Making Retirement Easier: Four Reasons to Rent

When I finished college, I moved to Arizona, a city I knew very little about. A year later, I moved again. A year later, my company moved me to Colorado. The point is that when life is quickly shifting, it makes sense to have flexible housing. The retirement downsize is one of those times.

If you’re selling your forever home and figuring out what’s next, here are four good reasons to rent:

Try The Neighborhood Before Buying

When moving to a new location, a Google search of “best neighborhoods in (area) for retirees” probably isn’t adequate. I worked with a couple who bought, sold, and bought again during COVID, eliminating almost 25% of their original equity. It turned out that the areas they loved to vacation in weren’t as appealing to live in.

This option is admittedly easier in urban than rural areas, as the home’s style, layout, or location may only be available for purchase. Several companies, such as AMH (formerly American Homes 4 Rent), are trying to institutionalize single-family rentals. 

Predictable Costs

Initial homeownership costs tend to be unpredictable. The third home I bought required three new basement floors within the first year due to flooding. We weren’t even among most new buyers who waived inspection on purchase. When you rent, you can reliably arrange your costs during your lease term. The downside is that you have no control over lease renewal and may find yourself moving again.

Turnkey or Move-in Ready

We often think of turnkey in terms of moving in. You turn the key, and your move-in is complete.

The benefit of renting being turnkey is that you can turn the key and leave.

It’s rare to see a retiree who doesn’t have travel as a significant item in their annual budget. When I leave my home for vacations, I check the HVAC, sump pump, and outside drains and ensure my dog is cared for. Renters only have to think about their dogs.

The Kids Won’t Fight (as much)

Speaking to a well-respected trust and estate attorney several years ago, he claimed he had never handled an estate with three or more children where there wasn’t conflict. The center of the conflict is almost always real estate. Michelle wants to hang on to the property so all the grandkids have a place to gather. Kevin wants to turn it into a rental to increase passive income. Sam wants to sell it because he needs the money.

People incorrectly assume that inheriting real estate is more tax-friendly than a liquid taxable investment account. Both are considered capital assets that are likely to receive a step-up on the basis of death. 

The reality is that your financial status and the life you want to lead should dictate whether you rent or own.