A few years ago, I met with a couple who needed more cash flow. I suggested that when they retire, they should consider selling their spacious house and getting a long-term rental. Selling the house would provide a lump sum of cash, which would enable them to achieve their retirement goals of traveling and helping the kids.
Their blank stares suggested that they were so committed to their bricks and mortar that they’d rather have less spending money than sell their real estate. However, a few years later, when they called to update their financial plan, they said that after a lot of thinking, they had indeed sold their house and used the cash to finance their dreams. “You know, Doug,” they admitted, “though at first we thought it was crazy, we did sell our house and it was the best decision we could have made!”
They used some of the proceeds from the sale of their house as spending/gift money and invested the rest. From the interest earned on their portfolio, they had enough cash to pay rent, fulfill their retirement wishes, and also to take some extra holidays. Furthermore, they no longer had to deal with the endless “to-do” list that owning a house demands; repairs became the landlord’s nightmare.
An added boon of selling your home and renting during retirement is that a multi-story house that may be ideal for raising kids frequently becomes cumbersome for older folks who have difficulty climbing stairs and no longer need to heat four bedrooms when only one is used on a regular basis.
Owning a property is sometimes better than renting. But before you make an emotional decision about whether you wish to own or rent, test both options to see which would be the best financial decision for you. Reconsider whether you believe that you should own a house because of an emotional attachment or because it truly makes sense….and cents.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published September 2, 2012.