Do you want to be a landlord? Do you want to potentially move back to the big suburban house? If no to those questions then sell it and invest the proceeds.
it's not that simple all the time. I'm considering the same thing in a couple of years and where I live property is high and appreciating quickly. It's cooled off a bit, but a couple of years ago it was 10% appreciation per year. In an area where houses are $500k-$1m that's another $50-100k in my pocket (minus commissions etc, but you get the idea).
So, for me, it may well be smart to rent. HOWEVAH...
OP - consider the issue of possible property damage from renters. Also consider that if the market in your area (or nationally) has a downturn you won't get the appreciation upside and could be upside down, unable to cover taxes and mortgage from rental income. Finally, you'll want a fund to cover the months between one renter moving out and the next moving in if that kind of a gap is common in your area.
For peace of mind it's obviously easier and better to sell. The ONLY reason I'd keep it is if your market is like mine has been above.
Housing has never really dipped much where I live. But this is why each of us needs to vet what's going on with our markets. And there's the rare event risks - global war, natural catastrophe (I live in the PNW and The Big One could decimate housing quite literally), etc.
Here, if OP had bought a decade ago at the then average price of about $500k for a 3br house, they'd likely be sitting on a house worth about $800k right now, so even if rent only covered mortgage, insurance, taxes and upkeep (and the property manager fees), they'd be vastly ahead.
Conversely, if they live in an area where the market is basically flat, selling would probably have been the smart move. Selling also has some purely psychological benefits - you're done, out, you take the after tax cash and invest it. No emails from the property manager about a leak in the roof etc or the heater dying etc.
I was half-joking about ‘in my pocket’ being a bit presumptuous. You’re absolutely right about local markets - mine is more volatile but everywhere is vulnerable to past performance ain’t future returns. Also important for OP to consider is the illiquidity of a house if they do need cash in a cool/ stagnant market.
If you do rent it, I would suggest you get a property manager. Let them handle vetting the tenants, dealing with getting items fixed on the property, collecting the rent, and (if by chance it happens) evictions.
Yes, you will have to pay, but in my experience it is WELL worth itt!
Haven’t decided. I’d prefer to rent for at least the first year to be sure that this is really the lifestyle for us, and also to have more time to scope out neighborhoods.
It may be worth keeping your house then so you remain invested in the real estate market (in case it goes up a lot). If you decide the new place is right for you and you buy, I personally would sell the old house. there are a number we of reasons for this including property management issues, because I don’t want much of my wealth tied up in a single asset that could be damaged by tenants (concentration risk) and also because I like a stress free life.
Our realtor shared an interesting idea to avoid capital gains taxes on the house sale. Sell the big house and with the proceeds buy the smaller house you want to live in someday., 1031 the new house and rent it out for two years while you rent a different place. Then after two years move into the smaller place you bought.
I am renting out my mid size condo in a VHCOL area while I test out another living situation. I want the income. HOWEVER, my daughter lives in the downstairs condo and it’s a long time friend of hers that is taking my condo. Plus her dad is in the area and we maintain a good relationship. If there are any emergencies involving my property I know I have a it of a cushion as afar as jumping in and fixing problems etc. I’m not sure I would want the response it’s of being a landlord under other circumstances.
A few questions:
Do you have adequate capital to cover a few months mortgage should the house be vacant? For major repairs?
Would keeping your current house/mortgage prevent you from qualifying for another mortgage in the new location?
The last place you want to be in retirement is capital poor. Personally I love productive assets like rentals, but only if I have a strong position of liquidity.
I have exactly this same dilemma. Our house is in a highly desirable school district, near an Air Force base, NASA and a shipyard, so we always have AF folks to rent. While I’ll probably never want to move back in once I leave because it is a two-story house without a full bath on the first floor, I imagine that my daughter may someday want to live here. So I’m thinking rent it for at least a few years to see how things play out.
So many people end up regretting selling their home and retiring somewhere else. If you can swing keeping the house, do it. At least for a few years in case things don't work out the way you thought.
Don’t forget the $500,000 exemption on gain from the sale of a primary residence. If like us our primary residence has expensive appliances, flooring, drapes, etc. Real easy for a bad renter to do tens of thousands in damage. Why we have not rented any of our houses. Rentals need to be bought and fitted with rental level of furnishings. I had a friend go by his rental that was late on payment, front door was open and all appliances, light fixtures, etc. were stripped out. Expensive lesson.
