Wisdom of owning house after retirement

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Ichthyo20023saurs
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Wisdom of owning house after retirement

Post by Ichthyo20023saurs »

I retired a couple of years ago and I live off SS and savings. I live in a house that is all paid off but needs a lot of TLCs. Home improvements keep me busy but I do not necessarily enjoy it. So I started wondering about the wisdom of owning the house after retirement even if it is paid off. In my case, there is no question that stocks have been much better investment than the house. How can I compare two possibilities: 1) sell the house, invest the proceeds in stocks, and rent a nice apartment located in a city I like vs. 2) keep the house, pay property tax, and spend money on home improvements. What else do I have to consider other than return yields of stocks vs house. How do I do the math? Is there anyone who has done selling and renting?
adamthesmythe
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Re: Wisdom of owning house after retirement

Post by adamthesmythe »

The problem is not owning a house after retirement. The problem is owning the wrong house.
delamer
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Re: Wisdom of owning house after retirement

Post by delamer »

adamthesmythe wrote: Fri Dec 01, 2023 5:44 pm The problem is not owning a house after retirement. The problem is owning the wrong house.
Bingo. We bought a brand-new house once fully retired. The HOA takes care of lawn care and there’s no home maintenance to speak of.

Apartment living is very different than living in a single-family home. Sharing walls is an eventuality that I want to delay as long as possible.
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Sandtrap
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Re: Wisdom of owning house after retirement

Post by Sandtrap »

Ichthyo20023saurs wrote: Fri Dec 01, 2023 5:43 pm I retired a couple of years ago and I live off SS and savings. I live in a house that is all paid off but needs a lot of TLCs. Home improvements keep me busy but I do not necessarily enjoy it. So I started wondering about the wisdom of owning the house after retirement even if it is paid off. In my case, there is no question that stocks have been much better investment than the house. How can I compare two possibilities: 1) sell the house, invest the proceeds in stocks, and rent a nice apartment located in a city I like vs. 2) keep the house, pay property tax, and spend money on home improvements. What else do I have to consider other than return yields of stocks vs house. How do I do the math? Is there anyone who has done selling and renting?
If your "house" is your 'home" (to love and cherish and take care of as a thing of beauty and a joy to behold), then, there's no "math". You have that warm fuzzy feeling being in "your home" with your little kitty curled up against your cheek and purring as you fall asleep for a nap.

But, if you don't feel that way toward your "house" and it is not a "home", so there's just math.

So, do the math...then if you can find a "home", it doesn't matter whether you rent or buy it, as long as it "feels like home" and you "feel safe and secure" that you will never be kicked out of it or evicted or have to move, because the landlord is going to sell it, or keeps raising the rent unrealistically, or the new neighbor next to you has an electric guitar or loves to play video games with the subwoofer speakers on high.

see?

j :D
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Sandtrap
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Re: Wisdom of owning house after retirement

Post by Sandtrap »

Sandtrap wrote: Fri Dec 01, 2023 5:50 pm
Ichthyo20023saurs wrote: Fri Dec 01, 2023 5:43 pm I retired a couple of years ago and I live off SS and savings. I live in a house that is all paid off but needs a lot of TLCs. Home improvements keep me busy but I do not necessarily enjoy it. So I started wondering about the wisdom of owning the house after retirement even if it is paid off. In my case, there is no question that stocks have been much better investment than the house. How can I compare two possibilities: 1) sell the house, invest the proceeds in stocks, and rent a nice apartment located in a city I like vs. 2) keep the house, pay property tax, and spend money on home improvements. What else do I have to consider other than return yields of stocks vs house. How do I do the math? Is there anyone who has done selling and renting?
If your "house" is your 'home" (to love and cherish and take care of as a thing of beauty and a joy to behold), then, there's no "math". You have that warm fuzzy feeling being in "your home" with your little kitty curled up against your cheek and purring as you fall asleep for a nap.

But, if you don't feel that way toward your "house" and it is not a "home", so there's just math.

So, do the math...then if you can find a "home", it doesn't matter whether you rent or buy it, as long as it "feels like home" and you "feel safe and secure" that you will never be kicked out of it or evicted or have to move, because the landlord is going to sell it, or keeps raising the rent unrealistically, or the new neighbor next to you has an electric guitar or loves to play video games with the subwoofer speakers on high.

see?

what has worked out well for others in whatever configuration...is not "you"...and there's "only you" for what fits you". So, you have to find that out.

j :D
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sleepy06
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Re: Wisdom of owning house after retirement

Post by sleepy06 »

Not retired, but I have observed some folks perform too much home maintenance.
Excessive painting, hiring lots of high octane contractors that exuberantly perform exhaustive yet high quality work.
Perhaps there is a middle road. Just perform the absolutely necessary maintenance.
Can't go wrong with an apartment in a city you love but would recommend renting there first to know you would enjoy it.
The math in my opinion would just be putting it all in a spreadsheet and comparing the multitude of expenses.
TipsQuestions
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Re: Wisdom of owning house after retirement

Post by TipsQuestions »

Can you pay someone to take care of all the home and yard maintenance you mention (because eventually you'll have to) without worrying about the hit to your nest egg? If so, stay in the house. If not, find something more economical.
ItzaHoot
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Re: Wisdom of owning house after retirement

Post by ItzaHoot »

Retired, sold our house, invested the money, and rented a condo. that lasted 6 months. Absentee landlord working through a real estate agent that didn't do anything except deposit rent checks at randon intervals and make excuses for not fixing problems.

