For retirees it seems to make financial sense to rent. They avoid paying the potentially high HOA fees (typically included in the rent and paid by the owner) and don’t have to pay for repairs. If a retiree has a second home in Italy, renting gives them the flexibility to be gone for months at a time. They don’t have to worry about maintenance on a home they do not own. Many baby boomers who think they want to downsize into a city condo are surprised that it will cost them as much to buy a condo as they would pay for a house in the suburbs. Often rents in desirable areas of a city are very high. People are sometimes disappointed the amount of space they can rent is less than expected, even though they are avoiding condo fees and maintenance costs. Living in an urban environment close to restaurants, entertainment and shopping can be attractive to retirees who don’t want the hassle of driving.
The other issues are what happens to a couple when one of the spouses dies. Today the surviving spouse loses the other spouse’s social security. Now the surviving spouse cannot afford the rent and has to move. Hopefully they can move into something cheaper but cheap rentals in good area are hard to find.
According to a 2016 Freddie Mac survey of boomers, the majority of those 55 and older plan to stay in their homes during retirement. Among those who plan to move, one in five say they will sell their home and buy a new one, while one in 10 say they will sell their home and rent when they move. Data from TenantCloud, a property management software service, shows that nearly one-third of all urban applications are for renters over age 60.
But there is a downside to renting. What happens if the owner wants to sell? Now the tenants need to pack up and find somewhere else to go. The landlord may keep increasing the rent as we have seen in the last 24 months. As the economy has rebounded rental rates have increased accordingly. If the rent gets to be unaffordable then the baby boomer will have to move and may have a hard time finding another place. The bottom line is there are a lot of things to be considered before making a decision to rent.