Does it make sense to rent as a retiree?

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am
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Does it make sense to rent as a retiree?

Post by am » Fri May 04, 2018 7:38 pm

Seems like renting would allow for more flexibility, better control of expenses (no surprise expenses) and lower expenses when you live in pricey areas with high taxes and assessments for condos. Additionally, you could sell your house and have a larger portfolio. Selling my house would yield about 600k which would support a rent of about 2k a month using a 4% swr. I could probably get about 3-3.5k for renting my house per month. Does this make sense and do most bogleheads who are retired or semiretired own or rent?
Last edited by am on Fri May 04, 2018 8:01 pm, edited 2 times in total.

bloom2708
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Re: Does it make sense to rent as a retiree?

Post by bloom2708 » Fri May 04, 2018 7:59 pm

I think it is a good question. I ponder it myself. Not yet retired.

Renting is not without downsides. Rent can be raised. The property can be sold out from under you. Neighbors (close) can come into play.

This might mean moving more. Moving itself is stressful. Part of the move to rent (for me) would be downsizing everything. Having less stuff and staying nimble takes much of the stress away from potentially having to move. Move? Sure. All my "stuff" fits in a small van and it moves easy.

On the plus side, not paying property tax, insurance (replaced with renter's insurance), maintenance, repairs, upgrades and being able to try something new or someplace new is very appealing to me.

My plan is to rent for a period of years. See what happens. I think the pluses outrank the minuses to move to a rent scenario.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

Chris K Jones
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Re: Does it make sense to rent as a retiree?

Post by Chris K Jones » Fri May 04, 2018 9:09 pm

It is a good question and I ponder it myself. I am about 4 years from retirement and have been renting for the last 3 years or so because of uncertainty about how much longer I will be n the area. In my area, buying is a better deal than renting. I am planning to buy a modest condo when I am retired and know where I will be living. For me, one of the more important reasons for buying is to stabilize the costs. Rents will probably go up with inflation. At least that is what I am thinking now.

ResearchMed
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Re: Does it make sense to rent as a retiree?

Post by ResearchMed » Fri May 04, 2018 9:29 pm

am wrote:
Fri May 04, 2018 7:38 pm
Seems like renting would allow for more flexibility, better control of expenses (no surprise expenses) and lower expenses when you live in pricey areas with high taxes and assessments for condos. Additionally, you could sell your house and have a larger portfolio. Selling my house would yield about 600k which would support a rent of about 2k a month using a 4% swr. I could probably get about 3-3.5k for renting my house per month. Does this make sense and do most bogleheads who are retired or semiretired own or rent?
We are contemplating this question.

DH loves our home, which is much larger than we need, but he's very happy here.
At some point in the not too distant future, the stairs may become a problem for me, and at that point, we'll need to move.
(Nope, we cannot envision one of those "motorized stair lifts" greeting us within a few feet, every time we enter the house.)

Our current thinking is we'll downsize to a comfortable, modern condo, some place with onsite management.
For one thing, that will make it easier as we continue to increase the amount of travel we are doing, especially if our housesitter cannot make it for all the nights. It will also be nice to have some services "provided"...

Then, we'll probably move into independent living (or possible assisted living?) at the facility where MIL currently is.
We've had a chance to view that for some time now, "from the inside", and we continue to be more and more impressed.
DH has at least one colleague already there, because her husband is in memory care, so she took an apartment there, too, so she could more easily spend time with him, rather than commuting back and forth.

And that's probably where we'll stay...

We may go there sooner, in the independent living "wing", because of all of the conveniences, and concerts and lectures, etc.
We'll view that as "just another rental", until such a time as we move to assisted living, which is also "apartment living" (so sort of another rental), but with far more services.

We have no plans to leave the area, except for travel.

RM
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am
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Re: Does it make sense to rent as a retiree?

Post by am » Fri May 04, 2018 9:44 pm

Chris K Jones wrote:
Fri May 04, 2018 9:09 pm
It is a good question and I ponder it myself. I am about 4 years from retirement and have been renting for the last 3 years or so because of uncertainty about how much longer I will be n the area. In my area, buying is a better deal than renting. I am planning to buy a modest condo when I am retired and know where I will be living. For me, one of the more important reasons for buying is to stabilize the costs. Rents will probably go up with inflation. At least that is what I am thinking now.
Rents will go up with inflation but if you sell your residence, wouldn’t that money also grow with inflation assuming it was invested in a balanced portfolio?

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Re: Does it make sense to rent as a retiree?

Post by Chris K Jones » Fri May 04, 2018 9:51 pm

It might! Lol

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Re: Does it make sense to rent as a retiree?

Post by TTBG » Fri May 04, 2018 9:54 pm

It’s a good question and I've also been pondering it.

To me one advantage of renting when I retire is that it will encourage me to downsize and get rid of ‘stuff’ while I’m still capable of doing it myself. Also, I’ve had several relatives who I think stayed in the house they owned longer than they should have, even though their quality of life suffered and it caused a bigger burden for their children. I think being a renter might make it easier to accept when it’s time to move closer to the kids or into assisted living, or whatever.

