We've been working on our retirement plan more diligently lately. And one of the things we've realized in the process is that we might like to rent in retirement. While it isn't a foregone conclusion at this point, we've realized that there could be some valuable benefits that come along with renting during our golden years. And in an effort to cut costs while still having some sort of active lifestyle, renting in retirement could be the way to go.
A place to call home
Don't get me wrong, we don't want to be transient renters without a place to call our own. However, there are plenty of people who buy vacation homes in retirement to pair with their regular living location. Rather than fix ourselves to two permanent locations, I think we'd prefer to have one base of operation - preferably a paid off home with low property taxes, low utilities, and near family and friends so they can check on it while we're away - and a rental.
Renting rather than buying a vacation home
But why rent rather than buy? It's a good question, and one I don't think people consider closely enough.
So let's consider the option of renting a place rather than buying in retirement. The cost of rent let's say is $1,000 a month. Now let's say our other option is to buy a vacation home in cash. Seems like a no-brainer, right? Owning a vacation condo outright seems like the clear answer. But then consider in our example that associated with the vacation home purchase there is also $300 a month in property taxes, $200 in utilities (whether we're there or not), it's a condo with $350 a month assessments, it's near the beach, so there is $150 a month homeowners insurance, then there are regular repairs, upkeep, and maintenance that go along with the maintenance of the property and that aren't included in the monthly assessment that run another $200 a month on average.
Then of course if we ever want to sell in an effort to live somewhere else, there could be as much as 10 percent or more of the sale price of the property going toward things like agent commission and closing costs. And there is always the chance of special assessments for things like major repairs or storm damage. Bear in mind, this is all without a mortgage, which could add even more to the carrying costs of a vacation home. Of course the space could be rented to recoup some of these costs while it's empty, but that's assuming we would want to deal with renters in our home.
Mobility and the chance to experience new places
Personally, we'd prefer the mobility of renting. Should we want to try a new spot, we give our notice and vacate after our year lease is up. In a home situation, we would have to find a real estate agent, prepare and stage the home for sale, have showings and potentially open houses, wait for someone to make an offer, and then negotiate a deal all before moving on to our next spot.
To me, it just seems like renting is a simpler way to experience new locations in retirement without all the strings attached that come with actually owning a property. But everyone has their own preference, and for those who want to settle in one spot and remain there, owning can have its benefits as well. It really just depends on the situation and one's personal preference.
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The author is not a licensed financial or real estate professional. This article is for informational purposes only and does not constitute advice of any kind. Calculations have not been verified by a professional. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
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