Selling vs. Renting: Which Option is Best for Your Retirement?

Are you a retiree considering whether to sell or rent out your home? It’s a complicated decision that requires careful consideration of investment, tax, and non-financial factors. Firstly, you need to evaluate whether your home is a good investment. The 1% rule suggests that you should be able to get 1% of the current purchase price of a home in monthly rent. Cap rates, which are the real estate term for yield, can also help you determine the total return of your investment. Tax considerations are also important. If you sell your primary residence, you may be entitled to the 121 exclusion, which allows you to exclude up to $250,000 of capital gains. However, if you turn your home into a rental property, you’ll need to consider how income will be taxed. Non-financial factors, such as the hassle of being a landlord and the possibility of wanting to move back, should also be taken into account. Ultimately, there’s no clear advice on what to do. However, by considering these factors, you can make an informed decision about whether to sell or rent out your home in retirement.