Of course the downside is less predictability in housing costs and the possibility of being forced to move when I don’t want to, but for now I’m leaning towards renting for at least the first few years of retirement.

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Watty
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Re: Does it make sense to rent as a retiree?

Post by Watty » Fri May 04, 2018 10:27 pm

am wrote:
Fri May 04, 2018 7:38 pm
Selling my house would yield about 600k which would support a rent of about 2k a month using a 4% swr.
Not after taxes.

4% would generate $24,000 a year but after taxes it might be more like $18-$20k and if you are in the income range where each extra dollar of income makes more of your Social Security be taxed you could be at a high tax rate.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

That is not to say that there is anything wrong with renting in the right situation and in some situations you can either rent or buy a condo in the same building or a house in the same subdivision. There is a rent vs buy calculator that you can use to play with the numbers.

https://www.nytimes.com/interactive/201 ... lator.html
Last edited by Watty on Sat May 05, 2018 12:20 am, edited 1 time in total.

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Re: Does it make sense to rent as a retiree?

Post by SQRT » Sat May 05, 2018 12:16 am

Really depends on your personality and where you want to live. Due to the fact that markets set rents and real estate prices, the best decision will be dependant on very personal factors, often not financial. This will, of course, not prevent many here from arguing one side or the other based on their views (biases). This debate is never ending. There is usually a premium set by the market for owning over renting. There is a reason for this “control” premium.

I always own because I like to control my environment and owning is better for this.
Last edited by SQRT on Tue May 15, 2018 4:15 am, edited 1 time in total.

SelfEmployed123
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Re: Does it make sense to rent as a retiree?

Post by SelfEmployed123 » Sat May 05, 2018 1:38 am

It's a very good question and one I have also been pondering. I'm in my mid 30s and am currently renting. I feel pressure at times to buy so that I won't have a mortgage when I retire, but I'm increasingly questioning that logic. As far as it coming down to a market by market decision, I am also questioning whether that's even true. A recent study by Nerdwallet found it is more expensive on a monthly basis to buy than to rent in all 50 states: https://www.nerdwallet.com/blog/mortgag ... s-renting/

But then other studies seem to show the opposite finding: https://www.investors.com/etfs-and-fund ... 42-states/

However, I feel the good people at GoBankingRates.com may have some skin in the game they are not letting on. I suspect whether or not you have a mortgage plays a role.

The Nerdwallet study does not appear to compare the cost of owning your home outright to renting. However, none of these analyses factor in the opportunity cost of sinking hundreds of thousands of dollars of your net worth in a nonproductive asset. You should run your own numbers taking into account local property tax and rental rates, but I feel you should also take into account your investment style and how productive the money you have in home equity could be in a bonds/stock portfolio (less taxes if investing a taxable account). My, this gets complicated rather quickly!

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kramer
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Re: Does it make sense to rent as a retiree?

Post by kramer » Sat May 05, 2018 4:01 am

I am in my early 50's, retired 11 years ago, and have rented my entire life. I think this comes down more to personality and lifestyle than finances.

For me, personally, my total rent plus all utilities is a small part of my total spending, so I consider it more of a rounding error and I am less concerned about optimizing it. But if I were spending, say, one-fourth to one-third or more of my living expenses on housing, I guess I would care more about the financial part.

Personally, in the long term, if I was pretty sure that I was going to be in a place a decade or more, and the owner/renter ratio prices were reasonably fair, I would prefer to own. But I have never been in that situation.

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Lancelot
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Re: Does it make sense to rent as a retiree?

Post by Lancelot » Sat May 05, 2018 4:05 am

I was committed to owning- until I retired early and started traveling. After discovering how much free time renting provides me by not maintaining a home, I can't see myself ever owning a home again. But maybe if I got a super deal :sharebeer
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Re: Does it make sense to rent as a retiree?

Post by Dandy » Sat May 05, 2018 6:12 am

I think so in many cases. I just turned 70 and am starting to feel the burden of maintaining a house in a HCOL northeast. I'm not fond of outsourcing all the services e.g. landscaping, snow plowing, etc and without a garage and the laundry in the basement it seems that I can't make this house good for much further aging in place.

Renting a condo or living in some senior living housing arrangement would be an adjustment after owning a home for 43 years. But the right rental could be a winner. I have seen a lot of seniors that seem to gradually decline physically and socially by aging in place. Maybe some arrangement that makes social interaction easier and reduces the ownership issues would have advantages.

The timing is critical -- too early and you might not fit in -- too late and many benefits might not be useful. I saw my mother in law age in a nice house on a hill until age 90 - she fell on an icy/hilly driveway twice and the last time was the start of her rapid demise. Getting her house ready for sale was a hassle and I'm sure that an estate house sale depressed the selling price. Potential buyers know the heirs just want to sell and get on with their lives.