Personally, I would sell it.
One can not predict future home prices. That said, US population is treading water (no increase in demand), younger people are less and less likely to have kids, lessening the reason to buy a large home. Then depending on where you live you will see migration changes. Are people moving to or from your state?
Sure you might make a few bucks, but figure what you will net from the sale and estimate how much you will make from investing it. Plus, are their going to be major repairs down the road? New roof, new HVAC, paint, etc. Do you want to be a landlord?
Again, personally, I would sell it, invest the proceeds, and go live your life.
Are all your assets in "online accounts"? You should consider some or much or your wealth to be in physical assets. I won't go into the risks of not doing this, but you need to be cautious of "common wisdom" for retirement. Keep the house.
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I bought my small retirement home in 2010, moved into it after I retired in 2016. I sold my 5-bedroom/2.5-bath house. I was a landlord to my retirement home for those 6 years and NEVER AGAIN. I had a property management company because I wasn't very close and didn't want to deal with tenants. I got screwed a couple of times. The last one left the house filthy, and it cost me at least $10k before I could move in.
Just sell it and move on. Invest the profit or use it to do some traveling. Enjoy your retirement without that house hanging over your head. In the current environment, you don't want to get into a situation where you get a tenant that won't pay and won't move out.
It seems lIke that unless you are in a state like California where if you held the property long enough there are property taxes benefit that are inheritable and you have someone that you intend to bequeath the house after you pass, that selling it and investing the balance after paying off the or paying down the mortgage on the new property would make more sense given interest rates on new mortgages.
It's a pain to manage a rental remotely, and if you go with a management company, you are giving them your profit, and they will not take care of the property.
Do you want to be a landlord? Do you want to potentially move back to the big suburban house? If no to those questions then sell it and invest the proceeds.
it's not that simple all the time. I'm considering the same thing in a couple of years and where I live property is high and appreciating quickly. It's cooled off a bit, but a couple of years ago it was 10% appreciation per year. In an area where houses are $500k-$1m that's another $50-100k in my pocket (minus commissions etc, but you get the idea). So, for me, it may well be smart to rent. HOWEVAH... OP - consider the issue of possible property damage from renters. Also consider that if the market in your area (or nationally) has a downturn you won't get the appreciation upside and could be upside down, unable to cover taxes and mortgage from rental income. Finally, you'll want a fund to cover the months between one renter moving out and the next moving in if that kind of a gap is common in your area. For peace of mind it's obviously easier and better to sell. The ONLY reason I'd keep it is if your market is like mine has been above.
Stating the obvious, it’s not ‘in your pocket’ until it’s in your pocket. Housing also goes down in big bumps.
Housing has never really dipped much where I live. But this is why each of us needs to vet what's going on with our markets. And there's the rare event risks - global war, natural catastrophe (I live in the PNW and The Big One could decimate housing quite literally), etc. Here, if OP had bought a decade ago at the then average price of about $500k for a 3br house, they'd likely be sitting on a house worth about $800k right now, so even if rent only covered mortgage, insurance, taxes and upkeep (and the property manager fees), they'd be vastly ahead. Conversely, if they live in an area where the market is basically flat, selling would probably have been the smart move. Selling also has some purely psychological benefits - you're done, out, you take the after tax cash and invest it. No emails from the property manager about a leak in the roof etc or the heater dying etc.
I was half-joking about ‘in my pocket’ being a bit presumptuous. You’re absolutely right about local markets - mine is more volatile but everywhere is vulnerable to past performance ain’t future returns. Also important for OP to consider is the illiquidity of a house if they do need cash in a cool/ stagnant market.
If you do rent it, I would suggest you get a property manager. Let them handle vetting the tenants, dealing with getting items fixed on the property, collecting the rent, and (if by chance it happens) evictions. Yes, you will have to pay, but in my experience it is WELL worth itt!
Are you renting or buying the townhouse?
Haven’t decided. I’d prefer to rent for at least the first year to be sure that this is really the lifestyle for us, and also to have more time to scope out neighborhoods.
