Should You Rent After Selling Your Home? A Smarter Approach to Downsizing

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Video Transcript

Over my 14-year career in real estate, I’ve helped dozens of long-time homeowners sell houses they’ve been in for 20, 30, or even 40 years. Now, full disclosure, as an agent, I get paid when you sell and buy a property, but today I’m giving you a strategy that doesn’t benefit my paycheck at all, because for many downsizers, renting first, and maybe even for the long haul, might actually be the smarter move you can make. Selling a forever home isn’t an overnight transaction.

It’s a process. Here’s why taking a pit stop to rent can completely transform that experience. With this kind of sale, the discussion that comes into play is, okay, where am I going to buy next? Typically, yet not always, the current home is owned outright, or maybe there’s a very small mortgage, or maybe just a line of credit to pay back.

Yet between the original purchase price of the house and where the market is now, these homeowners typically have a ton of equity, yet it’s tied up into the existing house. So we have the money, we just don’t have the money on hand. And yes, there are several different loan programs out there to help with this scenario, yet here’s another angle.

Here are a couple basic thoughts on why renting might not be the worst idea. A rental, I think it just adds so much simplicity to the process, which a lot of people overlook. And keep in mind that renting doesn’t need to be permanent.

So point number one, access to the money. Let’s use the term house rich, cash poor. Once you purchase the new home, that money is tied up into equity and harder to access.

Someone elderly or on a fixed income, that’s constant. Let’s say there’s an unexpected expense, such as a car repair or a doctor bill, you might not easily have access to that cash. Point number two would be increase in taxes, insurance, or if it’s a condo you plan to purchase, an increase in the monthly HOA fees, or even a special assessment.

I’ve seen some complexes with special assessments over $80,000 per unit. And again, I understand that the rent could be raised, yet long-term I see renting as way more stable. Point number three, renting shields you from unpredictable costs and routine maintenance headaches.

Let’s say surprise expenses, roof replacement, heating and cooling unit needs to be replaced, appliances stop working. When you rent a leaking water heater or a dead battery and a smoke detector is just a simple call to the landlord. Point number four, think of it almost like a test drive.

Let’s say you purchase and you end up not liking the apartment, the complex, or end up having a bad neighbor. To some extent you are stuck with it, or we need to sell and do this process all over again. If you were to rent and one of these issues came into play, we could either get you out of the lease early or relocate at the end of the lease.

Point number five, which is a big one I find. A lot of people feel a sense of pride in home ownership and view renting as throwing money away. Big picture though, when you sell, you receive a substantial check.

Instead of tying that money into the capital back in real estate, you can invest those proceeds and have access to those returns and let the money work for you while keeping your lifestyle low stress. If you were to rent, due at lease signing would be one month’s rent and one month’s security deposit. And now you have the keys to the new place.

That eliminates all of the stress of timing and simplifies the order of operations of where and when are we moving. Lastly, I’ll use the point of the stars need to align and working out that order of operations. What I mean by this is we find something which works.

We still need to go and get your current home officially on the market and we need to secure a buyer. Having an accepted offer for your current home is essentially your ticket to shop. And we have to manage both sales simultaneously.

Let’s even say we do get an accepted offer and then we find some issues during the home inspection of the new property. We really kind of got to figure out that and the current home is already on the market. Trust me, I’ve handled the sell in order to buy scenario hundreds of times over my career.

I can walk you through how we accomplish this and make the purchase scenario work, yet there are just so many more stressors and pieces to the puzzle. If we were to go the rental route, sell the current home, then just shop to find you something to purchase later, and now you have the cash on hand and we eliminate all of the pressure of timing, the rental idea doesn’t need to be permanent. So I hope this is helpful and look, ultimately I stand by the value of home ownership long term, yet there are different ways to utilize the money, whether it’s just short term or a longer term play.

If you or a family member are starting to think about downsizing and want to talk through the options, feel free to reach out anytime. No pressure, no obligation, just an honest strategy.