Finally, I have 2 children and it would be easier on them if they didn't have the hassle of having to relocate us if we are in need and sell the house or upon our demise deal with selling the house.

Renting or some senior living arrangement is on my mind.

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JoMoney
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Re: Does it make sense to rent as a retiree?

Post by JoMoney » Sat May 05, 2018 6:16 am

It depends. :wink:
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Re: Does it make sense to rent as a retiree?

Post by UpperNwGuy » Sat May 05, 2018 6:23 am

I am retired, and I rent an apartment in a high rise building. It provides the simplicity that I seek in housing arrangements. I doubt I will ever own real estate again.

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Re: Does it make sense to rent as a retiree?

Post by Silk McCue » Sat May 05, 2018 7:04 am

Watty wrote:
Fri May 04, 2018 10:27 pm
am wrote:
Fri May 04, 2018 7:38 pm
Selling my house would yield about 600k which would support a rent of about 2k a month using a 4% swr.
Not after taxes.

4% would generate $24,000 a year but after taxes it might be more like $18-$20k and if you are in the income range where each extra dollar of income makes more of your Social Security be taxed you could be at a high tax rate.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits
'
I don't believe that the tax burden would be that severe if you were paying rent using a tax efficient taxable account that was funded with the proceeds of the sale of the home that was not taxed itself due to favorable treatment. You would have dividends being thrown off and a certain amount of capital gains each year. Taxes paid yes, but likely at a much lower rate than the example provided.

Cheers

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Re: Does it make sense to rent as a retiree?

Post by fasteddie911 » Sat May 05, 2018 7:22 am

Not retired, but I've run the numbers of renting vs buying, particularly in a HCOL area, and often selling your home and renting can be the most financially beneficial. I know many older folks who plan on owning their home until they pass, with their home getting inherited by their children. While it's a nice gesture, that's money locked up in the home unable to be used by the retiree. Certainly the home can be used as a hedge for LTC or the like, but some homes can be worth significantly more than LTC will cost. At the very least, downsizing to a condo can have some benefits, financially and in lifestyle. Less maintenance, possibly better accommodations for mobility issues, be within a 'community' of sorts, etc. If you rent, I think the best situation is living in a rental complex managed by a single company. In your rent calculation, don't forget to account for your current house expenses (taxes, insurance, maintenance, etc.) as those will likely go down or disappear when you rent.

Hillview
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Re: Does it make sense to rent as a retiree?

Post by Hillview » Sat May 05, 2018 11:43 am

current plan is when we retire, rent for ~10 years and then buy into a CCRC ... that's the plan. We will see!

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Re: Does it make sense to rent as a retiree?

Post by flyingaway » Sat May 05, 2018 12:05 pm

If selling my house were easy, I would have done it yesterday.
I want to travel a lot in retirement, my current big house is a real liability.

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JoMoney
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Re: Does it make sense to rent as a retiree?

Post by JoMoney » Sat May 05, 2018 12:27 pm

Real estate is a liability, that can also be an investment... but there are other investment options one can choose. For most people buying real estate is more of consumption decision. In some situations, for some people, it makes sense, and in others it doesn't.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

am
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Re: Does it make sense to rent as a retiree?

Post by am » Sat May 05, 2018 1:23 pm

JoMoney wrote:
Sat May 05, 2018 12:27 pm
Real estate is a liability, that can also be an investment... but there are other investment options one can choose. For most people buying real estate is more of consumption decision. In some situations, for some people, it makes sense, and in others it doesn't.
I think a house is a consumption item in most cases and poor investment. It’s illiquid, has high transaction fees, limits your flexibility, introduces unexpected expenses, wastes time with repairs, remodeling, upkeep. Risky if real estate takes a dive or your area starts to go bad. Often too big for a retired couple.

It’s sounds real appealing in theory at least, to get a 1-2 br condo somewhere real nice overlooking the ocean for 2-3k month rent in say South Beach without the assessments, taxes, or upkeep. If you don’t like the location, building, neighbors, you can move somewhere else 1 yr later with little hassle or cost.

Seems like expenses would be more predictable and easier to manage. Sure landlord can raise rates, but my taxes, insurance and landscaping go up all the time as well, probably more than rents would.

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JoMoney
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Re: Does it make sense to rent as a retiree?

Post by JoMoney » Sat May 05, 2018 1:31 pm

am wrote:
Sat May 05, 2018 1:23 pm
.
Personally, I'm in alignment with your opinion on it... but I've also known several successful real estate investors, and home owners, who have done quite well financially with real estate.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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dm200
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Re: Does it make sense to rent as a retiree?

Post by dm200 » Sat May 05, 2018 2:01 pm

Our local (HCOL) jurisdiction has an over 65 real estate tax exemption or deferral with modest income and asset limits. DW and I save $6,000 a year by owning our home.

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Re: Does it make sense to rent as a retiree?

