There are several wonderful reasons to consider downsizing in retirement. From lower utility bills to fewer maintenance obligations, downsizing is a great way to simplify your senior years. But the downsizing process is a lot of hard work. Among the many tough decisions that you will have to make, deciding what to do with your current home may be the most difficult. Here are some things to consider as you weigh your options.
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Do You Need Regular Income?
Renting out your current home is a good way to fund your new, downsized life. Renting it out will create a steady cash flow to help pay off your new mortgage. Then you can sell your home whenever the housing market is in your favor. This will also help you save money thanks to rental property tax deductions!
If you’re downsizing into an assisted living community, renting out your home can help you pay for your care costs. If you’re planning to buy a home, you might need the equity you’ve built in your current home.
Do You Want to Be a Landlord?
Whether it’s for vacationers or long-term tenants, renting out a home is a lot like running a business. It’s a hands-on endeavor that can take a lot of time and mental stamina. As a landlord, you would be responsible for a wide variety of tasks, from marketing your home and coordinating maintenance to tracking down missed payments and keeping an eye on your tenants. Not everyone is willing to take on these responsibilities, especially when they’re moving far away or transitioning into assisted living.
Working with a property manager can lessen your workload but will also reduce your rental profits. If you decide to hire help, HGTV recommends selecting property managers based on referrals from friends or real estate agents and then interviewing your top picks. Look for a property manager that offers local hospitality through housekeeping services and on-site support. Some managers also promise high-level tenant screening so that your home is less likely to be damaged.
Would You Make More Money Selling Your Home?
Of course, selling your home is another way to cover the costs of a new house or a move into assisted living. To decide whether to sell or rent your house, MoneyCrashers recommends calculating all the costs of renting out your home. For example, you’ll have to cover ongoing mortgage payments, property taxes, regular maintenance, emergency repairs, and any property management fees. If you won’t be able to make a profit after deducting these expenses, you may want to consider selling instead.
However, selling your home isn’t without expenses, either. You’ll lose about 10 percent of your home sale price in real estate agent commissions, closing fees, moving costs, and other related expenses. Another downside to selling is that you won’t be able to keep your home in the family.
Are You Emotionally Attached to Your Home?
Selling the family home can be very emotional. If you’re not ready to give it up just yet, consider having a family member care for it. This can also be a good option for people who don’t want to be landlords or feel uncertain about allowing strangers into their homes. If you need to secure a regular income, consider charging your family members rent for staying there—just make sure you follow the tax rules when renting to a relative.
Even if you don't need the money, having someone stay in your home can give you peace of mind that your property won't fall victim to squatters, vandalism, and out-of-hand maintenance problems. You can even gift your home to your family members as an early inheritance and let them decide what to do with it!
Deciding what to do with your home can take some time. Don’t feel like you have to make this big decision based on financial factors alone. If you cherish your home and hate the thought of selling or renting it out to someone else, you always have other options. It’s important to do whatever feels right to you!
For more information on helping seniors, check out Elderaction.org.