Should You Sell Your Empty Nest Or Rent It Out?
Congratulations on making the decision not to age in place. Indecision is one of the worst estate planning decisions you can make. There is no one size fits all answer about whether you should continue living in the house where you raised your children, but the first step to making actionable plans for retirement is to decide whether you want to relocate after you retire. Relocating to a senior-friendly community in Florida is an excellent decision, as evidenced by the large number of seniors who spend a long, happy retirement in Florida. If you are not going to stay in your empty nest, then, what do you do with it? A house with a paid off mortgage is a valuable asset. Will it put you in a better financial position for retirement if you sell it or rent it out? An Orlando estate planning lawyer can help you weigh the financial and non-financial factors that affect your decision to sell your house after you retire or to hold onto it as a rental property.
Does Renting Out Your House Make Good Financial Sense?
Whether you want your house to remain in your possession after you retire is not purely a financial decision. For example, you might want your children to inherit the house simply because it is a valuable asset, even if it is not feasible for them to move into it now. Likewise, some people think that being a landlord in your golden years sounds like fun, but others find it stressful. Being responsive to tenants’ needs is a challenge when you are in a different city from your rental property. It is possible to hire a property management company to deal with the day-to-day aspects of communicating with tenants, but this adds to the cost of overhead.
In the old days, estate planning lawyers used to say that it was a good investment to rent out your house if the monthly rent you can get for it is at least one percent of the house’s resale value. For example, if a real estate agent tells you that you should list your house for $400,000, then you should rent it out if you can reasonably expect tenants to pay $4,000 per month in rent. In practice, you can be a little bit flexible with that number. Much like the four percent rule for withdrawing money from your retirement savings, the one percent rule for rental income is based on wishful thinking that good economic conditions we have not seen in decades will return.
Meanwhile, if you sell your house, you can defer up to $250,000 in capital gains tax. If you and your spouse own the house jointly and then sell it, you can defer up to $500,000 in capital gains tax.
Contact Gierach and Gierach About Alternatives to Aging in Place
An estate planning lawyer can help you start planning to get income for retirement from the sale of your house or from renting it out as an investment property. Contact Gierach and Gierach, P.A. in Orlando, Florida to discuss your case.