Post by delamer » Sat May 05, 2018 3:01 pm

Not sure why the OP mentioned how much rent s/he could get for current home in the post. If the plan is to sell the current home, than it does not matter.

We are semi-retired and not interested in downsizing or sharing walls with neighbors, and our home is affordable. So while we might buy another SFH, renting would have no appeal for us.

But I can certainly see the advantage if we were house poor with a big portion of our assets tied up in the house.
Last edited by delamer on Sun May 06, 2018 10:32 am, edited 1 time in total.

GCD
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Re: Does it make sense to rent as a retiree?

Post by GCD » Sat May 05, 2018 3:14 pm

Depending on the state, there are various levels of protection against creditors for your primary residence. Protecting your liquid assets after a sale of your residence is possible, but kind of a pain.

am
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Re: Does it make sense to rent as a retiree?

Post by am » Sat May 05, 2018 3:16 pm

GCD wrote:
Sat May 05, 2018 3:14 pm
Depending on the state, there are various levels of protection against creditors for your primary residence. Protecting your liquid assets after a sale of your residence is possible, but kind of a pain.
Umbrella policy? If your not practicing medicine or something similarly risky, don’t see how that wouldn’t be enough?

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Re: Does it make sense to rent as a retiree?

Post by am » Sat May 05, 2018 3:19 pm

delamer wrote:
Sat May 05, 2018 3:01 pm
Not sure why the OP mentioned how much rent s/he could get for current home in the post. If the plan is to sell the current home, than it does not matter.

We are semi-retired and not interested in downsizing or sharing walks with neighbors, and our home is affordable. So while we might buy another SFH, renting would have no appeal for us.

But I can certainly see the advantage if we were house poor with a big portion of our assets tied up in the house.
I mentioned what I could get for rent because renting my home in cold Midwest for 3-3.5k/month would allow me to move to warm climate near ocean and rent a nice apartment. I may do better this way than selling which I estimate would yield roughly 600k after fees. But renting my house would have more hassle, and my 3.5k would be more like 2.5-2k after taxes/insurance/upkeep. Assuming 30 yr retirement, selling my house would allow for about 2k a month in rent assuming 4% swr. But I am not house poor and have low 7 figure portfolio and more years to go.

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Re: Does it make sense to rent as a retiree?

Post by delamer » Sat May 05, 2018 3:44 pm

am wrote:
Sat May 05, 2018 3:19 pm
delamer wrote:
Sat May 05, 2018 3:01 pm
Not sure why the OP mentioned how much rent s/he could get for current home in the post. If the plan is to sell the current home, than it does not matter.

We are semi-retired and not interested in downsizing or sharing walks with neighbors, and our home is affordable. So while we might buy another SFH, renting would have no appeal for us.

But I can certainly see the advantage if we were house poor with a big portion of our assets tied up in the house.
I mentioned what I could get for rent because renting my home in cold Midwest for 3-3.5k/month would allow me to move to warm climate near ocean and rent a nice apartment. I may do better this way than selling which I estimate would yield roughly 600k after fees. But renting my house would have more hassle, and my 3.5k would be more like 2.5-2k after taxes/insurance/upkeep. Assuming 30 yr retirement, selling my house would allow for about 2k a month in rent assuming 4% swr. But I am not house poor and have low 7 figure portfolio and more years to go.
My thought was that you lose some of the advantages of renting for yourself if you hang onto your current home and rent it out (as you noted). If you weren’t sure if you wanted to move permanently then renting out your current home certainly could make sense. But otherwise, why hang onto it?

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Re: Does it make sense to rent as a retiree?

Post by petulant » Sat May 05, 2018 10:27 pm

am wrote:
Fri May 04, 2018 9:44 pm
Chris K Jones wrote:
Fri May 04, 2018 9:09 pm
It is a good question and I ponder it myself. I am about 4 years from retirement and have been renting for the last 3 years or so because of uncertainty about how much longer I will be n the area. In my area, buying is a better deal than renting. I am planning to buy a modest condo when I am retired and know where I will be living. For me, one of the more important reasons for buying is to stabilize the costs. Rents will probably go up with inflation. At least that is what I am thinking now.
Rents will go up with inflation but if you sell your residence, wouldn’t that money also grow with inflation assuming it was invested in a balanced portfolio?
Yes and no. To the extent the concern is general price inflation--like a return to 10% inflation--stocks can help weather the storm, although their volatility in actual inflationary periods can add even more stress. But really, most of the risk of rents going up or down is market-specific. Rent or real estate can go up in your area faster than general price inflation in very stressful ways. Owning a home hedges against the volatility of rent in your specific market.

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Re: Does it make sense to rent as a retiree?

Post by chessknt » Sat May 05, 2018 11:22 pm

Another factor would be whether you can rent the type of home you are looking for in your desired location. If neighbors on all sides and shared laundry doesn't bother you renting will be easy to fo d a good deal but if you want to live in a wooded lot with nobody for miles around so you can shoot off guns you might not be able to find anything for rent...

