Should I Sell My House and Rent When I Retire?

Retirement is a big step in your life, whether it’s happening now, in a few years, or you’re just planning ahead. It’s likely you have a vision for what retired life looks like, including where you plan to live. However, if you’re stuck between selling your home and becoming a renter when you retire, the decision may be a little harder.

In this Redfin article, we’ll help you answer the question – should I sell my house and rent when I retire? Whether you considering selling your home in Orlando, FL, or your house in Boise, ID, here’s what to consider before jumping from homeowner to renter.

Should you sell your house and rent when you retire?

It depends, the decision to sell your house and rent when you retire is unique to each individual. There are lots of pros and cons to consider depending on your specific retirement plans. It’s also helpful to ask yourself a few questions that can help you make the decision.

For many, it can make a lot of sense to sell their house and rent when they retire. It provides a large sum of cash to help with retirement goals. Becoming a renter provides additional flexibility in terms of commitment to a specific property or location. However, you’ll need to consider the other options available, like keeping your current home, renting out the house, or using home equity as a new loan.

Pros and cons of selling a house and renting in retirement

These are some of the pros and cons to consider when deciding if you want to sell your house and rent when you retire.

Pros of selling your house and becoming a renter

• You’ll have fewer home maintenance responsibilities, as a renter. Most apartment communities have on-site maintenance staff that fix issues and keep the property clean.
• You may be able to rent a new home that accommodates aging in place. Renting a condo with an entry level primary bedroom might be the right switch, compared to staying in a two-story home with stairs.
• Renting offers greater flexibility, allowing you to relocate to a new city. Most leases last for a year, so if you decide to move again, you have the option.
• In some locations, rent may be more affordable than a mortgage payment. This is highly dependent on your local housing and rental markets.
• You’ll won’t have the costs of owning a home, such as property taxes and homeowners insurance. When you rent, the landlord covers these cost, however you’ll still need renter’s insurance.
• You can use your home sale proceeds for supplemental income or activities like traveling. While you can put these proceeds towards rent, you may have additional income to use towards other goals.

Cons of selling your house and becoming a renter

• Rent may be more expensive than your monthly mortgage payment. Depending on where you live or want to move to renting could be more expensive. Also if you have paid off your mortgage, switching to renting is a new monthly cost to account for.
• You may be subject to capital gains tax. When you sell your house and make a profit, you may be subject to capital gains tax.
• You may face rent increases. It’s common for landlords to increase your rent each year, so this is an additional cost to be aware of.
• Paying rent means you can no longer build home equity. If you still have a mortgage, you won’t be building anymore home equity when you sell. Rent goes to your landlord every month and helps them build equity in their properties.
• You may need to follow additional rules and regulations, which can be specific to the apartment community or if the rental home has a homeowners association (HOA).
• You may not be permitted to make property renovations or home modifications to age in place. Rentals have additional restrictions about what you can change.

5 tips on selling vs renting a house when retiring

As mentioned before, the decision to sell a house and rent after retirement is unique everyone. To make the best assessment for yourself, here are some tips to consider:

1. Evaluate your current housing expenses

A great place to start is by understanding your current housing expenses and how that will factor into your decision to sell your home and rent after retirement. Look at all your expenses, not just mortgage payments, property taxes, and home insurance costs. How much do you spend maintaining the home monthly? Yearly? Are there any improvements you have planned before or when you retire?

2. Think about your lifestyle

Do you like to travel or plan on doing a lot of it when you retire? Renting might be a good option so you can build up a travel fund with a big payday when you sell. On the flip side, renting your current home and using it as a source of income could make sense as well.

3. Assess your retirement savings

Estimate what you’ll have in retirement savings. Will it be enough? Would selling your home or turning it into a rental income property help increase your retirement savings to help achieve your retirement goals?

4. Consider where you want to live

Deciding where to live at any stage in life is a big decision. When it comes to retirement, it becomes even bigger. If you know you don’t want to live in your current area, selling and then renting might make sense. If you don’t plan to leave your city, then it may be better to keep your home.

5. Research whether it’s cheaper to rent or own

Do the math on whether it’s cheaper to rent versus owning a house in the market you want to live in. This is a big factor in your decision to sell your house and rent after retirement if you’re worried about having enough money to retire.

6. Decide if it’s a good time to sell

Ask a real estate agent about the current housing market trends and conditions in your area and in the area you want to live. The best time for you to sell a house should depend partly on the local housing market.

Alternatives to selling a house and renting after retirement

Selling a house and renting after retirement is only one of many options to consider. Let’s look at a few more:

• Rent out your house: If your housing costs are low and rent is too expensive, you may want to keep your home and earn rental income by turning it into an investment property.
• Age in place: There are plenty of aging in place modifications to consider that can help you along the way.
• Airbnb your house: If you like to travel, consider the option to Airbnb your house. This can allow you to rent out the house on your own time, rather than commit to a long-term tenant.
• Take out a reverse mortgage: If you need some supplemental retirement income, a reverse mortgage might be a way to use the equity in your home to create a monthly stream of funds.

Selling a house and renting after retirement can be a great way to start a new path more conducive to the lifestyle change that retirement brings. It can provide more flexibility, the ability to age intentionally, and additional income to fund the next phase of your life. It’s not for everyone, but it’s certainly something to consider.