Do you dream of relaxing warm beaches or scenic hikes as part of your retirement? Then you might be one of the many people considering relocating in retirement. We'll explore the major things to consider when relocating for retirement, including whether you should sell your home.
Perhaps the most obvious consideration is your immediate financial situation and the cash necessary both to facilitate the relocation and to live off during retirement. It’s recommended that you have 10-12 times your annual income by retirement age and that you are able to immediately replace 60-100% of your annual income when you retire. This value could be more if it depends on your lifestyle. You’ll need more if you’re planning on traveling or if you want to contribute financially to your children and grandchildren.
Another consideration is the type of living situation you’d like to be in. If you’d prefer to buy a new home in a different location or downsize then you’ll need enough funds for a downpayment and moving expenses. Destinations that are popular for retirees often also come with higher home prices and general cost of living expenses. The average home price in Florida is $392,904, while Hawaii is much more at an average home price of $830,193.
You may prefer the flexibility of renting instead, which would also allow you the ability to “test” whether you like a new neighborhood or state. However, the flexibility also comes with more uncertainty when it comes to rental costs and makes you reliant on a landlord. Average rent prices in Florida for example range from $1,400-1,800, while average rent in New Hampshire ranges from $1,100-$1,775.
Some choose an independent living/retirement community, which comes with the benefit of community, social activities, communal meals, as-needed care and peace of mind that you won’t need to relocate for health care concerns. The average cost of these facilities can range from $3,500-$10,500 a month.
10 best states to retire in 2024:
- New Hampshire
- Utah
- Minnesota
- Connecticut
- Colorado
- Vermont
- Maryland
- Nebraska
- North Dakota
- Wisconsin
Relocation Company
A Relocation Company or a “Relo” Company is a moving company that specializes in long-distance moves and can also offer real estate support. In addition to the usual logistics of packing and moving a home, relocation companies are unique in that they also can help sell your current home and purchase a new home in your relocation area.
Timing
Timing can be an important factor when choosing how to spend your retirement.
A CDC National Survey of Residential Care Facilities found that 29% of senior housing communities have a waitlist, with an average wait time of over 180 days. It can be challenging to match the timing of the sale of a property with the closing of the new property. There may be a period of time where you will need to explore a short term rental situation or the possibility of living with family members.
If your move is especially time sensitive, it may make sense to work with a cash buyer like Haven Homebuyers. When selling your home to a cash buyer, you may select the exact date you would like to close and precisely coordinate it with the closing date of your new home. This is difficult to do with an open market sale as the closing date depends on a number of factors, such as the buyer’s desired closing date, lender delays, appraisal delays, inspections and repairs necessary.
Benefits of Renting Your Home and Retiring
Income
If the rental market is competitive in your area and you have relatively low costs (ie. you’ve paid off your mortgage), then renting can be a great option. This is especially true if the value of your home is anticipated to increase substantially in the short term and it would be more lucrative for you to hold onto it for a few more years.
Becoming a landlord in retirement is a big commitment, but may provide you with some income in retirement.
Not Ready To Sell
It’s understandable that you may have an emotional attachment to your home and may not be ready to sell. You may also want to keep the home in your family but need a bit of time before it can be transferred.
Selling your home can also be an issue of timing. The housing market fluctuates and it would be better to sell in a few years.
Benefits of Selling Your Home and Retiring
Additional Funds
Selling your home is an easy way to get liquid cash, assuming you have equity in your home. You may want those extra funds if you’re looking to buy a new home after you relocate or to cover the cost of moving.
Additional cash may also be necessary if your anticipated healthcare costs are rising. In fact, the average American underestimates the amount they’ll need in retirement by more than 80%. That can be a huge financial burden for many retirees who should expend over $300,000 on healthcare expenses in retirement.
Retirees may also choose to hire out more home services to help with ADLs, or activities for daily living. This can include things like light housekeeping, shopping, and meal preparation. In more advanced years, you may also find yourself needing care-based assistance for personal grooming and hygiene.
