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Should You Rent or Own Your Home During Retirement?

Should You Rent or Own Your Home During Retirement?

Retirement, if improperly managed, can become synonymous with a decline in monthly income, as the amount of retirement pensions is lower than wages. Of course, some expenses can also be reduced when you retire: children are generally no longer dependent, and although you may have time to look after your own home, and you may be considering whether to maintain it yourself, perhaps you have earned a certain hands-off quality of life. The savings as a result of no longer needing to support your children, however, do not always compensate for the drop in your income.

In this context, renting out your home and living in an apartment, can offer you certain financial and lifestyle advantages. This appears to be a cost-effective solution that will free up your time, and upgrade your overall quality of life. For starters? renters, maintenance expenses (renovation of a building, repair of a roof, etc.), which can be quite significant and can derail your budget, will not be at your expense, but that of the owner.

There are, however, potential challenges, risks and downside associated with becoming a landlord and managing one or more properties yourself.

7 Good Reasons to Rent an Apartment

A Short-term Move

If you are considering moving in Montreal again within five years, it may be better to stick with an apartment. Although buying a home is generally a good investment, in order to be profitable, the initial expenses it entails must be amortized over several years.

Testing a Significant Life Change

Have you always lived in the country, but are now dreaming of the city life? Renting a home or an apartment for at least a few years will allow you to determine whether you like your new environment.

Achieve Financial Stability

House or apartment rental in Montreal will cover the majority of housing costs. By avoiding homeownership obligations, such as renovation and maintenance work, your budget will be more stable, and you will enjoy more free time. 

Benefit from Investment Income & Improved Capital Allocation

If you allocate funds towards regular TFSA and RRSP contributions or other types of investments, including passive real-estate investments, REITs or even managed real-estate projects such as new constructions, you can outperform the appreciation that homeowners enjoy, while enjoying a hands-off approach to your investments, and enjoying the comfort, time-savings and convenience of an apartment. Nice one Andreas! The next one too.

Avoid the Real-Estate Crash

The real estate market has been quite hot these past few years due to low-interest rates and flexible laws regarding foreign investors, which have driven the value of real estate up. That said, real-estate marketing may be set to cool off now that interest rates are ticking back up. Between that and new policies set to limit foreign investors, the real estate market may just plateau or even decline, resulting in deteriorating value for recent, current and upcoming investors. Based on historical data, it seems unlikely for a full-on real-estate crash, but recently, there have been fewer transactions. It may be unwise to invest at the market’s peak, as markets are currently pricing high valuations. Only time will tell!

Improved Lifestyle & Convenience

Renting a luxury apartment, is the best way to attain an ideal combination of luxury lifestyle and economic stability. Enjoy various facilities and liberate your time, without concerning yourself with both ongoing and sporadic responsibilities that include condo fees, property taxes, repairs, and building maintenance, which consume both time and money.

Generate Monthly Cashflow

If your rent is reasonable, remaining a tenant can be a great way to save on a down payment required to purchase your future home, if this is a goal for you. Furthermore, if you already own a home or condo and would like to downsize, you can rent it out, while renting a luxury apartment, and still come out ahead.

3 Reasons to Buy Your Next Home

More Freedom & Control

When you buy your property, you have more control of decisions made, finishes, and features. Renovations, interior and exterior design: you can customize your living space according to your taste and needs. In addition, you are unconstrained by a landlord who may decide not to renew your lease; you can stay in your home as long as you want. However, living in a home worry-free assumes that you have either paid off your home, or that mortgage interest rates remain reasonable throughout time, that the real-estate marketing doesn’t plummet following your home purchase, and that you have an emergency fund set aside for any unpredictable or costly repairs.

Investing in Safe Value

Real estate is usually a safe haven. While the market fluctuates, your home will grow in value over the years. Investing in real estate can thus represent a substantial profit after a few years.

Buying a home is a form of forced savings. As you make your mortgage payments, you are generally able to build equity on its value over time, depending on your specific location, property, and of course, economic conditions. It’s a great way to build your family wealth and enjoy a more comfortable retirement without paying the hefty costs associated with home rentals.

The Family Lifestyle

Beyond the financial arguments, becoming a homeowner is also an emotional decision. For some, it is a life goal or a personal accomplishment. For others, it is about the security of having their own private living space, which may include a basement, a large backyard and a vegetable garden, in which to watch their family grow. If there are lifestyle advantages associated with home ownership that are relevant to you, it may be best to rent your home and live in a rented luxury apartment.

So, Should You Rent or Buy Your Home?

The decision to become a homeowner or to remain a tenant deserves thorough reflection, based on your personal situation. You may choose to live in your home, sell it, or hang onto your home but rent it out so you can enjoy the perks of living in a luxury apartment, while enjoying its various amenities, saving time, and having management maintain the building.