Downsizing: Should you Buy or Rent?

A couple living in suburban Baltimore have thought a lot about what they might do when both are no longer working every day. The husband has been a man-of-leisure for some 8 years now, having retired from the Baltimore City Schools after more than 30 years of teaching high school there. A handful of years younger, the wife is gearing up for her retirement as an administrator at a large national company in just a year or so.

Both have a list of activities they’d like to enjoy together once the constraints of work no longer have a hold on either of them. Traveling to NYC, a favorite pastime is on the top of the list, and visiting their grown kids in other parts of the country is major, too. So, it made sense for them to give up that large house in the ‘burbs – the one with the 5 bedrooms and huge back yard – in favor of something smaller.

But what they did next had a lot of their friends shaking their heads in disbelief. The couple sold their sprawling home and moved into a two-bedroom apartment that they’re renting on an annual basis, just like they did when they were first married.

Some friends told them they were foolish. What about the tax write-offs associated with homeownership? And do they really want to be living among transient folk in an apartment building where someone is always moving out and someone else moving in? And will it be enough space for them? Maybe they should have just bought a condo if they wanted a smaller space.

So…who’s right?

Well, in this scenario, there really is no right or wrong. It’s just a matter of opinion and preference.

In this case, the real-life couple above was ready for a change. The husband had had enough of home maintenance over the last 40 years. He didn’t want to mow another lawn, fix another leaky toilet, or worry about major things going wrong. The couple knew they’d eventually be on a fixed income and were more eager to spend what they had on experiences rather than things. That’s why they chose to rent.

Sure, renting has its downfalls, especially renting in a traditional apartment setting. But it has plenty of positives too, mainly the ability to be pretty much free of responsibility as far as maintenance goes. Broken dishwasher? Call the landlord or building superintendent! AC not working correctly? Not your problem.

And, of course, you don’t have to rent in a traditional apartment setting. You can rent just about any home of any size in any location. Many baby boomers have left their large homes in the burbs in favor of renting a small place in the center of a large city; a place where they can park the car and forget about it, using public transportation to get to their favorite restaurants, museums, and other city attractions.

Furthermore, if you rent, you can keep the proceeds of your sale without having to use them for a down payment on a new purchase. That could mean a large lump sum that you could use to travel, give to family, or do with whatever you please.

Others rent because it’s only a short-term commitment. Some people simply don’t want to stay put in one spot for more than a year or two, so that makes buying a home seem foolish, especially with the way the market goes up and down.

Of course, the idea of renting is simply a turn-off for some who are scaling down. Usually, this is the person who prefers to have control over not only maintenance but also particulars like decorating (i.e., wall color, floor tiles, etc.). In addition, they can’t imagine someone else owning the home in which they live. Been there, done that.

So, instead of renting, others who are ready to downsize simply look for a smaller property with fewer responsibilities connected to it. For many, that something else might be a condo, townhouse, or other property with a homeowner’s association (HOA) fee that covers services such as lawn maintenance, snow removal, and more. This way, they don’t have to deal with those things and are free to move about the world (or wherever) without worry.

Others shy away from renting because they simply want the financial advantages that come with owning a home, even if being a homeowner can sometimes be trying, especially in one’s older years.

The cost of renting often comes into consideration as well. Renting can be very high in some locations, and some see that rent payment as money going down the tubes with little to show for it. Others, however, say it’s worth the cost simply to gain their freedom. It’s certainly a personal decision.

So, if you’re hoping to scale down in the near future and aren’t quite sure in which direction you’d like to move – renting or buying – talk to a realtor in your area about the market conditions where you plan to live. They can explain the advantages and disadvantages of both, and then you can decide which is right for you at this time in your life.