Pros and Cons of Owning Real Estate in Retirement
PARAGON is pleased to include an article from one of our guest bloggers. John Haas, founder of Haas Properties, has spent most of his working life in the Real Estate industry. He serves as a director on the Cherokee County Board of Realtors and has served as a Director and Chair Person on the Atlanta Chapter of NARPM. When not working, John enjoys spending time with family and coaching youth basketball and baseball.
Ultimately, whether owning a property is a good idea will all depend on the financial situation and stability of the investor and their living status. This is especially important for people who are retired or are near retirement.
Experts in real estate regularly offer advice about the pros and cons of owning real estate. As the cost of maintaining a home continues to rise, and with many seniors living alone, people often downsize once they retire, or as they continue to age. Nonetheless, downsizing still does not eradicate regular home maintenance expenses or other issues with owning a home, and as seniors age and mobility becomes more difficult, continuing to look after the home can become a challenge.
The question is: should seniors own real estate in retirement – at all? John Haas, president of HaasProperties.com shares the pros and cons in this post.
Pros of Owning Real Estate
Home ownership is an expensive undertaking, but downsizing to a condo or smaller home may be a financially attractive option. Plus, owning real estate allows you to build equity in the property, and it may even serve as a source of credit if you need money urgently.
Your home will always be an asset -- not only for you but possibly for your heirs as well.
When you own a home, you have liberty, control, and independence. You can come and go as you please, you can decorate the place the way you want, and you may even make some extra money on the side by renting out a room or the basement.
When you own a home, you don’t have to worry about paying monthly rent or be bothered with an increase in rent, etc.
Owning a home may offer more predictability in managing your finances than if you rent.
Cons of Owning Real Estate
Owning a property means that a large portion of your money is tied up in a relatively illiquid asset, and not easily accessible in case you need it.
As is the case these days, the price of real estate may be very high depending on your area.
Unpredictable repairs can pop up, and many of these repairs can be expensive.
Property taxes typically increase annually, as does the cost of homeowner’s insurance. Together, these add to your annual expenses.
If you lose the ability to live independently, you may need to move. Selling your home may be an unpleasant hassle to be resolved, in already difficult time.
Selling a home may take time, and you may need to renovate - which costs money.
As you can see, there are several pros and cons of owning real estate. However, there are also some additional considerations that may be important to you. For example, when you rent, you have fewer responsibilities of home ownership. Typically, rents are relatively stable, and you don't have to worry about personally caring for any maintenance, homeowners insurance, or property taxes.
You have the freedom to move around to different locations as you wish during different seasons. Most apartments and condos have facilities and all necessary amenities for seniors. If your health changes, you can move out without any worries. Also, all your money is not tied up in a property.
Conversely, it is important to keep in mind that rents typically increase every year. Also, you are dependent on your landlord when it comes to maintenance-related matters. Some rentals do not allow pets, so that is another factor to be considered for seniors who have pets.
Conclusion
The decision to rent or own a home during retirement comes down many factors. Two of the most important are how much money you have, and whether you can live independently and maintain the home. It also may depend on whether or not you have family nearby, and the level of assistance you need keeping up the home. While downsizing may be a great option for some, it may not be the best decision if you are alone and not able to do daily living activities.
Investing in real estate during retirement can provide several benefits. First, it’s an asset for you. Second, it’s an asset for your children. Third, you can rent out a portion for additional income.
The decision to buy – or pay off and keep - a home in retirement is one you should think through carefully. It may make sense to speak with your financial planner or a real estate agent as you mull things over. There is no right or wrong answer; it all depends on your personal preferences and financial situation. Nevertheless, the more thought you put into your decision making, the better off you will be in the long run.
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