Moved out, rented a "luxury" apartment (yeah right...) and paid an early termination fee to leave after 6 months. To beging with, they nickle and dime you to death. Won't accept checks or let you pay rent in the management offices. Must use Rent Cafe. Of course, that requires to either let them debit your bank account or pay with a credit card. Add in a handling fee for paying your rent and them a surcharge for using a credit card since there's no way anyone is debiting my checking. Add in $35/month concierge trash service which is required but not part of the rent. It would be simple to drop trash in the dumpster but you still have to pay out $35. Then they accumulate the utility costs for the natural gaas for the grills, electric for common areas, including their offices, and common area water and sewer. Add it up, prorate it based on occupancy, and there's another chunk out of your pocket each month. Toss in a downstairs tennant that parties all hours of the night, the guy above us that obviously works second shift, comes home and stomps around and play catch with a large dog and a billiard ball all night, and when he's not home, the dog is continuously barking and whining. It was worth paying a 2 month penalty to get out of there.

Through out all of this, we were, and are, looking for a new home to buy. Currently we've been renting a house in a retirement community and our landlady is great. Hopefully, withing the next year, we'll find that "perfect" house and buy it.
Last edited by ItzaHoot on Fri Dec 01, 2023 7:50 pm, edited 1 time in total.
Zdex
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Re: Wisdom of owning house after retirement

Post by Zdex »

Ichthyo20023saurs wrote: Fri Dec 01, 2023 5:43 pmWhat else do I have to consider other than return yields of stocks vs house. How do I do the math?
Here's a big one: "imputed rent." There are jurisdictions, particularly in the EU, where you, the homeowner, are actually taxed on the rental income you would have received had you rented the home to a third party. The taxing authorities in these jurisdictions believe it is appropriate to tax you, the homeowner, as though you received rental income, because a taxable event is what would have happened if you were paying, or receiving, rent.

[Unnecessary comment removed by moderator Kendall.] More about it here:
US homeowners get a huge tax break almost nobody knows about, and it's even part of GDP

The Netherlands is one of just five countries that actually tax homeowners as if they're paying themselves rent. (The others are Iceland, Slovenia, Luxembourg, and Switzerland, according to the OECD.) But back here, some economists argue that not doing the same thing is like giving American homeowners a huge tax break, and is distorting the housing market.

US lawmakers decided long ago that landlords pay income tax, but not homeowners who live in their own homes. The US government taxes the income from stocks, savings-account interest, and rent received as a landlord. But if you own an asset like a house and live in it, that generates an implicit income that's free from tax.

You can think of the "return" on this investment as the value of paying yourself, rather than a landlord, even if it's not paying dividends or increasing in value.

"The issue really is that the imputed rent from your house is exempt," Eric Toder, codirector of the tax policy center at the Urban Institute, told Business Insider. "So if you finance a house by equity, it's as if you have money invested in the house. If you invested it in a Treasury bond, it'd be taxable income. This is income that is tax-free."

[Article length shortened in keeping with forum policy - moderator Kendall]
AlaskaTeach
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Re: Wisdom of owning house after retirement

Post by AlaskaTeach »

former homeowner here. Got it mostly correct when I bought in 2004. There were 3 repos on the street in McKinney TX, within walking distance to grades 6-12. Our boys were young elementary students, so l thought we had it made wrt re-sale value. Made a slight mistake and bought too much home. In hindsight we should have bought the 3/2.5/2 2100 s.f. home instead of the 4/2.5/2 2720 s. f. home we bought.

Maintenance was strange as one item was the water softener located outside, in the backyard. I paid a pretty penny to get it moved inside the garage.

Speaking of water the home also had a reverse osmosis system under the sink that I never did service, until getting new filters when we sold the home 14 years later.

But,the biggest headache was the awful HOA. They were never satisfied with my edging. Mistake was buying a corner lot. I had to edge both the sidewalk and the street. Totally unfair, to make a homeowner edge the street.

Had we bought the interior lot home, I would have only had to edge about 55 feet. I was edging about 65 feet wide by 110 feet deep, 175 feet. After they got under my skin about the edging they pursued other things like one time they took a picture of one piece of fence that was slightly off color from the other pieces.

Had I been retired and in a smaller place, none of this would have been an issue, but as a teacher with two part-time jobs, it was too much to handle easily. I did become an expert at buying home owner warranties, and also became an expert at getting the A/C unit serviced once a year.

I did a really nice job of rehabbing the home in 18 and sold the home that year. Came out ahead. Nowadays property taxes in Texas are super high, so I am not considering buying again. The apartment where the wife lives has high utility bills though, especially the water bill. Back in the day we never paid a water bill in an apt, but now they've got you good. I think the total utilities for a 2 bedroom 990 s.f. apt are about $350 per month. Rent is a fairly reasonable $1039.
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Re: Wisdom of owning house after retirement

Post by Parkinglotracer »

I rented a house once and it was a nightmare. Owner was delinquent on his mortgage I figured out when foreclosure and legal paperwork flooded his (which was now our address). Some mail was unsealed and it showed they were months behind in their mortgage. I found their chapter 13 bankruptcy notice in paper and confronted them on where I should pay my rent check. WW3 with landlord broke out,

To answer question I would think inflation might price someone out of renting at some point in retirement but I have never run the numbers.
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Re: Wisdom of owning house after retirement

Post by AlwaysLearningMore »

ItzaHoot wrote: Fri Dec 01, 2023 7:48 pm Retired, sold our house, invested the money, and rented a condo. that lasted 6 months. Absentee landlord working through a real estate agent that didn't do anything except deposit rent checks at randon intervals and make excuses for not fixing problems.

Moved out, rented a "luxury" apartment (yeah right...) and paid an early termination fee to leave after 6 months. To beging with, they nickle and dime you to death. Won't accept checks or let you pay rent in the management offices. Must use Rent Cafe. Of course, that requires to either let them debit your bank account or pay with a credit card. Add in a handling fee for paying your rent and them a surcharge for using a credit card since there's no way anyone is debiting my checking. Add in $35/month concierge trash service which is required but not part of the rent. It would be simple to drop trash in the dumpster but you still have to pay out $35. Then they accumulate the utility costs for the natural gaas for the grills, electric for common areas, including their offices, and common area water and sewer. Add it up, prorate it based on occupancy, and there's another chunk out of your pocket each month. Toss in a downstairs tennant that parties all hours of the night, the guy above us that obviously works second shift, comes home and stomps around and play catch with a large dog and a billiard ball all night, and when he's not home, the dog is continuously barking and whining. It was worth paying a 2 month penalty to get out of there.