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Re: Does it make sense to rent as a retiree?

Post by GCD » Sun May 06, 2018 8:06 am

chessknt wrote:
Sat May 05, 2018 11:22 pm
Another factor would be whether you can rent the type of home you are looking for in your desired location. If neighbors on all sides and shared laundry doesn't bother you renting will be easy to fo d a good deal but if you want to live in a wooded lot with nobody for miles around so you can shoot off guns you might not be able to find anything for rent...
I may have missed it, but I think you are the first to raise this point here. I have always been somewhat intolerant of being told what to do. Having a landlord only adds another person to the mix with a legitimate basis for telling you what you can and can't do. I'm not eager to add to my list of "can't dos" in retirement.

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Re: Does it make sense to rent as a retiree?

Post by pezblanco » Sun May 06, 2018 9:35 am

GCD wrote:
Sun May 06, 2018 8:06 am
chessknt wrote:
Sat May 05, 2018 11:22 pm
Another factor would be whether you can rent the type of home you are looking for in your desired location. If neighbors on all sides and shared laundry doesn't bother you renting will be easy to fo d a good deal but if you want to live in a wooded lot with nobody for miles around so you can shoot off guns you might not be able to find anything for rent...
I may have missed it, but I think you are the first to raise this point here. I have always been somewhat intolerant of being told what to do. Having a landlord only adds another person to the mix with a legitimate basis for telling you what you can and can't do. I'm not eager to add to my list of "can't dos" in retirement.
I think this is super important. I retired a few years ago and we moved to a new (warmer) locale in the Southwest. We rented for 1 year and I just absolutely hated it. If something needed fixed, the property manager needed to be called who took their time getting to it. Needed repairs were done shoddily or not at all, etc etc.

In addition to aggravation like the above, most people do not consider renting as nice a place to live in as they would for purchase. People sometimes say, well I can sell my 500K house and rent this house in another place that rents for only 1K/month ... look at the savings! But that 1K/month place may very well have a purchase price of much less than 500K. You're not comparing oranges to oranges.

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Re: Does it make sense to rent as a retiree?

Post by GCD » Sun May 06, 2018 10:21 am

pezblanco wrote:
Sun May 06, 2018 9:35 am

In addition to aggravation like the above, most people do not consider renting as nice a place to live in as they would for purchase. People sometimes say, well I can sell my 500K house and rent this house in another place that rents for only 1K/month ... look at the savings! But that 1K/month place may very well have a purchase price of much less than 500K. You're not comparing oranges to oranges.
Absolutely. This is often overlooked. I couldn't rent a house as nice as mine for what I am paying on the mortgage. Part of the usual equation for landlords is "let the tenant pay your mortgage." The implicit requirement for this is that the tenant is paying more than the mortgage. This means you will almost always get a worse quality place to live for the amount of money you are spending.

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Re: Does it make sense to rent as a retiree?

Post by SeekingAPlan » Sun May 06, 2018 10:25 am

GCD wrote:
Sun May 06, 2018 10:21 am
pezblanco wrote:
Sun May 06, 2018 9:35 am

In addition to aggravation like the above, most people do not consider renting as nice a place to live in as they would for purchase. People sometimes say, well I can sell my 500K house and rent this house in another place that rents for only 1K/month ... look at the savings! But that 1K/month place may very well have a purchase price of much less than 500K. You're not comparing oranges to oranges.
Absolutely. This is often overlooked. I couldn't rent a house as nice as mine for what I am paying on the mortgage. Part of the usual equation for landlords is "let the tenant pay your mortgage." The implicit requirement for this is that the tenant is paying more than the mortgage. This means you will almost always get a worse quality place to live for the amount of money you are spending.
But rent replaces more than your mortgage. There are taxes, upkeep, maintenance, possibly utility bills, etc.

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Re: Does it make sense to rent as a retiree?

Post by GCD » Sun May 06, 2018 10:30 am

SeekingAPlan wrote:
Sun May 06, 2018 10:25 am
GCD wrote:
Sun May 06, 2018 10:21 am
pezblanco wrote:
Sun May 06, 2018 9:35 am

In addition to aggravation like the above, most people do not consider renting as nice a place to live in as they would for purchase. People sometimes say, well I can sell my 500K house and rent this house in another place that rents for only 1K/month ... look at the savings! But that 1K/month place may very well have a purchase price of much less than 500K. You're not comparing oranges to oranges.
Absolutely. This is often overlooked. I couldn't rent a house as nice as mine for what I am paying on the mortgage. Part of the usual equation for landlords is "let the tenant pay your mortgage." The implicit requirement for this is that the tenant is paying more than the mortgage. This means you will almost always get a worse quality place to live for the amount of money you are spending.
But rent replaces more than your mortgage. There are taxes, upkeep, maintenance, possibly utility bills, etc.
Maybe. I would imagine the landlord works that into his equation too. Or I could be off on my mental calculations. I admit I have never sat down and dug deep into the numbers. It's just an off the top of my head observation that the numbers don't seem to be close.

