You are in your 60’s, the kids are out of the house and therefore, your current house is probably too big! You’re almost retired or recently retired and want something low maintenance with no worries while you’re in Florida for 3 months during the winter. Oh and by the way the housing market has exploded and your house that’s too big, that’s too much maintenance, that costs too much to upkeep, is worth way more than you paid for it, and if you sell it, the profit will be 100% tax free!
If that sounds like you, then I would say there has never been a better time to sell and become a renter! I believe owning a house is a lifestyle choice, we do it for our children our families etc. We are almost conditioned and programmed that owning is better than renting. Alex Avery, is a Chartered Financial Analyst, a licensed property appraiser and has written a book called “The Wealthy Renter”. In his book he explains the stigma toward renting and he analyses how it’s cheaper to rent than it is to own! He does caution that you if you are young and you choose renting over owning than you need the discipline to save the money that you otherwise would have spent owning a home.
However, my point is a little different I am saying people that are older, that have chosen to own ,have built equity, but now need worry and maintenance free housing, now might be the perfect time to consider renting! The timing is right with respect to the housing market and your stage of life.
Let’s assume you are able to sell your home for $300,000 (tax free under principal residence exemption) you can then invest that $300,000, and let’s again assume you can earn a 5% rate of return on that money which equates to $15,000/yr or $1250/month. I think you could rent a pretty nice place for $1250/month in the Windsor/Essex area and you would still have your capital for your beneficiaries or you could choose to encroach on your capital and help fund your 3 months in Florida.
This planning strategy might not be for everyone, but I do think it is worth considering given the real estate market and the demographic of recently retired or emerging retirees! Now might be the best time to become a “wealthy renter”!
This material is not to be construed as an offer or solicitation. The planning strategies mentioned may not necessarily be considered suitable for all clients. Rates of return mentioned are not guaranteed. Contact your Investment Advisor to discuss your individual planning and investment needs.
Todd T. Hopper BA, CFP
Certified Financial Planner
Account Representative, Manulife Securities Investment Services Inc.
Life Insurance Advisor, Vision Wealth Consultants Inc.