Are you or someone you know looking at downsizing your home? At times, moving can seem more like an onslaught of decisions than an exciting transition. Even after you’ve decided on a new home, you’re still left with the fate of the old property. You could sell it to boost your savings, rent it out to earn a monthly income, or hand it over to a family member for safe keeping.
While each option comes with positives and negatives, the best choice will depend on your unique situation. Let’s dive into some of the details of each scenario to give you a better perspective on what’s best.
SELL IT TO BOOST YOUR SAVINGS
The natural process of moving usually sees the owner of the home sell their previous house and put the earnings towards the purchase of their next home. This tried-and-true option usually yields the smoothest transition. Downsizing seniors are particularly fond of this choice. If the current home is paid for, they often don’t have to worry about taking out a loan or managing another mortgage. They can simply sell their old house to pay for their new one.
Before placing your home on the market, it’s important to scan local listings for some information. You need to note the average cost that homes are selling for, and think about what your own home might be worth. For example, Redfin notes the average home in Charleston is selling for around $350,000. Make some comparisons, and if the price is something you’re comfortable with, you can move onto the next step of hiring a real estate agent and preparing your home to sell.
RENT IT OUT TO EARN MONTHLY INCOME
It’s no secret that living on a fixed income can be challenging. When you’re in this position, renting out your old home can be a great way to enjoy some passive income. Just be sure the rent you charge is sufficient to cover the expenses of ongoing homeownership – such as property taxes, upkeep, and utilities – and still enough to pad your nest egg.
Don’t forget that having a rental property is an investment and a business. You have to front costs for updates and renovations to make the home more appealing to potential tenants. You also have to be proactive about finding reliable renters with clean records and little-to-no debt. If you’re interested in the income but don’t want the hassle of managing the property, you can hire a professional property manager to handle all of the details.
TRANSFER IT TO A FAMILY MEMBER
For some seniors, no amount of money or monthly income can convince them to let go of their beloved home. Too many good memories and meaningful experiences are tied up in the house to simply give it away. If this is how you feel about your old home, you don’t have to sell it or rent it when downsizing. Instead, you may wish to hand it over to a family member for safe-keeping.
Bear in mind, transferring a large asset like a house can have some complex tax ramifications. It’s best to discuss this option with an elder law attorney before jumping in.
On the upside, having someone living in the house ensures it will be maintained. Also, an empty property is more likely to fall victim to theft or vandalism, so you avoid those concerns as well. What’s more, if it’s left empty for long, insurers may void your policy.
It’s not easy to decide the fate of an old home when your circumstances require a downsizing. To help make the decision easier, take note of all your potential options and weigh the pros and cons of each. Once you sort your options, you’re sure to find the best choice for your circumstances.
Author Jim Vogel is founder of elderaction.org.