Through out all of this, we were, and are, looking for a new home to buy. Currently we've been renting a house in a retirement community and our landlady is great. Hopefully, withing the next year, we'll find that "perfect" house and buy it.
Thanks, didn't know about those European countries that tax imputed rent. Sorry, not for me. Yet another reason I love America. 🇺🇸

"The main tax benefit of owning a house is that the imputed rental income homeowners receive is not taxed. Although that income is not taxed, homeowners still may deduct mortgage interest and property tax payments, as well as certain other expenses from their federal taxable income if they itemize their deductions. Additionally, homeowners may exclude, up to a limit, the capital gain they realize from the sale of a home."

https://www.taxpolicycenter.org/briefin ... eownership

"Owner/occupied houses are not the only assets or activities that generate imputed value. By the same economic logic, owning and using any other property -- cars, boats, refrigerators, washers/dryers etc. -- does so as well. So do self-performed services...."

Edit: I originally included a link to the Americanbar.org for citation of the second quote, but removed it in the event that a moderator found it to be political. It can be easily found online.

OP, agree with finding a house you can manage (of you like being a homeowner).
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Re: Wisdom of owning house after retirement

Post by JS-Elcano »

Zdex wrote: Fri Dec 01, 2023 7:50 pm
Ichthyo20023saurs wrote: Fri Dec 01, 2023 5:43 pmWhat else do I have to consider other than return yields of stocks vs house. How do I do the math?
Here's a big one: "imputed rent." There are jurisdictions, particularly in the EU, where you, the homeowner, are actually taxed on the rental income you would have received had you rented the home to a third party. The taxing authorities in these jurisdictions believe it is appropriate to tax you, the homeowner, as though you received rental income, because a taxable event is what would have happened if you were paying, or receiving, rent.

Personally, I believe this tax is outrageous. Thankfully, most jurisdictions do not tax imputed rent -- but some most certainly do. This favors home ownership in the United States. If tax-loving economists had their way, it would be taxed. More about it here:
US homeowners get a huge tax break almost nobody knows about, and it's even part of GDP

Benjamin van de Klundert calls the Amsterdam apartment he owns with his wife, Jessy, "cozy." The tall and narrow brick one-bedroom occupies the floors above a bar in the trendy De Pijp neighborhood.

But what makes it different than an apartment in, say, Williamsburg, Brooklyn, is that in the eyes of Dutch tax collectors, owning that home means the Van de Klunderts became landlords. Their tenant? Well, that's where things get weird. There isn't one.

The Van de Klunderts owe taxes on roughly what they would charge to rent the place to strangers, even though they don't. And Benjamin, who makes deals at a reinsurance company, is OK with that.

"This seems like the most fair way of taxing the capital one has when owning a house," Benjamin told Business Insider.

The Van de Klunderts are subject to what's called imputed rent, a concept that, even in the Byzantine world of economics and tax policy, is difficult to wrap your head around. But it has huge implications for the housing market, and how we measure the size of the economy, even in the US.

The Netherlands is one of just five countries that actually tax homeowners as if they're paying themselves rent. (The others are Iceland, Slovenia, Luxembourg, and Switzerland, according to the OECD.) But back here, some economists argue that not doing the same thing is like giving American homeowners a huge tax break, and is distorting the housing market.

US lawmakers decided long ago that landlords pay income tax, but not homeowners who live in their own homes. The US government taxes the income from stocks, savings-account interest, and rent received as a landlord. But if you own an asset like a house and live in it, that generates an implicit income that's free from tax.

You can think of the "return" on this investment as the value of paying yourself, rather than a landlord, even if it's not paying dividends or increasing in value.

"The issue really is that the imputed rent from your house is exempt," Eric Toder, codirector of the tax policy center at the Urban Institute, told Business Insider. "So if you finance a house by equity, it's as if you have money invested in the house. If you invested it in a Treasury bond, it'd be taxable income. This is income that is tax-free."

But just because it's tax-free doesn't mean the government doesn't care about it.
It is an interesting point. However, this tax is really rare even for Europe. Iceland, Luxembourg and Slovenia have a combined population of just above 3 million out of several 100 million Europeans in total, and Switzerland just abolished it (or is in the process of doing so). To say that home owners in the US get a tax break (as opposed to what's typical in other countries) seems an exaggeration to me. What happens here seems to be the rule rather than the exception.
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Re: Wisdom of owning house after retirement

Post by Jovby »

Ichthyo20023saurs wrote: Fri Dec 01, 2023 5:43 pm How do I do the math? Is there anyone who has done selling and renting?
One thing to consider is housing stability. As a renter you could be asked to leave at any time. Moving at 80 or 85 may be quite a challenge.

Perhaps sell your home and buy a newer one with less maintenance.
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Re: Wisdom of owning house after retirement

Post by PaddyMac »

I couldn't imagine wanting to not own my own home. I'm happy to do some gardening and we have housekeepers who keep up the place. We can do anything we want to the house without asking permission. Can't imagine having to give permission for a landlord to poke their nose into our business.

I have a good friend who rents a similar house nearby and while she doesn't have to pay for maintenance, she has to beg and beg to get things fixed. She would love to buy if she could afford it.
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Re: Wisdom of owning house after retirement

Post by watchnerd »

Paid for house, 2200 sq ft, 3 bed, 2 bath, 600 square foot basement, so nothing too large for 2 adults.

We have an acre of land with trees and wildlife, waterfront view from 180 degrees, personal well water (no water bill), private gated driveway, and own our own stretch of private beach with tidal rights 200 feet into the water.

