For many Americans, the idea of owning their home is ingrained in the concept of financial success. While homeownership may be a key component to wealth-building, it’s not always the best option for adults once their families have left the nest. Before going house hunting when you downsize in retirement, it’s important to consider the financial benefits of renting in retirement.
Benefits of Renting in Retirement vs. Homeownership
Homeownership can be the cornerstone of wealth creation, but once your home has appreciated, it may not be in your best interest to maintain that investment. Since 1968, home values have appreciated an average of 5.4 percent per year, according to the National Association of Realtors. Over the same time, the S&P 500 index appreciated at 10 percent each year.
If you leverage $400,000 in equity from the sale of your home and invest it at a 6 percent return, you’ll generate $24,000 before taxes each year, which can go a long way toward defraying rent expenses.
Surprise expenses are part and parcel with homeownership, and even predictable maintenance costs can make budgeting difficult when you own your home, and annual property tax assessments can be crippling when you own a high-value home. In contrast, renters fixed housing payment makes budgeting predictable and simple. When an appliance needs replaced or hail wrecks your roof, it’s covered by your monthly rent.
If you’re unsure about your housing needs in the long-term future, renting may be a more prudent decision. Buying a new home in which you live only a handful of years before moving on is expensive. Homeowners face closing costs and brokerage fees, not to mention any additional costs of preparing a home for sale. Expect to pay an additional 6 percent to real estate agents and 2-4 percent in closing fees. On a $400,000 sale, that can be up to $40,000 in fees.
While those costs are inevitable when you sell your current home. If you’re planning on staying less than 10 years in your next residence, it’s typically best to rent, as home values often don’t appreciate enough to make short-term ownership a financially prudent option.
Members of the 55 Resort at Water Valley Community enjoy more than luxury apartments and the benefits of renting in retirement. They make use of more than two dozen on-site amenities that are often impractical for homeowners, particularly those looking to downsize. Residents make use of our luxuries at no extra cost.
- Theater and Multimedia Room: Don’t sink money into a big-screen television, a theater-grade audio system and the square footage to make use of them. 55 Resort Apartments at Water Valley brings the home-theater experience to our residents.
- Community Dining Room: Continue to host dinner parties and other events. Our community dining room is perfect for dinner parties, and its connection to our community kitchen makes it easy for your guests to continue to enjoy your cooking.
- Fitness Center and Classes: Cancel your gym membership, as everything you need to burn calories is included in your rent. Our fitness center features top-of-the-line exercise equipment, and staff hosts spin, yoga and other exercise classes several times each week.
Unsure if renting is for you? Visit 55 Resort Apartments at Water Valley and take a look at our luxury floor plans and community amenities. Call 833-LEASE-55 (833- 532-7355) or visit our Contact page to schedule your visit.