Nevertheless, I retreat to my initial point about being told what I can and can't do in/on/to the property.

SeekingAPlan
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Re: Does it make sense to rent as a retiree?

Post by SeekingAPlan » Sun May 06, 2018 10:44 am

Like the original poster I am wondering if I should give renting a try. I hesitate because I have never rented.

I also have never lived in an apartment so I wonder if I shouldn't rent before buying an apartment. What if I hate it?

I have lived in my single family home for decades. These days I live here alone and the home is aging along with me. Maintenance that we used to do ourselves is turning into something that I must try to hire for. For many of the tasks I simply cannot find anyone willing to do them. The neighborhood is in severe decline and what used to be a good neighborhood of owner occupied homes has become a neighborhood of rentals. Gang issues and shots fired have become a regular thing. Obviously homes are tough to sell here. It sure does sound like an attractive prospect to have someone else maintain the space and to be able to just pick up and go if I no longer want to stay in a place.

Another thing -- my sibling has stated his preference that I rent because he does not want him or his children to have to sell my place when I die. I live in a distant state from them. I do have to admit that it was so much easier for me when my uncle passed and I only had to clear out his rental apartment rather than selling a home 2000 miles away.

Jackson12
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Re: Does it make sense to rent as a retiree?

Post by Jackson12 » Sun May 06, 2018 10:45 am

An acquaintance rented a home to a couple for 20 years. Easy tenants, treated the home with care, reliable income for their landlord. Then when the acquaintance grew older and the children left home and retirement loomed, they decided that the rental home was ideal for the next stage of life.


Out went the tenants. I want more security in retirement. And I want a home where I can age in place as long as possible, perhaps requiring some home modifications to do so. We’ll probably downsize but that’s about it...at least till a nursing home or continued care community is a realistic option.

A concern is hitting that stage of life where some assistance is needed but not a nursing home.

How open would a landlord be to adding grab bars in the shower and next to the toilet, and perhaps near steps leading into the house? What about wheelchair ramps, toilets which meet ADA standards, and other adaptations? My parents required grab bars to help them get in and out of their home, new toilets, higher counters, wheelchair ramps wherever there were stairs ( inside or out) etc.

They also needed part- time live- in help...whenever I was unavailable. Perhaps you’ve made plans for the time when such assistance is needed, other than living in a rental or owning a home. .

.

SeekingAPlan
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Re: Does it make sense to rent as a retiree?

Post by SeekingAPlan » Sun May 06, 2018 10:52 am

Jackson12 wrote:
Sun May 06, 2018 10:45 am
An acquaintance rented a home to a couple for 20 years. Easy tenants, treated the home with care, reliable income for their landlord. Then when the acquaintance grew older and the children left home and retirement loomed, they decided that the rental home was ideal for the next stage of life.


Out went the tenants. I want more security in retirement. And I want a home where I can age in place as long as possible, perhaps requiring some home modifications to do so. We’ll probably downsize but that’s about it...at least till a nursing home or continued care community is a realistic option.

A concern is hitting that stage of life where some assistance is needed but not a nursing home.

How open would a landlord be to adding grab bars in the shower and next to the toilet, and perhaps near steps leading into the house? What about wheelchair ramps, toilets which meet ADA standards, and other adaptations? My parents required grab bars to help them get in and out of their home, new toilets, higher counters, wheelchair ramps wherever there were stairs ( inside or out) etc.

They also needed part- time live- in help...whenever I was unavailable. Perhaps you’ve got plans for the time when such assistance is needed.

.
People who need those adaptations can rent a place that already has them much easier than modifying their own home. In addition, they likely will need more assistance that just that. None of my elders who lived past age 85 were able to live completely independently. The ones who stayed at home required daily assistance from their children. The happiest and most successful was a relative who moved to an independent senior building in her 80's and remained there until about 2 months before she passed away at 97. The building provided companionship, bus trips to grocery stores and other places of interest, 24 hour on call assistance and more.

am
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Re: Does it make sense to rent as a retiree?

Post by am » Sun May 06, 2018 11:00 am

GCD wrote:
Sun May 06, 2018 10:21 am
pezblanco wrote:
Sun May 06, 2018 9:35 am

In addition to aggravation like the above, most people do not consider renting as nice a place to live in as they would for purchase. People sometimes say, well I can sell my 500K house and rent this house in another place that rents for only 1K/month ... look at the savings! But that 1K/month place may very well have a purchase price of much less than 500K. You're not comparing oranges to oranges.
Absolutely. This is often overlooked. I couldn't rent a house as nice as mine for what I am paying on the mortgage. Part of the usual equation for landlords is "let the tenant pay your mortgage." The implicit requirement for this is that the tenant is paying more than the mortgage. This means you will almost always get a worse quality place to live for the amount of money you are spending.
Nice rental condo in south beach 1-2 br overlooking ocean can be had for 2-3k without taxes, high assessments, upkeep, hassle of buying and selling, getting stuck. I can get 600k for my house but I have other funds for housing, so it’s not like the choice is my house or an apartment for 2k based on 4% swr.I’m not talking about doing this when you need assistance with daily living, but perhaps in 50s for semiretirement. I like owning my home free and clear now because I have a job, kids who need stable lives and schools, and because this works best right now. But I hate how it traps you into a location, the unexpected costs, the high transaction fees, the unstable housing market, etc.