Anything in our neighborhood of comparable quality that is rentable is rented out via Air BnB at outrageous rates.

There are certain lifestyle qualities one just can't get as a renter.
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Re: Wisdom of owning house after retirement

Post by chrisdds98 »

I retired a few years ago and have considered selling the house and renting. The reason I didn't do it a few years ago is due to low interest rates on bonds and stocks being at all time highs.

Renting would require more cash flow which would limit how much I would want to roth convert.

as of now I think I will sell the house in the burbs and move to my desired retirement location within a few years.
bendix
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Re: Wisdom of owning house after retirement

Post by bendix »

I rented for a while and I cannot recommend it. Whatever the math is, I cannot recommend it.
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Re: Wisdom of owning house after retirement

Post by boogiehead »

You can downsize and sell the house and buy a condo and invest the difference in equities.
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celia
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Re: Wisdom of owning house after retirement

Post by celia »

Ichthyo20023saurs wrote: Fri Dec 01, 2023 5:43 pm How can I compare two possibilities:
1) sell the house, invest the proceeds in stocks, and rent a nice apartment located in a city I like

vs.

2) keep the house, pay property tax, and spend money on home improvements.

What else do I have to consider other than return yields of stocks vs house. How do I do the math? Is there anyone who has done selling and renting?
Since you are comparing two vastly different scenarios, it doesn't make any sense to do a "math comparison".

This is like asking if you sold your tesla and used bus fare for transportation, how would they compare?

The cash in both comparisons would certainly be different but so would other other factors: right to do what you want when you want, interaction with others, taxes [if owned], maintenance, "exercise options" (yardwork and walking to bus stops), ...
barcharcraz
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Re: Wisdom of owning house after retirement

Post by barcharcraz »

When you do the math ensure you do it correctly. Real estate is very, very good at hiding both costs and risks. For example I think calculating risk as stock market traders tend to do, and as done in the modern portfolio theory that boglehead investment advice is based on does not work for homes. This is because (in a few ways) real estate tends to substitute liquidity risk for volatility. Mortgages also have structures and fees that benefit the bank. Ensure you understand all of them.

On "finding the right home is all that matters": I would not live in an area where you can't find rentals that are roughly equivalent to the homes for sale, if that's the case then it means the only reason anyone lives there is so they can afford to buy a home instead of renting. I'm sure someone will tell you "well they never make more land", and I guess that's true, but they absolutely do make more housing. IMO it's best to find somewhere where there are similar housing units available for rental and for purchase, and pick the one that makes the most financial sense.

Another factor is spending. If you're a heavy saver, as many bogleheads are, you probably don't feel the need to accumulate as much _stuff_ as the average American, and this makes moving cheaper. Having to deal with all the landlord shenanigans and the inability to lower your rents without moving is much, much easier if you can pay for talented full-service movers. For moves in the same city this is probably around $5,000-$10,000 (probably less than the closing costs of a house). The potential monetary benefits of being able to move in a hurry can also be really quite large.

I am pretty strongly anti-home-ownership as an investment, I'm a city-mouse though and in retirement I think it would be fun to be able to move around pretty frequently if I want to.

Thinking about this brought up a few questions in my mind, if anyone knows the answers:

1) For the usual US style fixed rate mortgage what actually happens to the equity parts of your payments? Can the bank invest them? Are they treated similarly to the float an insurance company maintains?

2) Is it correct that using an interest-only ARM is often financially the best way for people with fairly vast reserves of other assets to buy a house? Is it true that, barring that, a non-interest-only ARM is usually better than a fixed rate mortgage (keep in mind that high rates probably mean high inflation, somewhat offsetting the higher rate you get on the mortgage)?
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Re: Wisdom of owning house after retirement

Post by watchnerd »

barcharcraz wrote: Sat Dec 02, 2023 4:09 am I would not live in an area where you can't find rentals that are roughly equivalent to the homes for sale, if that's the case then it means the only reason anyone lives there is so they can afford to buy a home instead of renting.
How did you come to this conclusion?

I live in an area where the homes have waterfront access, private beaches, and some have private docks. None of them are rentals.

If you want to own a boat with a dock, renting isn't really an option.

So saying these boat-owning people can't afford to buy because there are no rentals in the market seems silly.
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barcharcraz
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Re: Wisdom of owning house after retirement

Post by barcharcraz »

watchnerd wrote: Sat Dec 02, 2023 7:03 am
barcharcraz wrote: Sat Dec 02, 2023 4:09 am I would not live in an area where you can't find rentals that are roughly equivalent to the homes for sale, if that's the case then it means the only reason anyone lives there is so they can afford to buy a home instead of renting.
How did you come to this conclusion?

I live in an area where the homes have waterfront access, private beaches, and some have private docks. None of them are rentals.

If you want to own a boat with a dock, renting isn't really an option.

So saying these boat-owning people can't afford to buy because there are no rentals in the market seems silly.
Well, if you want to own the dock then I suppose so. You can absolutely rent space at docks though. I would expect vacation rentals to be pretty common in such a place. This is a bit different than a normal rental so if you really want to live someplace like that full time then sure. Also if you really _do_ want to live someplace and there aren't any rentals around then that's fine, I just wouldn't think of it like an investment.

There are also some exceptions with gated communities, like the Medina, Washington, which probably has one of the highest median resident net worth on the planet. In that case the house really isn't the investment you're considering.
Last edited by barcharcraz on Sat Dec 02, 2023 7:27 am, edited 1 time in total.
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watchnerd
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Re: Wisdom of owning house after retirement

Post by watchnerd »

barcharcraz wrote: Sat Dec 02, 2023 7:22 am
watchnerd wrote: Sat Dec 02, 2023 7:03 am
barcharcraz wrote: Sat Dec 02, 2023 4:09 am I would not live in an area where you can't find rentals that are roughly equivalent to the homes for sale, if that's the case then it means the only reason anyone lives there is so they can afford to buy a home instead of renting.
How did you come to this conclusion?

