You’ve recently received your Medicare card, you’re signed up for Social Security, and now you’re ready to really “retire.” When you decide what this means to you, you might find that your current house doesn’t fit the plan. You may need a smaller space, especially if you live alone, can’t afford the utilities, or have budding issues with mobility or vision.
The big question now is what to do with your home. Should you keep it to leave as an estate for your family? Is it better to sell it and put the money toward your smaller space? If you don’t need a quick injection of cash, can you rent it out for enough money to cover your new mortgage?
Prepare a Sound Budget
The last thing any retiree wants to do is set themselves up for a precarious financial future. With that in mind, carefully establish a budget for whatever downsizing solutions you’re seriously considering. Weigh in factors like cost of living in your new living situation, what you can earn from your solution, and don’t forget that moving will be one expense you can count on.
Movers are notorious for scamming people, especially seniors. As you tally up costs and to avoid becoming one of their victims, be sure to research reviews from actual customers before you select a moving company. Get quotes from several companies in your area, and make sure you understand in detail what services their quotes cover.
Before you commit to putting your home on the market, you’ll need to figure out what it’s worth and how much you’ll make from the sale. There are many things that go into this, but a good starting point is to determine the average selling price in your area. If you have significant equity, or better yet, if your home is paid off, you might be able to purchase your next home outright, and/or pay off other debts.
Selling is usually a great idea if you have a larger home and enough equity to avoid a mortgage in the future. For example, if you owe $100,000 on a home that you expect to sell for $500,000, you can reasonably anticipate buying a $300,000 condo or cottage and having some money to spare to cover closing costs and any senior-friendly changes you want to make to your new home.
Keep in mind that you will also need to compare your property to similar properties within a few miles of where you’re located. Take into consideration the condition of your home, and then determine if you want to sell as-is or make upgrades that might increase its value.
If you don’t have a ton of equity, it might make better financial sense to turn your house into a rental. This can be especially prudent if you have a low monthly mortgage and your home is in an area with relatively high rental rates. Renting for more than you pay each month, when you factor in insurance and maintenance, ensures your mortgage continues to be paid on time and supplements your Social Security or pension.
If your home is in a tourist-friendly area, it may be prudent to rent it to vacationers. A vacation rental has the potential to bring in significant income if it is in the right location and provides the amenities tourists are looking for. Of course, you’ll need it to stand out in online listings and look beautiful for your guests, so if you choose this route, consider working with an expert designer who can help with every aspect of setting up your spaces to make them irresistible to renters.
Along with an experienced interior designer, many find that hiring a management company is their best option. A property manager can handle many important responsibilities like home cleanings, security, booking and checkout, and local guest support. One concern here is that there are many regulations that govern the process of becoming a landlord. Rentec Direct explains that these fall under the scope of both federal and state laws. You may also have to contend with your homeowner’s association, which might require that the owner or a relative remain on the premises.
Keep it in the Family
When your desire is to pass down the family home, you must realize that this means you may not enjoy a financial gain. RBC Wealth Management asserts you should confirm that your children or grandchildren actually have an interest in the property, first and foremost, since they might have other plans.
Another potential difficulty here is if you have multiple heirs and have not made a will. This can leave your personal desires open to interpretation and can create turmoil in the family if you die intestate. What’s more, there are some complicated legal- and tax-related issues in gifting a large asset like a house, so consider discussing your particulars with an attorney.
Anytime you’re handling a big life decision, it’s best to get some advice from family members and professionals if you are unsure of the best route. Remember, what you do with your home now can affect you in the future. Unless health or finances push you toward one or another, take your time, put yourself first, and don’t rush the process.
Guest Author Hal Salazar Elders Today
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Ty Strahl is the areas leading senior adviser. Her job is to help you navigate the many aspects of aging and to help seniors who are in transition to find the right solutions for their individual needs.