Should I Sell My House and Rent When I Retire?

There’s no doubt about it: your retirement years mark a significant life transition, and can often take quite a bit of adjusting to get used to. Whether you’re retiring from a decades-long career, selling a business, or finally taking off your “consulting” cap and retiring, this new stage of your life is likely uncharted territory. And no matter how rock-solid your retirement plan is, there will still be some things you figure out along the way. 

For example, some soon-to-be retirees may debate which beach they’ll abscond to first. Or to which part of Europe their frequent flyer miles will propel them. But before laying out the travel itinerary, many homeowners have questions about using home equity for retirement or, “Should I sell my house and rent when I retire?” As you’ll soon discover, selling your current home and becoming a renter can help in unlocking home value in retirement and securing your personal wealth (and a wealth of retirement possibilities.) And while we’re sure you’d much rather be pondering whether you should sample French or Italian cuisine first, we assure you that deciding whether to sell and rent will allow you to enjoy a more peaceful retirement.

Read on as we explore the ins and outs of selling your home and renting –– and decide whether this retirement strategy is right for you. 

Exploring the Pros and Cons

The decision to sell your home and become a renter can be challenging, and you should consider both the benefits and limitations of this strategy to ensure you make the best choice. Weigh these pros and cons as you ponder this question. 

Benefits of Selling and Renting

1. Financial Flexibility – What may be the most notable advantage of selling your home and transitioning to renting during retirement is the added financial flexibility this approach provides. As a homeowner, the majority of your assets are likely tied up in your home equity. But by selling your home and renting, you can unlock your home equity and apply it toward daily expenses or cash flow, your travel fund, or just some added peace of mind as you navigate retirement. 

2. Elimination of Maintenance Responsibilities –Owning a home can be rewarding, but it can also be work –– what with all the ongoing maintenance costs and repair responsibilities that come with homeownership. These costs (and chores) can become burdensome over time, eating into your retirement savings and what would otherwise be time spent enjoying your retirement. When you rent, this maintenance is no longer your responsibility –– freeing up your time and reducing the stress associated with homeownership.

3. Enhanced Mobility – Some retirees look forward to late mornings spent playing Wordle on the porch or evenings by the fire. But others see it as an opportunity to squeeze a lifetime’s worth of globetrotting (or just long-overdue visits to see friends and family) into a few years. By selling your home and becoming a renter, you can add to your retirement fund to embark on bucket list-worthy expeditions while creating added flexibility that might not be available to homeowners. 

4. Predictable Monthly Expenses – Retirement planning often requires meticulous budgeting to ensure your savings can maintain your lifestyle, and the unpredictability of homeownership can throw a wrench in even the most precise of plans. And as a renter with no costly repairs to stress over, your monthly expenses are made more predictable. This, in turn, can help you better manage your finances and navigate unexpected health costs more seamlessly. 

Drawbacks of Selling and Renting

1. Loss of Equity – Of course, one of the biggest benefits of selling your home and becoming a renter can also be its greatest disadvantage –– depending on your retirement goals. When you sell your home and move into a new one, your equity rolls into a new investment. But by selling your home and using the equity to fund your retirement, this equity can no longer appreciate in value. If you’d take two birds in the bush over one in the hand, selling may not be the right path. 

2. Rent Increases – Renting can free you from the stresses of home maintenance, creating greater predictability in your monthly expenses. With that said, you may still be subject to increases in your monthly rent, thus forcing you to reevaluate your retirement budget as needed. 

3. Limited Control – Renters make many sacrifices — and having limited control over the living space is one of them. This means that if you had plans of using your retirement to tackle major home renovation projects or use your home as a canvas for creativity, renting likely isn’t for you. However, depending on the terms of your lease, you should still be able to let your personality shine through as a renter via a fresh coat of paint or some lively decor. 

Financial Considerations

Now that we’ve established the pros and cons of selling your home and becoming a renter, let’s zoom in on some financial factors that will influence your decision. 

Cost Savings Through Renting

As mentioned above, selling your home and becoming a renter can relieve you of costly home improvement projects –– like a water heater replacement or roof repair, which can cost anywhere from $1,500 to $10,000+.¹ But as far as homeownership costs go, these are just the tip of the iceberg. While repairs may pop up without warning, things like property tax and homeowners’ insurance linger, eating up a sizeable chunk of your retirement savings. When you rent, these responsibilities are off your plate (and off your mind,) allowing you to divert your savings and energy elsewhere. 

But for the investment-minded retiree, selling your home can save you money while making you money. By selling your home and unlocking your equity, you open the door to investments that may generate higher returns than your property’s potential appreciation. And while many may hestitate to “gamble” with their retirement income, those with sizeable retirement savings may be willing to assume the risk. 

Impact on Retirement Budget

Your retirement budget can help you decide whether you should sell and rent, as freeing up a large sum of cash is a great way to make up for a lack of savings. If you’ve been a diligent saver over the last several decades, you might not need your home equity to make ends meet. But if your savings have been depleted, or your preparation was less than ideal, using your home equity can help you maintain your standard of living. Before you decide one way or another, it’s wise to financially plan for retirement by creating a budget and see if selling and renting supports your financial goals.  