I live in an area where the homes have waterfront access, private beaches, and some have private docks. None of them are rentals.

If you want to own a boat with a dock, renting isn't really an option.

So saying these boat-owning people can't afford to buy because there are no rentals in the market seems silly.
Well, if you want to own the dock then I suppose so. You can absolutely rent space at docks though. I would expect vacation rentals to be pretty common in such a place. This is a bit different than a normal rental so if you really want to live someplace like that full time then sure. Also if you really _do_ want to live someplace and there aren't any rentals around then that's fine, I just wouldn't think of it like an investment.
There are a handful of vacation rentals, but they're charged by the day or week.

That's pretty pricey on an annualized basis if you wanted to rent full time.
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Re: Wisdom of owning house after retirement

Post by snic »

Ichthyo20023saurs wrote: Fri Dec 01, 2023 5:43 pm I retired a couple of years ago and I live off SS and savings. I live in a house that is all paid off but needs a lot of TLCs. Home improvements keep me busy but I do not necessarily enjoy it. So I started wondering about the wisdom of owning the house after retirement even if it is paid off. In my case, there is no question that stocks have been much better investment than the house. How can I compare two possibilities: 1) sell the house, invest the proceeds in stocks, and rent a nice apartment located in a city I like vs. 2) keep the house, pay property tax, and spend money on home improvements. What else do I have to consider other than return yields of stocks vs house. How do I do the math? Is there anyone who has done selling and renting?
Have you considered what you'll be doing with your time if you're not spending it on home maintenance? It seems facetious, but I'm serious: it's a common story that after people retire, they get bored and run into problems because they don't know what to do with themselves. This could be a variant of that. You could try renting an AirBnB in a city you think you'll like for a month or two to see if you really do like it. If you do, I see no reason not to follow your plan to sell the house and rent. There's a risk you'll be forced to move because the landlord is wants to renovate the apartment or whatever, but if you can handle moving now, you can handle doing it again a few years from now - and if/when you CAN'T handle it, it's probably time to get more help - e.g., move into a retirement community that provides some level of services you need. For example, there are "independent living" facilities that provide meals, activities and transportation. This is probably not what you're looking for now, but might be a reasonable next step if/when living on your own becomes too much. So I wouldn't worry too much about the "you might be forced to move" problem. There are probably other ways to minimize the chances of being forced to move, such as choosing an apartment complex or building as opposed to a granny apartment attached to someone's house (although I guess rent increases that make it unaffordable are always a possibility, unless there is rent control).
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Re: Wisdom of owning house after retirement

Post by kayakprof »

Not sure this is entirely relevant to your situation. But my parents had a paid-off beautiful small(ish) home on a lake with 2 lightly wooded acres. It needed a lot of maintenance. As they aged, they decided to move into a retirement community. They paid for $360,000 for the house in the retirement community but do not own it. They pay all utilities. It is well maintained by the company, including the landscaping. However, they also pay a large monthly fee to be part of the community. When they moved in 2 years ago the monthly fee was $2800/month. In just two years, the fee has inflated to $3700/month. It seems like one could pay someone else A LOT of maintenance on the previously owned home at $44k/year. They are now concerned they will run out of money. And despite being in their late 70s/early 80s they are still very active (biking/kayaking) and feel like they aren't old enough to be in the retirement community.
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Re: Wisdom of owning house after retirement

Post by protagonist »

There are definite advantages and disadvantages to both, and OP, you seem like an analytic person who is probably well aware of them, so I need not explain.
If you can afford either, it boils down to what lifestyle you prefer.
Forget about the math. In most markets it is unpredictable. You have no idea where the stock market is headed if you rent, or the real estate market if you buy. You have no idea when you will require major repairs if you buy. This past year, a friend who was renting for $1500/mo saw her rent increase to $2400/mo, which was not uncommon here in FL....plus if you rent, you don't know when your landlord might decide to sell the house or move their inlaws in, and you will be forced to move.

If you like the idea of lack of responsibility and not being tied down, rent.
If you prefer the security and comfort of your own home, buy (but if in a new location, rent before you buy).
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Re: Wisdom of owning house after retirement

Post by Nowizard »

Sandtrap: +1.

Tim
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Re: Wisdom of owning house after retirement

Post by hudson »

Ichthyo20023saurs wrote: Fri Dec 01, 2023 5:43 pm I retired a couple of years ago and I live off SS and savings. I live in a house that is all paid off but needs a lot of TLCs. Home improvements keep me busy but I do not necessarily enjoy it. So I started wondering about the wisdom of owning the house after retirement even if it is paid off. In my case, there is no question that stocks have been much better investment than the house. How can I compare two possibilities: 1) sell the house, invest the proceeds in stocks, and rent a nice apartment located in a city I like vs. 2) keep the house, pay property tax, and spend money on home improvements. What else do I have to consider other than return yields of stocks vs house. How do I do the math? Is there anyone who has done selling and renting?
First I'd figure out what my house was worth by talking to a realtor. Then figure out what your share would be.
Then I'd figure the out-the-door price for an apartment in your favorite city....add 20% to 25% for stuff you don't know about.
Throw in moving expenses.
Throw the numbers onto the back of an envelope and you'll have a rough idea.
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Re: Wisdom of owning house after retirement

Post by LadyGeek »

Raraculus has a question which I've moved into a new thread. See: Thinking about a 5 year interest-only ARM - rent or buy?

(Thanks to the member who reported the post and explained what's wrong.)
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Re: Wisdom of owning house after retirement

Post by unwitting_gulag »

Long-term former owner here, now a renter. As others noted, it is imperative for a good ownership experience, to have bought a good house. If it's a lemon, then maintenance gets tiresome, and financially a dead-end; better to cut one's losses. If the house isn't a good investment, then one would feel foolish as an owner. If one has to live in the locale, for example for work or for family reasons, but feels no affinity for the locale - then it's probably better to rent.

