Preparing for retirement can be a complex task, with many decisions to be made. When retirement is on the horizon for homeowners, one of the big questions to answer is: what should we do with the house?
Multiple options exist, and there isn’t a one-size-fits-all. Deciding what to do with a house when retirement is nearing or has arrived will depend on factors that vary per person. However, homeowners must consider their options early to make the best financial decision. Here’s what you can do with your house if you’re retiring soon.
Option 1: Sell The House
Selling a house can benefit some homeowners planning to retire soon, especially if the property is owned outright — meaning they have no mortgage or liens. The benefits of selling a home when retiring can include the following:
- An opportunity to downsize to a more affordable home or relocate to a less expensive neighborhood/city
- Fewer house-related expenses if transitioning to a limited-maintenance condo or retirement community where the HOA handles lawn care and snow removal
- Rental insurance is often less expensive than homeowner’s insurance
- Eliminates paying property tax
- An influx of cash that homeowners may need for post-retirement living
Even if the property has an existing home loan, money may be made when selling, downsizing, or moving to a less expensive area. However, some things can affect how much money is made from selling a property and how far that profit may stretch.
The current real estate market is a key factor regarding how much homeowners may profit from selling their houses. It’s important to remember the market fluctuates and may vary significantly by city and region.
Option 2: Use The House As A Rental
For some homeowners transitioning into retirement, setting up their house as a rental property may be a profitable way to keep the home and earn a profit. Using a home as a rental often has pros and cons, so it’s a solution that homeowners should consider from all angles.
Some HOAs don’t allow short-term rentals, so setting up the home as an Airbnb may not be possible. However, where Airbnbs are permitted, the short-term rental model can offer more flexibility and a potential return on investment that could be higher than renting to a single tenant for a longer lease.
Like the real estate market, rental rates will vary depending on the neighborhood, city, proximity to public transportation, shopping, dining, schools, parks, and highways. If considering an Airbnb rental, proximity to an airport can also be a plus.
Option 3: Employ A House Sitter
A house sitter stays in the home, caring for it while the owners are away. This option can be an alternative if becoming a landlord and renting the home out doesn’t hold any appeal.
Homeowners often use house sitters when traveling, and the pets must stay home. For a vacation, the house sitter may only be there for a week or two, caring for the home and pet, bringing in the mail, and handling any deliveries that may arrive.
Homeowners should consider the following questions when considering a house sitter for an extended period:
- Should I hire a friend/relative, so it’s a known person living in my home?
- Should I hire a house sitter from a website?
- How much is a house sitter paid? Are taxes involved?
- What kind of liability falls on the homeowner?
- How is a house sitter contract different from a rental lease?
Employing a house sitter may be an option for homeowners who do not want to sell because the house is needed for a specific time each year. Many have found it fits the retirement lifestyle to have a second residence (owned or rented) in another state, where the climate is more conducive to outdoor activities or puts retirees closer to family and friends.
Option 4: Modify For A Retirement Lifestyle
Modifying the space and property to fit a retirement lifestyle may offer more flexibility and be more cost-efficient than selling the house and moving. Depending on the budget, consider renovations that will open rooms, add accessibility features, update the most-used areas, and create outdoor living space suited for a relaxing retirement. Funding for these projects may come from cash reserves, a home equity loan, a cash-out refinance, or an unsecured personal loan.
Your Home & Retirement
Every retiree is unique, making deciding what to do regarding living space and the home very personal. Whatever the retirement situation, it’s essential to think about plans long before that last day of work. Financial retirement planning is crucial and will directly affect whether or not the current house remains the long-term home.