Your kids are long out of the house, and you’re thinking of selling and downsizing—and maybe moving to a different area altogether.
If you’ve been a homeowner for a long time, and especially if you have substantial equity in your current home, buying a new place might seem like the natural option.
But increasingly, older homeowners are finding that renting makes more sense, both financially and logistically.
The number of renters ages 50 – 64 rose 87% between 2000 and 2017, according to an analysis conducted by the Joint Center for Housing Studies at Harvard University, and the number age 65 and older rose 55%.
The case for renting
While some of the increase in older renters reflects an aging population, the dramatic rise goes beyond what the demographic shift would suggest, notes another Harvard report.
“A bigger home typically comes with bigger problems,” said Robert Johnson, a finance professor at the Heider College of Business at Creighton University in Omaha, Neb.
That’s proved to be true for Craig Carlson, 59, and his wife, who sold their six-bedroom house in suburban Hinsdale, Ill., when their last son headed off to college five years ago. The couple moved to downtown Chicago, where they rent a luxury apartment, complete with new appliances and an outdoor deck and pool.
“We have simplified things and developed new groups of great friends who have similar lifestyles,” says Carlson.
It’s often cheaper to rent, too: According to a recent report from Attom Data Solutions, it’s more economical to rent than buy in over half of U.S. counties.
But there are many factors that go into the decision that go beyond the monthly nut. These three questions can help you determine whether going from owning to renting may be your best option.
How long will you stay? Selling one house and buying another one is costly. There are fees for a real estate agent, closing costs and movers, among other expenses, says Greg McBride, chief financial analyst for Bankrate, a New York-based financial data and content company.
You need to stay for a while to recoup the costs of a sale, so if you have any reason to think you’ll be packing up in the near future—say, if you’re retiring soon or you or your spouse are in poor health—renting might make more sense.
If you’re relocating, it almost certainly makes sense to rent, at least for a while, says Ron McCoy, CEO of Freedom Capital Advisors in Winter Garden, Fla. “Give yourself time to decide if you like the area,” he says.
Is your home suited for elderly living? If your current home isn’t age-in-place friendly, you may need to factor in the cost and irritation of minor or major renovation projects down the line.
Meanwhile, many rental properties are already set up to accommodate aging bodies.
That said, many condos and homeowners associations have rules on everything from pet ownership to painting, that may not jive with your plans.
How flexible is your budget? While renting gives you greater flexibility in many ways, it isn’t risk-free. Landlords can raise the rent every year—or even sell the place altogether, forcing you to move.
“When you’re retired, the bulk of your income will be fixed and rising rent can squeeze your standard of living as the years progress,” says McBride.
If you have more equity than savings, however, that cash might come in handy to plump up your retirement funds. And if renting is cheaper than owning in your market, you’ll get an extra boost.
That’s how it’s worked out for Carlson. “We paid a lot in property taxes and now our rent is cheaper than our mortgage,” he says.