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dm200
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Re: Does it make sense to rent as a retiree?

Post by dm200 » Sun May 06, 2018 11:04 am

One advantage of renting may be less need for home maintenance/repair and yard work as folks age. Some retirees actually can and do MORE such things, while others have health and other challenges making this more of a problem.

cherijoh
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Re: Does it make sense to rent as a retiree?

Post by cherijoh » Sun May 06, 2018 11:09 am

am wrote:
Fri May 04, 2018 7:38 pm
Seems like renting would allow for more flexibility, better control of expenses (no surprise expenses) and lower expenses when you live in pricey areas with high taxes and assessments for condos. Additionally, you could sell your house and have a larger portfolio. Selling my house would yield about 600k which would support a rent of about 2k a month using a 4% swr. I could probably get about 3-3.5k for renting my house per month. Does this make sense and do most bogleheads who are retired or semiretired own or rent?
I think you are taking the short term view when you say "better control of expenses". Unless you live somewhere with rent control, you run the risk of getting a big increase in rent the next time you renew your lease. Some people naively assume their landlord will only raise their rent a nominal amount to keep a problem-free tenant, but where I live that is simply not the case. I know of several people whose rent was scheduled to increase 20- 30% from one year to the next. They ended up moving to a less desirable apartment (i.e., either smaller or with an increased commuting distance from work). As a retiree, do you really want to be stuck moving each year?

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Re: Does it make sense to rent as a retiree?

Post by dbr » Sun May 06, 2018 11:11 am

Of course it makes sense. Rather it can make sense. This is one of those questions to which the guaranteed right answer is the one given by a previous poster: it depends.

What it depends on is the needs, wants, preferences, and financial resources of the people considering the choice.

I would say, however, that renting vs owning at any age is primarily a lifestyle decision with ancillary financial consequences.

As far as what Bogleheads do, that kind of decision doesn't have much to do with BHism, as far as I can see. As far as people I know, living circumstances range over about every possibility one might imagine according to what people want, can, or have had to do.

In your case do you want to live in your house or would you prefer an apartment of the sort you could have for $2000/month? Of course you could live in a much nicer apartment than that if you have the income to support it. Equating the apartment rent to the income from the asset represented by the house makes no sense. If you think you might prefer an apartment, you should back up and review your retirement spending as a whole and see what fits.

SeekingAPlan
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Re: Does it make sense to rent as a retiree?

Post by SeekingAPlan » Sun May 06, 2018 11:21 am

I suspect a lot depends on what is available in the area you choose to live and what you want.

My aunt's rentals had space to garden. If she wanted to, fine. If she didn't that was fine too. She did not have to shovel snow, repair appliances, unclog drains, etc. In other words, the fun stuff was available if desired and the chore stuff was done by the owners.

Uncle's place had no gardening but did have easy access to museums, concerts, restaurants, parks, transportation, etc. He sold his home at 65 and never looked back.

The problem I am seeing is that in the old days there were more rentals. These days there seems to be more condos so you lose the benefit of being able to easily pick up and move somewhere else.

cherijoh
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Re: Does it make sense to rent as a retiree?

Post by cherijoh » Sun May 06, 2018 11:30 am

SeekingAPlan wrote:
Sun May 06, 2018 10:25 am
GCD wrote:
Sun May 06, 2018 10:21 am
pezblanco wrote:
Sun May 06, 2018 9:35 am

In addition to aggravation like the above, most people do not consider renting as nice a place to live in as they would for purchase. People sometimes say, well I can sell my 500K house and rent this house in another place that rents for only 1K/month ... look at the savings! But that 1K/month place may very well have a purchase price of much less than 500K. You're not comparing oranges to oranges.
Absolutely. This is often overlooked. I couldn't rent a house as nice as mine for what I am paying on the mortgage. Part of the usual equation for landlords is "let the tenant pay your mortgage." The implicit requirement for this is that the tenant is paying more than the mortgage. This means you will almost always get a worse quality place to live for the amount of money you are spending.
But rent replaces more than your mortgage. There are taxes, upkeep, maintenance, possibly utility bills, etc.
This is very location dependent. Some places are cheaper to own than to rent an equivalent property. And the longer you stay in your house the more likely that you couldn't afford the rent on your current house. I paid off my mortgage several years ago, but I eventually ended up refinancing to a 10-year mortgage. It would currently cost me at least 50% more per month to rent my house than what I paid at the end for principal, interest, taxes, insurance and home owner's dues. No way is the upkeep that high.

