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Here’s How Your
Home Can Become a Financial Tool When You Downsize in Retirement
When senior citizens choose to
downsize, one of the first (and biggest) decisions they have to make is what to
do with their current home. Should they put it on the market? Rent it? Keep it
in the family? There are a lot of details that can help determine the best
option for a senior - such as where they’re moving, their budget, and their
home’s condition - and it’s a decision that should be made carefully.
Most homeowners realize their property serves
two purposes: Your house is the place you call home, but it’s also an
investment. When we’re young, we tend to focus primarily on the first reason
for home ownership. For seniors, though, it can be smart to start thinking
about how your home can also serve as an investment, especially if you’re
planning to downsize. When you’re ready to find a place that’s better suited to
aging in place, Forbes explains how your home is a source of equity that you can use to your advantage.
Are the
Market Conditions Right for Selling?
Some real estate agents will tell you there’s
never a bad time to sell, but market conditions can make a difference in how
quickly you sell and the price you get. Currently in Orlando, homes are selling
for an average of $257,000. Other market factors
can impact your potential for selling as well, such as the local economy,
mortgage rates, and even the time of year. Since you’re looking to sell in
Florida, you don’t have to avoid selling in the winter, since you won’t need to
contend with harsh conditions like snow and ice. However, local conditions can
make a difference depending on trends in your area.
How to
Get the Greatest Windfall - Sell Now or Rent?
The answer to this question is that it
depends. In addition to market conditions that influence your potential sales
price, you also want to consider what the rental market is like in your area.
Money Crashers recommends searching for comparable rental homes near where you live to get an
idea of what you can anticipate bringing in. If you live in an area that’s
popular with tourists, you may even want to consider renting it as a vacation home rather than a full-time rental.
Once you have a general idea of how much you
can expect to earn through rent, you also want to make sure you know how much
it will cost you. Besides paying the mortgage (if you don’t own the home free
and clear), don’t forget about property taxes, maintenance (for instance, if a
dishwasher needed repairing, it could cost $150-$200) , and any costs associated
with being a landlord, such as rental income taxes,
marketing, and accounting. If you come out netting a profit once all expenses
are accounted for, renting the property may be a smart way to generate extra
income in retirement while holding onto your home as an asset that can serve
you in the future.
Other
Logistics
Even after you’ve run the numbers, don’t
forget that there are logistical issues that might make one option better than
the other. For example, if you’re thinking about renting out your home, would
you manage it yourself, or would you need to hire a property manager? Since you’re downsizing, you
probably also have more possessions than you can keep in your new home. If you
plan on selling, have you considered what to do with those things you can’t
take? If you rent it out, would you keep it furnished? These are just a few of
the many logistical issues to think about before making a decision.
How Do
You Feel About Selling?
The financial impact of whatever you decide should
work out in your favor, but regardless of the numbers, how do you feel about
selling vs. keeping the home? Letting go of your family home is a highly
emotional decision, not to mention the added stress that can come from the process of
selling. On the other hand, many seniors downsize in part because they want to simplify life. In this case, keeping a home as
a rental may be more of a burden than you want right now.
We know that there are a lot of questions to
consider, and that can be overwhelming when you’re making such a big decision.
Of course, you want to make sure you do what makes sense financially, but don’t
discount the emotional factor as well. All in all, look at this as an
opportunity to fund your future as you downsize and start the next adventure.
Contributed by Jim
Vogel of elderaction.org. For more information, contact Jim at Jim@elderaction.org
The Climer School of Real Estate, the best Real Estate School in Florida, is proud to host any and all beneficial and positive contributions from other sources. Call 407-822-3926 for information on your real estate class. Start Your Real Estate career the right way, www.climerrealestateschool.com
The Climer School of Real Estate, the best Real Estate School in Florida, is proud to host any and all beneficial and positive contributions from other sources. Call 407-822-3926 for information on your real estate class. Start Your Real Estate career the right way, www.climerrealestateschool.com
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