As a renter, I have no stories of exasperation with my fellow tenants, or with fraught dynamics of renting. Lucky? It's also pleasing, to not worry about cost of remediation, during heavy rains that overflow the gutters. But it is mentally oppressive, as a self-assessed reduction in socioeconomic class. To be dependent on a landlord feels like a Medieval vassalhood. It is inconsistent with the effort of decades of attempt at savings and investment. One should "deserve" better, after said effort. One also feels envy of the homeowners who have seen their property-value balloon, while so many paper assets stagnated.

My personal conclusion is that it's hard to claim with a straight face that one's investments are "diversified", unless one happens to own real estate. As a renter, never mind how deftly I allocate between large-cap and small-cap US stocks, international stocks, bonds or whatever else... my portfolio is tilted... to paper assets. This is an unwelcome exposure to volatility.

In sum, it's better to rent than to be owning a bad house. It's even better to be owning a good house! An owner who becomes a renter, will feel a reduction in class, a missed opportunity for capital gains, and a de-diversification of investment portfolio. Is it worth it? It depends....
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Re: Wisdom of owning house after retirement

Post by Tib »

I bought a house that is too big for me and too old. I dislike maintenance and also dislike trying to find others to do it for me at a reasonable cost, especially in this tight labor market. There have been suggestions of moving to a newer house. I've been thinking of doing just that. But I've found that homes in new/newer developments in my area, except for those selling for about $2.5M, are tightly packed together and offer little privacy and little or no view. Or else privacy is secured by an 8-foot backyard wall that would give one the sense of living on cell block D. To get a new, low-maintenance house, I'd have to give up the privacy and the nice view of my present house. Guess I'll stay put, at least for now.
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Re: Wisdom of owning house after retirement

Post by Call_Me_Op »

protagonist wrote: Sat Dec 02, 2023 8:17 am There are definite advantages and disadvantages to both, and OP, you seem like an analytic person who is probably well aware of them, so I need not explain.
If you can afford either, it boils down to what lifestyle you prefer.
Forget about the math. In most markets it is unpredictable. You have no idea where the stock market is headed if you rent, or the real estate market if you buy. You have no idea when you will require major repairs if you buy. This past year, a friend who was renting for $1500/mo saw her rent increase to $2400/mo, which was not uncommon here in FL....plus if you rent, you don't know when your landlord might decide to sell the house or move their inlaws in, and you will be forced to move.

If you like the idea of lack of responsibility and not being tied down, rent.
If you prefer the security and comfort of your own home, buy (but if in a new location, rent before you buy).
Nicely said protag.
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Re: Wisdom of owning house after retirement

Post by barcharcraz »

unwitting_gulag wrote: Sat Dec 02, 2023 2:14 pm As a renter, I have no stories of exasperation with my fellow tenants, or with fraught dynamics of renting. Lucky? It's also pleasing, to not worry about cost of remediation, during heavy rains that overflow the gutters. But it is mentally oppressive, as a self-assessed reduction in socioeconomic class. To be dependent on a landlord feels like a Medieval vassalhood. It is inconsistent with the effort of decades of attempt at savings and investment. One should "deserve" better, after said effort. One also feels envy of the homeowners who have seen their property-value balloon, while so many paper assets stagnated.
extreeeeemly nitckpicky point, but perhaps helpful: From cursory research (wikipedia) vassalhood was more like a lack of sovereignty over the land than the lack of ownership over it. These are different, the sovereign gets to set the terms of ownership and the "rules of the game". While ownership is the ability to exploit the land and it's resources however you wanted. Vassals were given the rights we now associate with ownership. The difference between renters and owners is more like the difference between a freeholder and any other free man (or women, rare as it might have been).

Most of the money you pay in rent as a modern renter is not quite an economic rent in the way we usually consider it. Most of the portion that is such a rent is a rent on capital that's being paid to whatever bank the landlord got their loan from, and to the government.

You also aren't subject to most of the oppressive parts of the renter-tenant relationship if you have large holdings in other real assets and the ability to up and move.
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Re: Wisdom of owning house after retirement

Post by Silverado »

kayakprof wrote: Sat Dec 02, 2023 8:14 am Not sure this is entirely relevant to your situation. But my parents had a paid-off beautiful small(ish) home on a lake with 2 lightly wooded acres. It needed a lot of maintenance. As they aged, they decided to move into a retirement community. They paid for $360,000 for the house in the retirement community but do not own it. They pay all utilities. It is well maintained by the company, including the landscaping. However, they also pay a large monthly fee to be part of the community. When they moved in 2 years ago the monthly fee was $2800/month. In just two years, the fee has inflated to $3700/month. It seems like one could pay someone else A LOT of maintenance on the previously owned home at $44k/year. They are now concerned they will run out of money. And despite being in their late 70s/early 80s they are still very active (biking/kayaking) and feel like they aren't old enough to be in the retirement community.
Thanks for sharing this story.

Hope things work out for your parents.
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Re: Wisdom of owning house after retirement

Post by Hebell »

There's a third choice if you are happy to downsize yourself. Move into independent living right when you retire. (Not a continuous care facility, but a simple pay by the month business model). Your neighbors will all be older and they will be very very quiet. Pick a place that doesn't accept dogs.

We found a place solidly constructed, that backs up on a city park with access to bike trails. You can hear a pin drop here on Saturday night. At the same time you get to enjoy dinners when you want with other people, many who have had very interesting lives and enjoy having younger people around. You don't have the capricious policies that you see in luxury 55+ apartment buildings. You also won't be bothered by the smell of weed, which you will find many apartment buildings nowadays (even the nicest ones in the most sedate neighborhoods).

Plus you know as you age, you have priority on access to any assisted living should you need it. This assumes you pick a place that has both.

We are very happy with this decision.