As has been already pointed out, many people who are retiring don't rent an equivalent property. If they are downsizing or going from a SFH to an apartment building that changes the arithmetic quite a bit. If that is what they want (i.e., no yard or home maintenance) that is one thing, but some people might find out they don't like living in close proximity to noisy neighbors or even reasonable ones who have to get up at 6 in the morning. Just like in a hotel, in an apartment you often hear neighbors walking around upstairs, using the plumbing or playing the TV loudly.

WillRetire
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Re: Does it make sense to rent as a retiree?

Post by WillRetire » Sun May 06, 2018 11:53 am

We have considered this too. Decided to remain homeowners to protect home as an asset should one of us need long term care and we run out of money. Medicaid allows healthy spouse to keep home.

A condo is a nice alternative to single-family house... less to maintain one's self.

If single, would strongly consider renting.

am
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Re: Does it make sense to rent as a retiree?

Post by am » Sun May 06, 2018 12:45 pm

After reading through this thread, biggest downsides for me are possibility of rents going up significantly, for which I say that taxes, insurance, upkeep has also been going up and may price me out of my fixed retiree budget.

Noisy annoying neighbors which I have right now but don’t have to share walls with them.

Possibility of keeping the house as an asset if one of us needs long term care. Maybe get long term care insurance as a compromise?

oxothuk
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Re: Does it make sense to rent as a retiree?

Post by oxothuk » Sun May 06, 2018 1:22 pm

Another tax consideration is that the extra income from selling your home (which will fund the rent) may push you into IRMAA territory (or a higher IRMAA bracket).

blgaarder
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Re: Does it make sense to rent as a retiree?

Post by blgaarder » Tue May 08, 2018 10:00 am

Property tax has been mentioned as to ownership, but remember that the amount an apartment building's tax goes up is divided by the number of units.

That tax increase can be a significant portion of the monthly rent increase.

ncbill
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Re: Does it make sense to rent as a retiree?

Post by ncbill » Tue May 08, 2018 10:50 am

You can do both.

Most in my development of town homes are elderly, downsized from larger, traditional SFRs.

I got an amazing deal on the last unit direct from the builder, so we've lived in the same place from before the birth of my kids through them going off to college.

And living here has been an incredible bargain - zero outside maintenance (including roof replacement, painting) in exchange for paying a modest monthly fee.

gouldnm
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Re: Does it make sense to rent as a retiree?

Post by gouldnm » Tue May 08, 2018 2:32 pm

We are also trying to decide this question. We will probably rent, at least for the first few years, because we will be moving to a new city and we aren't sure which neighborhood we'll be happiest in.

Having rented for many years as well as owned several homes, I can say that there are pros and cons to each, but I personally prefer renting. Here are a few things to think about:

#1. Owning and renting both have their own unique risks. Owning can be a better inflation hedge, although you will also have many additional expenses that you won't have with renting (e.g, maintenance, taxes, etc.). If you buy a condo or live in a development, they might have special assessments that increase your monthly expenses similar to a rent increase. For example, in my development, I pay a special assessment because they needed to build a revetment to protect our beach area from erosion. We were able to get a special deal from the state, but there are several developments in my area where people are paying $2-3K in special assessments for beach protection.

#2. The nice thing about renting is that if you don't like something or your rent is being increased, you can always pick up and move with relatively little effort. You can't do that when you own a home.

#3. Some people have stated that they don't like renting because they don't want to share a wall with neighbors or have someone telling them what to do. But keep in mind that many people who retire buy condos. In a condo you also share walls with neighbors and HOAs tend to be very strict about what you can and cannot do. Even if you own your own home, neighbors can still be a problem. When I owned a house, I had neighbors that would use their chain saws to cut down trees at 8:00 A.M. on a Saturday morning, for example. Another neighbor set up a drainage system on his property that ended up flooding our yard! So the idea that buying a house will somehow protect you from difficult neighbors is a myth. Besides, having neighbors close by can be an asset to an elderly person. When I was in my 20's and renting, I used to always run errands for my elderly neighbors who had major health problems. I don't know what they would have done without me!

#4. Some people have expressed concern that apartments won't have the amenities that an older person might need. However, there are apartment complexes that specifically cater to the 55+ crowd.

#5. I was definitely happier as a renter than as a home owner. However, every person is different. It really just depends on your personal preference.

#6. As a renter, I definitely saved more money than I did as a home owner. One reason that I bought a house is that I needed more space. But I intend to seriously downsize in my retirement. I don't want to have to maintain a 2,000+ sq. ft. home any more, when 1200 sq. ft. will do just fine. It can be very hard to find a small house in a nice, upscale neighborhood. On the other hand, it can be very easy to find an apartment, even in wealthy neighborhoods. Unless you really need the space, my experience is that renting is the much cheaper option.

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