. Seven months then three plus in a furnished apt.

We rented when we returned for two reasons. The first was the real estate market was in the toilet. Not a good time to buy. Secondly, we wanted to try condo living.

We did buy a small home four years later. We enjoyed renting. Fridge went on the blink, landlady had a new one delivered the very next day. Overall less hassle than owned and considerably less cost.

Until that time we had mostly owned our home. I believe renting can be an excellent option for some retirees. It certainly can remove a lot of the potential agro and costs associated with home ownership.

The owner of our rental condo took a bath over the four years we were rented. The value dropped to her original purchase price, she had two condo assessments, $40K and $6K, condo fees zoomed up.

Financially, at that time, we did far better taking our home equity and placing it in the market for those four years than we would have done if we had purchased a home.

I believe that it comes down to ones personal preferences, finances, and to the real estate or rental market where one lives. There is hardly a one size fits all answer.

 

[Koolau]

Bear with me for a moment - or skip:

Since I am one who both rents and owns at the same time, I believe I have a relatively unique perspective on this subject. You might think, "Well, I have both rented and owned as well." Very true, most of us have rented at one time or another and most of us have also owned, eventually. But owning and renting at the same time means that I am seeing the contemporary "issues" of both at the same time - not at different times.

What do I mean by contemporary issues? So the issues caused by Covid or the issues caused by the Great Recession or the issues surrounding the current and past political climates as well as the Sub-Prime Mortgage crisis, etc., I have seen from both perspectives for almost 20 years. I have seen the rent increases and I have seen the recent run up in housing prices - all from both the renter and the owner perspectives at the same time and under the present circumstances - and in two dramatically different areas.

Also, living in a condo building, I have seen both sides as well. About 2/3 of our building is owner occupied while the other is occupied by renters. I can track rental expenses (I see the little cards posted on the bulletin board offering rentals in the building and I know people who rent and I talk to them about their rents here in the building). I see the sales in the building and know, pretty much within $10K what each unit is worth at any given time. I'm also privy to HOA issues associated with condo ownership.

So. why do I bring up this dreary subject? I suppose it is simply to say that this subject of "rent vs own" is best described by the phrase "IT DEPENDS." Folks so far in this discussion have pretty well hit all the "issues" of both renting and owning. They're all true for both situations - the good and the bad of each. BUT, it so much depends on current circumstances (the renter or owner's circumstances and the current circumstances surrounding the area AND the "climate" (economy, political - like "rent control", inflation, insurance industry, j*b market, HOAs, etc., etc.)

So MY conclusion is that there is no way to say one is better than the other without including all the circumstances under which the decision is being made. IOW, IT DEPENDS.

I hope this helps someone.

 

[Koolau]

Yes. We rented for four years. After retiring we downsized, sold our home, put what was left in storage and travelled. Seven months then three plus in a furnished apt.

We rented for two reasons. The first was the real estate market was in the toilet. Not a good time to buy a year after selling. Second reason was we wanted to try condo living.

We did buy four years later. We enjoyed renting. Fridge went on the blink, landlady had a new one delivered the very next day.

Until that time we had mostly owned our home. I believe renting can be an excellent option for some retirees. It certainly can remove a lot of the potential agro and costs associated with home ownership. The owner of our rental condo took a bath over the four years we were rented. The value dropped to her purchase price, she had two condo assessments, $40K and $6K.

Financially, at that time, we did far better taking our home equity and placing it in the market for those four years than we would have done if we had purchased a home.

I believe that it comes down to ones personal preferences, finances, and to the real estate or rental market where one lives. There is hardly a one size fits all answer.

Heh, heh, I see brett has been more succinct in saying what I was saying. (Anyone surprised?)

 

[brett]

I think there is a bit of an attiutide on the part of some people who have owned homes all of their lives (as we have) towards retirees and others who rent. And rent for many different reasons.

When we came home from a year 'off' one of our acquaintences made the comment half jokingly that we must have spent all of our home equity on travel and hence could not afford to buy. Imagine, downsizing from 3700 sq ft home ownership to a 1300 sq ft rental condo.....why would anyone want to do that?

What a silly comment to make!

It made us realize the mindset of some people on this rent vs. buy issue.

As an aside, what we saved on renting vs owning over those four years, and the ROI on home equity money we placed in the market more that paid for extensive international travel, 4 months or more per year, and then some! And we could lock and leave with no issues.