(You have to be comfortable living with people with mobility problems, using walkers. This doesn't bother me at all, but it messes with some people's heads, or makes them depressed)
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Re: Wisdom of owning house after retirement

Post by vested1 »

I had enough of being subject to the authority of someone else when I was working, to ever consider selling my house and renting, subjecting myself to the whims of a landlord. I know that sounds overly dramatic, but you didn't know some of the landlords I had before buying our first house at age 42 with my current wife.

We were lucky because we were able to buy an older ranch in a not so great neighborhood in California and live there for 25 years. You can't pick your neighbors, and we certainly wouldn't have picked the one right next door from the time we moved in, although the others were great. We bought the house for 185k and it was recently listed at 986k, but the owners who bought from us missed the boat on timing so pulled it off the market. That house is 55 years old and counting and had numerous maintenance issues that I mostly handled myself for the 25 years we owned it.

We stayed there for the first 4 years of retirement then sold it at my age 67, 4 years ago last Friday, and moved to a LCOL state near a daughter and bought for cash with the proceeds of the sale with 6 figures left over. We now own a 5 year old house in a gated community on a lake with no mortgage. We don't need savings because of my wife's 30k non-cola 100% survivor pension and our combined SS cover all expenses and discretionary spending. As of Friday the 70% of our AA in index stocks is up over 20% ytd.

The house is single story luxury, twice as large, with 10 foot ceilings and too many upgrades to list. We have one neighbor and they are terrific. Maintenance on the house has been negligible, other than things we didn't need in California, like contracts for pest control, AC and heat, all well worth it. The HOA takes care of all outside maintenance. A house in the community that recently sold was listed for rent at $4,000 a month, although rentals are nearly non-existant.

My point is that selling then deciding to either buy or rent needs to include a goal which only you can determine, with hopefully an upgrade in the process. We couldn't upgrade in California because the money we got for the old house would only be enough to buy another one of the same quality.

Retirement isn't just about amassing huge amounts of money that you'll never have time to spend. It's also about gifting yourself, and a spouse if you have one, those things you never could have afforded while working because you were still in the accumulation stage. We earned our retirement like most everyone else, through sacrifice and hard work, and soon discovered that sacrifice and hard work are more appropriate pursuits for the younger crowd.
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Re: Wisdom of owning house after retirement

Post by Hebell »

It amazes me to see wide swing in feelings on owning a home in retirement. There are those like me who want nothing to do with it (after a lifetime of home ownership), and prefer to rent or live in independent living. Then there are others who view the final retirement home as the reward for a life of hard work.

No reconciling that! Go with your heart and physical care and mobility needs.
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Re: Wisdom of owning house after retirement

Post by lws »

After living here since the world began, I find it psychologically hard to move so I stay.
The casa is too big but I can deal with that.
Won't mind alternate living arrangement if necessary.
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Re: Wisdom of owning house after retirement

Post by Tib »

Really, every type of home has serious drawbacks---unless perhaps you positively enjoy keeping up a house and yard. Of course, homelessness is no picnic either.
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Re: Wisdom of owning house after retirement

Post by ncbill »

Ichthyo20023saurs wrote: Fri Dec 01, 2023 5:43 pm I retired a couple of years ago and I live off SS and savings. I live in a house that is all paid off but needs a lot of TLCs. Home improvements keep me busy but I do not necessarily enjoy it. So I started wondering about the wisdom of owning the house after retirement even if it is paid off. In my case, there is no question that stocks have been much better investment than the house. How can I compare two possibilities: 1) sell the house, invest the proceeds in stocks, and rent a nice apartment located in a city I like vs. 2) keep the house, pay property tax, and spend money on home improvements. What else do I have to consider other than return yields of stocks vs house. How do I do the math? Is there anyone who has done selling and renting?
You can always split the difference.

Most of the residents here in my townhome community are older couples who downsized from their detached SFR after the kids left.
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Re: Wisdom of owning house after retirement

Post by Scubadude »

unwitting_gulag wrote: Sat Dec 02, 2023 2:14 pm Long-term former owner here, now a renter. As others noted, it is imperative for a good ownership experience, to have bought a good house. If it's a lemon, then maintenance gets tiresome, and financially a dead-end; better to cut one's losses. If the house isn't a good investment, then one would feel foolish as an owner. If one has to live in the locale, for example for work or for family reasons, but feels no affinity for the locale - then it's probably better to rent.

As a renter, I have no stories of exasperation with my fellow tenants, or with fraught dynamics of renting. Lucky? It's also pleasing, to not worry about cost of remediation, during heavy rains that overflow the gutters. But it is mentally oppressive, as a self-assessed reduction in socioeconomic class. To be dependent on a landlord feels like a Medieval vassalhood. It is inconsistent with the effort of decades of attempt at savings and investment. One should "deserve" better, after said effort. One also feels envy of the homeowners who have seen their property-value balloon, while so many paper assets stagnated.

My personal conclusion is that it's hard to claim with a straight face that one's investments are "diversified", unless one happens to own real estate. As a renter, never mind how deftly I allocate between large-cap and small-cap US stocks, international stocks, bonds or whatever else... my portfolio is tilted... to paper assets. This is an unwelcome exposure to volatility.

In sum, it's better to rent than to be owning a bad house. It's even better to be owning a good house! An owner who becomes a renter, will feel a reduction in class, a missed opportunity for capital gains, and a de-diversification of investment portfolio. Is it worth it? It depends....
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Re: Wisdom of owning house after retirement

Post by snackdog »

There are places where you can purchase a fabulous condo in a community full of amenities. You maintain nothing. You pay a modest HOA fee and have pool, tennis, golf, maybe more. Lock and leave if you are vacation. Some have aging in place including meal plans at the clubhouse and nurse visits to your house.
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Re: Wisdom of owning house after retirement

Post by Dave5280 »

Do what makes you happy, and nothing has to be forever, so if you don’t like it move.

