Retirement age couple, packing moving boxes in the kitchen of their home, smiling while they pack.

Should You Sell Your House And Rent When You Retire?

February 15, 2024 6-minute read

Author: Michelle Banaszak

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If you’re close to retiring or have already entered the retirement phase, you may be wondering what the next step is with your home. Do you still need or want the house you live in, or are you looking for something a little different? We’re here to help you answer a big question: “Should I sell my house and rent when I retire?”

Is Selling Your House And Renting When You Retire A Good Idea?

Selling your house and renting when you retire can be a good idea for some homeowners. If you have equity in your home, you may want to use that cash for something else now that you’re retired. On the other hand, you may have reasons you’d like to stay in your current home. So, what’s the right answer? It really depends on your specific circumstances.

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Reasons To Sell Your Home And Rent In Retirement

There are many reasons you may want to sell your home and rent in retirement. You may even want to sell your current house and buy another. Let’s look at a few reasons you might consider selling your home when you retire.

You Want To Relocate

Many people who retire are excited to get out of the workplace and explore the outside world! Whether that means traveling to places on your bucket list, visiting family and friends out of town or just looking for a change of scenery, selling your home can give you more opportunities to do so. You won’t have to worry as much about the upkeep of your home, and there’s nothing stopping you if you fall in love with one of your destinations or hope to live closer to the grandkids. Selling your home and renting also gives you a more flexible living arrangement – you can try a place out and decide if you want to stay or leave, no strings attached.

You Can’t Afford To Live In Your Home

Now that you’re retired, it’s possible you won’t be making as much as when you were in the workforce. Or maybe now, you’d like to spend your money on other things besides a house payment. Whatever the reason, retiring may change your financial situation. If you’re struggling to keep up with house payments or other related bills, selling your house and renting can be a good option in retirement.

You Want To Downsize

If you’re nearing retirement age, it’s likely you won’t need or want all the space you once did. You may have kids who are now grown and living on their own, you want to “clean house” and get rid of items no longer needed or you’re looking for a different living arrangement, such as moving out of a home with stairs. If any of these conditions apply to you, it’s a good time to think about downsizing.

You’ll Receive Cash For Your Home

As long as you have equity in your home, you’ll get an influx of cash when you sell. Many retirees have more of their money tied up in home equity than any other investment. You may want to have some extra cash on hand for expenses that generally go hand in hand with retirement, such as increased health care expenses, health insurance premiums and tax payments.

You Won’t Have To Worry About Maintenance

If you sell your home and rent after retiring, you won’t have to worry about the maintenance that comes with owning a home. Maintenance of the property and associated expenses will most likely be covered by your landlord. Sometimes not having to worry about lawn care or an appliance breaking can be more rewarding than owning your own home.

You Won’t Pay Property Taxes

As a retiree, you can avoid paying property taxes if you choose to rent instead of own. This can lead to more money in your pocket to use in retirement.

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Reasons To Stay In Your Current Home In Retirement

Now that we’ve talked about some of the reasons to sell your home and rent in retirement, let’s look at some of the reasons you may want to stay where you are.

You’ve Already Built A Community

In 2023, it can be pretty difficult to build a new trusted community or circle of friends. You may know your neighbors well, your kids may still have friends from a nearby school and your former coworkers probably live in the same area – unless you were working remotely before retirement. It’s not impossible to establish new relationships, but you might prefer to stick with what you know.

You Have Inheritance Plans

If you plan to leave your home to a family member, selling is not really an option. Plans can always change, but if someone you know is expecting the house once you’re gone (either to live in or sell), you’ll want to continue living there.

You Have Emotional Ties To The Home

Just like already having a community, there may be other emotional or sentimental factors that would cause you to stay in your home. Maybe it’s the house where you grew up, or where your children grew up. Perhaps a family member helped build the house or plant a garden. You’ll want to think about any of these emotional ties before you decide whether or not to sell.

Your Money Isn’t Going Toward An Appreciating Asset

If you sell your home, the money you pay for rent won’t go toward an appreciating asset. An appreciating asset is a property that tends to increase in value over time. These assets have the potential to generate a positive return on investment. When you rent, you’re paying for what you currently have, even if it might actually be depreciating in value.

You Face Unpredictability In Rental Costs

Retirees who rely on a fixed income can face challenges when confronted with rent increases. A sudden increase of rent can cause considerable disruption to their retirement plan. But by opting to stay in your home, you have a better handle on future monthly expenses.

You Rely On A Landlord

While not having to worry about maintenance can be a positive thing, some retirees may not want to rely on a landlord. In addition to the possibility that rental costs can change, you won’t have as much freedom to personalize your space, your landlord may not maintain the property as much as you’d like and you might still be on the hook for repairs, depending on your contract.

FAQs About Selling Your House And Renting In Retirement

Let’s take a look at some commonly asked questions about selling your home and renting when you retire.

Should I sell my home or rent it out as an investment property when I retire?

Just like deciding if you should sell your home and rent another residence after retirement, there is no right answer. If you’re thinking of renting out your home, being a landlord is a big commitment, especially in retirement. While you may gain some income by renting your house out, you’ll lose some other resources like time and flexibility.

Does it cost more to own a home or to rent?

It depends on your specific circumstances. There are several things to take into account. Do you own your home outright or are you still paying a mortgage? How much are the taxes on your home? What is the renting market like in your desired area? You may consider talking with a financial advisor to answer some of these questions.

What taxes will I pay if I sell my house?

You might pay taxes on the profit if you sell your home. If you sell your home for more than you paid for it, you could be subject to capital gains tax, depending on how long you’ve lived in the home for and how much you profit from the sale. If you have questions about how this could impact you, you should consult with a tax professional.

If I decide to stay in my home after I retire, should I pay off my mortgage?

If you have substantial retirement savings or are downsizing, paying off your mortgage may be a good idea. If you have to withdraw money from tax-advantaged retirement plans or withdrawing funds from your retirement savings forces you to make extreme changes in your lifestyle, you may not want to pay off your mortgage.

The Bottom Line

Like a lot of home decisions, deciding whether to stay in your current home, purchase a new home or start renting is a choice you’ll need to make based on your own situation. There are pros and cons to each, but after some research, you’ll ultimately know the right decision for you. If you have decided to go the home buying route, start the mortgage approval process today.

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Michelle Banaszak headshot.

Michelle Banaszak

Michelle graduated from Michigan State University in 2011 with a Bachelor's in Communications and a Bachelor's in Studio Art. She's been writing for various companies since she graduated, and enjoys bringing stories and information to life. She currently works for Blue Cross Blue Shield of Michigan as a Communication Specialist and is a recent first-time homeowner.