One important thing to note is that freeing up hundreds of thousands of dollars worth of home equity can impact your eligibility for things like Medicaid and Social Security. Further, you may find yourself on the hook for a hefty capital gains tax –– which can erode away at your newfound financial safety net. To understand the full impact of selling your home and becoming a renter, it’s wise to consult a qualified expert. 

Emotional and Lifestyle Factors

We’ve discussed the financial aspect of selling your home and becoming a renter, but for many homeowners the deciding factor will come down to the home’s sentimental value –– and the lifestyle adjustment that will accompany life as a renter. 

Emotional Attachment to Your Home

For many Americans, a home is far more than a place to rest our heads and store our belongings. It’s a place where memories are made, children (and grandchildren) are raised, and entire lives are lived. For this reason, many homeowners develop a deep emotional attachment to their homes –– making the decision to sell feel like parting with a loved one; the closing of a significant chapter in life. 

But as much as selling your home is the close of one chapter, it can also mark the beginning of an exciting new one. If you have a larger home, downsizing to a smaller rental property can be emotionally liberating. Becoming a renter can simplify your life, help you reduce clutter, and make daily living more manageable, especially as you age. When deciding if you should sell and rent, consider the financial implications, but be sure to weigh the emotional and lifestyle factors as well. 

Flexibility and Mobility Through Renting

Are you ready to trade the calm of the suburbs for the crashing of nearby waves? Or do you want a conservative rental to come home to on breaks from your travels? If your other expenses are covered by retirement savings, selling your current home and renting can empower you to explore new horizons and broaden your own. Whether you’re renting a beachfront apartment, a vibrant city loft, or a serene countryside cottage, this newfound flexibility can open doors to exciting experiences and opportunities for personal growth.

This flexibility can also help you better adapt to your changing needs, putting you in closer proximity to trusted family and friends –– or medical facilities –– for added security. 

Evaluating Housing Market Trends

Lastly, the decision to sell your home and become a renter can be one of opportunity. And if you find yourself in the right place at the right time, capitalizing on the current market may be the right choice. 

Current Market Conditions and Property Value

As we’ve seen in the past several years, real estate trends can often fluctuate with the tide. Before you make the decision to sell your home and become a renter, you’ll want to be sure the state of the market tips in your favor. Conduct thorough research on current market trends, property values, and the possibility of future appreciation to determine whether now is the time to strike or if you might be better off waiting. For a better understanding of the market and your home’s place in it, you may want to consult a real estate professional in your area. 

Renting in a Dynamic Real Estate Landscape

The market isn’t just in flux for buyers and sellers –– renters must also navigate a dynamic real estate market. Just as you would before selling your home, scope out the rental market in your desired area to understand what you may be getting yourself into. And when you are ready to sign on the dotted line, take a good hard look at the terms of your lease to ensure it suits your desired lifestyle. If you’re planning on bouncing around from place to place, shorter-term leases will likely be the better fit. But if your long-term plans center around having a stable setting to spend your retirement, you may want to lock in a multi-year lease at the lowest possible rate. 

Making a Well-Informed Decision

Given the numerous considerations you must make to decide if you should sell and rent, this choice can be overwhelming. But by leveraging the below tips, you can ensure you’re making an informed decision for your future. 

• Seek Professional Guidance: The decision to sell and rent during retirement should not be taken lightly. Before you decide your next step, consider consulting a financial advisor with extensive experience in retirement planning –– as well as a realtor familiar with your area. Each can give you a clearer understanding of your situation, helping you devise a strategy that aligns with your goals. 

• Engage in Comprehensive Retirement Planning: Do you know how to plan for retirement? This housing decision is part of a much larger retirement planning process. Be sure to develop a comprehensive retirement plan that accounts for your income, investments, healthcare, and estate planning, as well as your housing choice.

• Define Your Priorities: Retirement is your time, and your priorities for this period should lead the way. Take the time to define your long-term retirement goals and objectives –– financial, lifestyle, and emotional –– then choose the housing option that best addresses these priorities.

• Think Practically: Finally, consider the practical aspects of renting during retirement. As you age, your needs may change –– and proactively planning for this change now will make your life in retirement easier. While a remote cabin tucked away from the world may seem like the perfect retirement setup, it probably isn’t all that practical. 

The Bottom Line: Should You Sell and Rent? 

Retirement is a big enough transition on its own –– and selling your home to become a renter can add to the complexity of this process. It involves in-depth financial considerations, as you explore how selling your home impacts your budget and benefits, and a great deal of introspection as you decide whether you’re ready to part with your cherished home. However, if you’re looking for a way to free up your equity without moving after retirement, Truehold’s sale-leaseback can be the best of both worlds. 

When you sell your home to Truehold, you access your home equity just as you would in a traditional sale. But instead of packing your things, you can continue living in your home as a renter for as long as you continue to pay rent. Now, you’re free from essential home repairs, you’ve got the flexibility to come and go as you please, and your home equity is in hand –– opening up a world of possibilities in this exciting new chapter. 

Is this the right retirement move for you? Learn more about Truehold’s sale-leaseback today, and get an offer for your home equity within 48 hours. 

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Sources: 

1. Angi. What are the Most Common Home Repair Costs? https://www.sofi.com/learn/content/most-common-home-repair-costs/