Renting vs. Buying Retirement Housing
Are you thinking about moving to a more manageable home? Weighing whether you should rent or buy? Retirees have an assortment of points to consider when Rightsizing. Health, expenses, accessibility, and location are only a few of the long list of points to consider when wanting to continue living independently.
So what are your options?
Regardless of the above points to consider, the basic answer is you can either buy another home or you can rent another home. This home can be an apartment, a condo, or a smaller single family home. If you want to be in a retirement home, with cooking, cleaning, and nursing care, then this is not the blog for you.
Lets compare the advantages and disadvantages of renting and buying:
- High monthly rental fees ($2000/month rent = almost $250,000 in 10 years)
- Losing your equity (paying your landlord approximately 5% annually and investing your equity for only 2% annually is a net loss of up to 3% each year)
- Your landlord can sell the home and make you move with short notice
- Lower monthly costs
- Control on when you move and what you re-sell it for
- Continuing to increase your investment’s equity
Now, lets breakdown renting a large 2-bedroom suite vs. buying that same suite:
|Monthly Expense Scenario||Renting||Buying|
|Water (incl. in rent/common fees)||0||0|
|Building Insurance (incl. in rent/common fees)||0||0|
|Total Monthly Expenses||$2250||$1000|
We can see, in the chart above, that renting is the most expensive avenue to go down. You are literally more than doubling your monthly expenses when renting and in the end, you get nothing when you move out.
Now, lets compare the equity loss and gain with renting vs. buying that same 2-bedroom suite:
|Scenario||Amount||ProjectedYearly % Gain||ProjectedYearly $$$ Gain||Projected10 year $$$ Gain|
|Rent Property||$2000 x 12 months = $48,000||-5%||-$25,000||-$250,000|
|Investing you money in stocks or RRSPs||$500,000||2%||$10,000||$100,000|
If you rent and invest your money in low risk investments, you can average $100,000 over 10 years at 2%. But at that same time, you will be paying your landlord $250,000 over 10 years at 5%. That equates to a $150,000 net loss in your investment’s equity over 10 years.
If you purchase at a 55+ community, your equity will see an average increase of 10% each year, which will give you a $500,000 equity gain over 10 years.
The initial purchase price was $500,000 and you just gained an extra $500,000 over 10 years. That equals to $1,000,000 in equity that you can do whatever you want with it when you decide to sell.
Now, who would say no to a million dollars?
At Sound Lifestyles, we understand that home ownership can be stressful. This is why we design, build, and maintain fully accessible housing exclusively for retirees. All of our supportive communities help retirees live independently in their own home for as long as they wish.
We want you to keep your independence and your equity!
Written by Katie Graham