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Do you have the financial resources to buy a home? Can you afford to buy it outright? Do you have enough savings that you could come up with the down payment, and then still have enough savings left to generate whatever income you need above your pension and social security to live on?
I would guess that the for many people who arrive at retirement age without having significant equity in a home the answer to those questions might be no, but your situation might be different.
There's obvious and not so obvious pros and cons to either renting or owning in senior years.
One big thing to consider is the hidden cost(s) of owning. Your costs don't stop at the mortgage payment. There is annual property tax, annual water and sewer costs, water usage, sewer fees, heating and cooling, homeowners insurance, and putting aside money for repairs and upgrades. Although we own our home without a mortgage, the for us these items add up to about $1000/month or more.
We may decide to own until late 70s, then move to a rental in a less expensive area for the cost of owning a home (maybe $1000-$1200/mo? hopefully including heat and hw). For us, the plus of owning after that is that we would have the owned house as partial leverage for nursing home in case our other funds are largely spent down.
OP, you mention that your next move may not be your forever move. That leans in favor of renting. You can put your funds to equally good if not better use in other investments, imo. I agree with the old adage "you do not own a home, your home owns you."
Location: On the "Left Coast", somewhere in "the Land of Fruits & Nuts"
8,852 posts, read 10,451,396 times
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Quote:
Originally Posted by Giesela
So for retirement it is usually recommended to own your own, mortgage payed off by retirement.
In fact it seems most retirement advice operates on the assumptions of married, kids, house.
Currently live in an apt, looking to retire on small pension at 60 in 2 years.
Single. Have no family to speak of.
Will retire in a different location. Would love it if it were the last place but am not
absolutely sure.
Should I buy?
How else does my situation change the standard assumptions about retirement?
If you like the area and can afford to buy a house, then by all means do so, and start establishing some equity to use later on down the line if need be. Because unlike an apartment, it's not just a home, it's also an investment. And with a reverse mortgage, you can even continue to live there, and still get to use some of that equity. Sure there'll be costs and home upkeep to plan for, but so does your car (and you don't rent that, do 'ya)?
Yeah this is it. If you are planning on retiring on a small pension it sure sounds like a lot of that will be eaten up with monthly rent payments. Frankly I do not see how anyone can retire and then pay rent.
Its not like houses are free.
Paying rent at least allows you to look for cheaper apts if say, inflation goes sky high and your fixed income isn't going as far.
If you like the area and can afford to buy a house, then by all means do so, and start establishing some equity to use later on down the line if need be. Because unlike an apartment, it's not just a home, it's also an investment. And with a reverse mortgage, you can even continue to live there, and still get to use some of that equity. Sure there'll be costs and home upkeep to plan for, but so does your car (and you don't rent that, do 'ya)?
Its only an investment in certain areas. Much of the "rust belt" a house is not.
As a matter of fact, were I to stay in Dayton I would only buy a house here if I planned on living in it forever.
I am not moving to one of those places where real estate reliably appreciates. Usually they are places that are more expensive to buy in and live. Sort of a plus/minus thing.
Location: On the "Left Coast", somewhere in "the Land of Fruits & Nuts"
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^ ^ But even so, unless you choose "poorly", owning even a rust belt house is gonna be a better investment than any similarly priced rental, where you have absolutely 'zero' equity (and no deductions). Although if that's the price you're willing to pay for 'freedom' and flexibility, so be it.
Its only an investment in certain areas. Much of the "rust belt" a house is not.
As a matter of fact, were I to stay in Dayton I would only buy a house here if I planned on living in it forever.
I am not moving to one of those places where real estate reliably appreciates. Usually they are places that are more expensive to buy in and live. Sort of a plus/minus thing.
I agree. Given that you are thinking of retiring in an inexpensive area in the Midwest, I would be extremely cautious about buying, especially buying an inexpensive condo. Less expensive condo complexes often go rental over time and the complex deteriorates. Then the banks won't even give loans so you have to sell then to a cash buyer. This happened with my sister's condo in Baton Rouge. She bought a small condo in the early 90's or late 80's for about $30-35K and later put $15 in improvements into it. BY 2010 we were lucky to get close to $40K for the property, primarily because of the improvements. Of course that was a bad time to sell, but Zillow today has a similar property listed for $47K. Not a significant increase and the condo is no longer in a desirable area where I would want to retire or live out my senior years. Wherever you move, I would rent first before buying.
Its only an investment in certain areas. Much of the "rust belt" a house is not.
As a matter of fact, were I to stay in Dayton I would only buy a house here if I planned on living in it forever.
I am not moving to one of those places where real estate reliably appreciates. Usually they are places that are more expensive to buy in and live. Sort of a plus/minus thing.
I'm assuming you can afford to do either, or you wouldn't be asking the question.
Location: On the "Left Coast", somewhere in "the Land of Fruits & Nuts"
8,852 posts, read 10,451,396 times
Reputation: 6670
Quote:
Originally Posted by ABQ2015
I agree. Given that you are thinking of retiring in an inexpensive area in the Midwest, I would be extremely cautious about buying, especially buying an inexpensive condo. Less expensive condo complexes often go rental over time and the complex deteriorates. Then the banks won't even give loans so you have to sell then to a cash buyer. This happened with my sister's condo in Baton Rouge. She bought a small condo in the early 90's or late 80's for about $30-35K and later put $15 in improvements into it. BY 2010 we were lucky to get close to $40K for the property, primarily because of the improvements. Of course that was a bad time to sell, but Zillow today has a similar property listed for $47K. Not a significant increase and the condo is no longer in a desirable area where I would want to retire or live out my senior years. Wherever you move, I would rent first before buying.
But that's not a rust belt phenom, that goes with condos in general anywhere, and even sub-divisions with HOA's, where you're always depending on someone else to manage your money and the upkeep (not to mention, remind you of the "rules" for what to do with your own home)! And just to be fair, folks can make some pretty "bad decisions" with apartments as well (just check out the Renting Forum)!
Although something tells me the OP has already decided and is really just looking for the right 'reason'.
Look into subsidized senior housing options. There are many different types, and many have several different funding sources for different apartments in the building/complex - meaning some tenants will be on Section 8 vouchers, some will be at a different level, some even have market rate apartments. Different types of funding require different things - some allow you to have more assets than others.
But, what they all have in common are low rents that only increase when there's a cost of living adjustment.
Just to give you an example. I'm on SSI disability with is currently $890/month. I'm 59. I'm in a 55+ low income subsidized building. The max rent you can make to move into this building is $22,980. Now this is based on the COL in this city/county. Other areas are much higher, like around the SF Bay Area.
When I first moved in my rent was $335 for a tiny studio apartment. I later received my Section 8 voucher, and my rent is now $197. No matter what happens to the economy, my rent will never be more than 30% of my income.
There are lots of variations of the above. I suggest you check it out. I have found these buildings to be well maintained and managed. They have to undergo regular audits and inspections by several different govt agencies that all make sure we are safe and in well-maintained buildings.
They're usually built in walkable neighborhoods, too, and the buses or dial-a-ride services take tenants to the clinic, etc.
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