Avoid the hassle of dealing with renters
Some retirees choose to rent their homes for additional income as a way to hold onto their assets. However, renters aren’t a guaranteed source of income.
There will be an initial investment needed to get your home ready for listing, listing your home for rent, and qualifying potential renters. Ideally, there would be someone local who can perform inspections, tend to tenant complaints and oversee maintenance and repair work once the property is rented out. A property management company is a good solution for this, but an additional cost that can eat into the profitability of rent.
While we all hope that the tenants we rent our homes will pay rent on time, cause minimal damage and be liked by our neighbors, that’s not always the reality. Often tenant issues can be a cause of great stress and frustration.
Avoid ongoing maintenance
A major benefit of selling your home is that you do not need to worry about regular and major maintenance of the property. This can be especially tricky if you’re on a beach on the other side of the country. Finding and vetting contractors when you can’t easily meet them in person can be complicated and a source of stress.
If your current home is in an area with a high chance of damage by unforeseen natural causes, then it’s likely that you’ll need to coordinate the repair of major damage at some point. In addition to finding repairmen, you may also need to deal with your insurance cross-country.
If you’re buying property at your new destination then you’ll need to worry about maintaining multiple properties.
Taxes
Selling your home also means that you won’t need to deal with taxes associated with the property. Property taxes are one of the highest ongoing costs incurred when owning a home. Property taxes are assessed by the county and are paid twice a year in most states. There is usually a base tax rate, plus supplemental taxes to cover bond payments, water projects, vector control, special school districts, sewer projects and other items. Property taxes are calculated as a percentage of the assessed value and can range from 1 to 3 percent, depending on the state and city. They never go away and usually increase each year along with the value of the property. Whether it’s renting or downsizing, your tax burden will likely improve. When you rent a home, the owner or landlord is responsible for paying the property taxes. If you choose to retire and purchase a smaller home, the property tax will likely be lower due to the lower assessed value. Capital gains taxes are separate from property taxes. You may have a capital gains tax liability if you are selling your home for more than you paid. This tax liability could be substantial and you should consult with your tax professional about this.
How to Sell My Home and Retire
Traditional Sale
Selling your home on the open market is generally the best way to maximize the net proceeds that you’ll receive. There is significant effort required, but many homeowners are rewarded with a higher selling price by taking these additional steps. With a traditional sale, the home is listed on the MLS. It must be kept in clean and uncluttered condition while it is on the market. Prospective buyers will schedule viewings throughout the week and the real estate agent may hold open houses on the weekends. Prior to listing, the seller should address any deferred maintenance or repairs that are needed. They will be discovered at the inspection and the purchase price will be discounted if they are not repaired. The seller may also consider making some renovations to the home, so that it looks modern and appealing to buyers. Once a buyer has made an offer, escrow is open and will last 30 to 60 days before closing. During this time, inspections and appraisals are completed, the buyer completes loan requirements, the seller fills out disclosure forms and a lot of documents are signed. During this time, there is a risk of buyer cancellation or renegotiation.
Sale-Leaseback
Some sellers will choose to do a sale-leaseback transaction. In this case, the transaction closes and the seller receives their proceeds, then is allowed to remain in the home for a certain amount of time. This option is used in cases where the seller needs the proceeds in order to make a deposit or pay for their new property, or if they need the funds to help with moving costs. It may also be used if the new residence is not ready yet. In this scenario, the seller would likely pay rent and make a security deposit to the buyer. Many times, the rent is held back from the sale proceeds so that it is certain that the buyer will receive it. If a sale-leaseback is needed, it is important to agree on the terms at the time the sale is agreed to, as not all buyers will be agreeable.
Sell for Cash
Selling your home with Haven Homebuyers is the most convenient way to sell your home quickly, for cash, on your timeline. Haven Homebuyers will purchase your home for cash and close in as little as five days. Our high-performance track record shows we create win-win agreements with homeowners. We will also close on your timeline, so whether you need cash quickly to purchase your new home, or need to wait for a spot to open in a senior care community, we can accommodate you.
Still not sure? Read our blog on the Pros And Cons Of Selling To A Cash Buyer.
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