We’ve had bad neighbors as renters and as homeowners, so you never are in control of that part.
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Re: Wisdom of owning house after retirement

Post by 6bquick »

snic wrote: Sat Dec 02, 2023 7:32 am Have you considered what you'll be doing with your time if you're not spending it on home maintenance? It seems facetious, but I'm serious: it's a common story that after people retire, they get bored and run into problems because they don't know what to do with themselves. This could be a variant of that. You could try renting an AirBnB in a city you think you'll like for a month or two to see if you really do like it. If you do, I see no reason not to follow your plan to sell the house and rent. There's a risk you'll be forced to move because the landlord is wants to renovate the apartment or whatever, but if you can handle moving now, you can handle doing it again a few years from now - and if/when you CAN'T handle it, it's probably time to get more help - e.g., move into a retirement community that provides some level of services you need. For example, there are "independent living" facilities that provide meals, activities and transportation. This is probably not what you're looking for now, but might be a reasonable next step if/when living on your own becomes too much. So I wouldn't worry too much about the "you might be forced to move" problem. There are probably other ways to minimize the chances of being forced to move, such as choosing an apartment complex or building as opposed to a granny apartment attached to someone's house (although I guess rent increases that make it unaffordable are always a possibility, unless there is rent control).
Came here to say this as well. If you're a fidgeter, busybody, on-the-move type person, while home improvement/maintenance may not be ideal, it certainly may be scratching that itch, so to speak.
If your outgo exceeds your income, your upkeep will be your downfall
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Re: Wisdom of owning house after retirement

Post by stocknoob4111 »

I've rented all my life and never had any major issues. I am now retired but may consider buying in the future but the problem is that since I have never been a homeowner I don't have the experience and being retired with a fixed cashflow I don't want any surprise expenses that blow my budget out of the water.

Buying a home is a risk and if you've owned the home a long time then you pretty much know those risks pretty well, but buying something totally new it could be a huge risk to your budget - with renting you know what the maximum you're going to pay and sure it's an inconvenience to move but if there are noise issues and such you could always move out in a year when your lease is up - it's not a huge commitment like a home.
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Re: Wisdom of owning house after retirement

Post by Tib »

Your points are good ones, stocknoob. I bought my first home in retirement and didn't have experience (or interest) in home maintenance. I'm DIY for changing light bulbs but that's about it. Of course, this adds to the expense of home ownership. It was more relaxing to be a renter both because others arranged for maintenance and because I didn't have to worry about a financial hit from something like a slab leak or a falling tree. Also, when you're the owner, you somehow get sucked into expensive remodeling projects, even when you had no previous interest in such things. If you should want to sell, the remodeling probably better be in accord with the latest fads. Despite the recent run up in property values, I'm pretty sure I'd have been ahead financially if I had continued to rent. But that's partly because I'd probably have rented something smaller and less nice than my house. And unless you rent in a commercial building, your tenure isn't secure. Moving is not just an expensive hassle, it can get more challenging in the later years of retirement. I would buy a condo if I could find a nice one within my budget that is single-story, is in a convenient location, has to-the-door delivery of packages and groceries, and has a decent view that doesn't include other people's windows. Thus far I've not found such a condo.
Last edited by Tib on Wed Jan 17, 2024 12:15 am, edited 1 time in total.
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Re: Wisdom of owning house after retirement

Post by MoonOrb »

Financially, you should be considering:

Expected appreciation in the home, if you keep the home
Expected maintenance and home-associated expenses, if you keep the home
Expected insurance/mortgage/taxes, if you keep the home
Expected return of delta between home ownership and renting, if your monthly cost of ownership is lower and if you are going to invest and not spend that delta
Whether there are anticipated tax benefits to owning the home, if you keep the home


Expected net selling proceeds, if you sell the home
Expected monthly rental costs, and any rental-associated home expenses, if you sell the home
Expected return of invested sale proceeds, if you sell the home and invest and not spend the proceeds

Then you just have to consider everything else: the misery of maintenance and home ownership if you are not actually enjoying it vs. the likelihood that you'll have a more pleasurable experience renting; the possibility you may be forced to move one day if you rent; whether it's possible to live in your same neighborhood as a renter if that's something you want to do, etc.

I think you can just do some back of the envelope math here and as long as the "keep the house" side isn't a gigantic favorite over the "sell the house" side then you can just do what you want and what you think will bring you the most happiness. If "keep the house" pencils out to being a much smarter financial move, then maybe you dig into the numbers some more, or maybe you see if there are ways to make the experience of ownership somehow more pleasurable for you.
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Re: Wisdom of owning house after retirement

Post by stocknoob4111 »

Tib wrote: Tue Jan 16, 2024 8:02 pm Moving is not just an expensive hassle, it can get more challenging in the later years of retirement.
Yeah, that is a fair point and also important... I would buy if the home price is attractive and all included costs including maintenance is competitive with renting something similar, however currently in many metros it's considerably more expensive to own and with the recent rise in rates it's absurdly more expensive to own unless you're paying all cash.
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Re: Wisdom of owning house after retirement

Post by pasadena »

adamthesmythe wrote: Fri Dec 01, 2023 5:44 pm The problem is not owning a house after retirement. The problem is owning the wrong house.
This. To me, it's more of a peace of mind thing, than a financial one.

I do not want to have a monthly rent in my later years. I do not want to have the uncertainty of rent increases or non-renewed leases. I do not want to have to deal with a landlord. And I certainly do not want to be forced to move at 85 years old.

Now, I do think it requires a recent home, or one that has been recently renovated (not just remodeled). Because I also do not want to have to go through heavy renovations at 85. Nor do I want to baby an older house for the next 30 years.

Does that mean I'll buy one right away when I retire? Maybe not. Maybe I'll wait a few years. But I *will* buy one, and when I do, I'll make sure all of the above is true (or I can do all the renovation right away), and that there is no stairs :)

You can always sell this house, rent for a while, until you find a new house that fits you better for the future.
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