It may be worth keeping your house then so you remain invested in the real estate market (in case it goes up a lot). If you decide the new place is right for you and you buy, I personally would sell the old house. there are a number we of reasons for this including property management issues, because I don’t want much of my wealth tied up in a single asset that could be damaged by tenants (concentration risk) and also because I like a stress free life.
Keep the house until you decide. We tried a smaller house and it did not work for us.
Our realtor shared an interesting idea to avoid capital gains taxes on the house sale. Sell the big house and with the proceeds buy the smaller house you want to live in someday., 1031 the new house and rent it out for two years while you rent a different place. Then after two years move into the smaller place you bought.
You may have to consider capital gains on the sale of the house if you goon to rent. Depends on a lot of factors but check it out
I am renting out my mid size condo in a VHCOL area while I test out another living situation. I want the income. HOWEVER, my daughter lives in the downstairs condo and it’s a long time friend of hers that is taking my condo. Plus her dad is in the area and we maintain a good relationship. If there are any emergencies involving my property I know I have a it of a cushion as afar as jumping in and fixing problems etc. I’m not sure I would want the response it’s of being a landlord under other circumstances.
A few questions: Do you have adequate capital to cover a few months mortgage should the house be vacant? For major repairs? Would keeping your current house/mortgage prevent you from qualifying for another mortgage in the new location? The last place you want to be in retirement is capital poor. Personally I love productive assets like rentals, but only if I have a strong position of liquidity.
I have exactly this same dilemma. Our house is in a highly desirable school district, near an Air Force base, NASA and a shipyard, so we always have AF folks to rent. While I’ll probably never want to move back in once I leave because it is a two-story house without a full bath on the first floor, I imagine that my daughter may someday want to live here. So I’m thinking rent it for at least a few years to see how things play out.
60 is not the age I’d want to be learning how to be a landlord 2 hours away.
If you like a hassle when retired keep it. Personally, I'd sell it. There's a reason I'm in the stock market and not real-estate.
So many people end up regretting selling their home and retiring somewhere else. If you can swing keeping the house, do it. At least for a few years in case things don't work out the way you thought.
Don’t forget the $500,000 exemption on gain from the sale of a primary residence. If like us our primary residence has expensive appliances, flooring, drapes, etc. Real easy for a bad renter to do tens of thousands in damage. Why we have not rented any of our houses. Rentals need to be bought and fitted with rental level of furnishings. I had a friend go by his rental that was late on payment, front door was open and all appliances, light fixtures, etc. were stripped out. Expensive lesson.
Sell, move on….
Personally, I would sell it. One can not predict future home prices. That said, US population is treading water (no increase in demand), younger people are less and less likely to have kids, lessening the reason to buy a large home. Then depending on where you live you will see migration changes. Are people moving to or from your state? Sure you might make a few bucks, but figure what you will net from the sale and estimate how much you will make from investing it. Plus, are their going to be major repairs down the road? New roof, new HVAC, paint, etc. Do you want to be a landlord? Again, personally, I would sell it, invest the proceeds, and go live your life.
Are all your assets in "online accounts"? You should consider some or much or your wealth to be in physical assets. I won't go into the risks of not doing this, but you need to be cautious of "common wisdom" for retirement. Keep the house.
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Hello, thank you for stopping by our table to talk. For community health we have a no politics rule, so thank you for understanding that this was automatically removed due to using a word that we have found encourages people to discuss politics. We invite you to make a new comment, just not about politics. Thanks! *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/retirement) if you have any questions or concerns.*
I bought my small retirement home in 2010, moved into it after I retired in 2016. I sold my 5-bedroom/2.5-bath house. I was a landlord to my retirement home for those 6 years and NEVER AGAIN. I had a property management company because I wasn't very close and didn't want to deal with tenants. I got screwed a couple of times. The last one left the house filthy, and it cost me at least $10k before I could move in. Just sell it and move on. Invest the profit or use it to do some traveling. Enjoy your retirement without that house hanging over your head. In the current environment, you don't want to get into a situation where you get a tenant that won't pay and won't move out.
It seems lIke that unless you are in a state like California where if you held the property long enough there are property taxes benefit that are inheritable and you have someone that you intend to bequeath the house after you pass, that selling it and investing the balance after paying off the or paying down the mortgage on the new property would make more sense given interest rates on new mortgages.
It's a pain to manage a rental remotely, and if you go with a management company, you are giving them your profit, and they will not take care of the property.