Now that the kids are gone, you no longer need a five-bedroom home with a big backyard that is also expensive. But when it comes time to downsize, you need to make an important decision: buy or rent a two bedroom apartment in Glen Allen, VA?
While many long-time homeowners may resist the idea of renting, don’t dismiss it outright. Instead of sinking money into a new house, you may be better off putting it in your investment portfolio. For example, suppose you sell your five-bedroom home and net $300,000 in cash. If you invest that money and earn 6% annually, you’ll generate an extra $18,000 in the first year. Even after taxes, you’ll have a good amount left over to put toward rent, and the cost of homeownership will drop sharply or disappear altogether.
When deciding whether to buy or rent an apartment around Richmond, VA for retirement, estimate how much income you’ll need to pay the bills. You should also look at the costs of home prices versus yearly rent for comparable homes in your community. Other factors to consider range from projected rent hikes and renters' insurance premiums to the costs of home maintenance and property taxes.
You should also think about how long you expect to stay in your new place. Renting may be the better choice if you’re not sure where you want to settle down for good in retirement. This is especially true if you think you may move within three to five years. Otherwise, your home might not increase enough in value to offset your initial expenditures on things like real estate commissions and closing costs.
Don’t discount emotional issues when making this important decision. Do you love the idea of owning your own place and fixing it up the way you want? Or will it be a big relief after years of ownership not to worry about the lawn or a broken sump pump?
Deciding whether to buy or rent when downsizing depends on many factors. You should estimate your cash-flow needs, and assess the relative costs of home prices and yearly rents for comparable properties in a community. You also need to make certain assumptions, such as for investment growth, annual rent hikes, and the costs of home maintenance, property taxes, and homeowners and renters insurance.
Your decision will depend a lot on nonfinancial, emotional issues, as well. Do you love the idea of owning your own place and fixing it up the way you want? Or will it be a big relief after years of ownership not to worry about the lawn or a broken sump pump?
Darrow Kirkpatrick, 54, ran the numbers and decided that renting was a better option than buying when he downsized two years ago. Renting makes their monthly expenses predictable. You won’t get blindsided with roof repairs.