When we sell our house, should we rent instead of buy?
Q. My wife and I would like to downsize the home we live in now since our kids are gone. We built the house 41 years ago and it has served us well. We intend to stay nearby so we can see our grandchildren. Our home has been paid off and we think now is a good time to sell but not really a good time to buy. We are considering renting for a year or so. Any thoughts?
— Seller
Your question is a common one.
It seems your strategy would work out to your benefit if there are a few key assumptions made, said Ken Van Leeuwen, a certified financial planner with Van Leeuwen & Company in Princeton.
One consideration is how you would be investing the proceeds from your current home.
“Investing the proceeds would make the math work more in your favor, instead of keeping it in a cash account earning next to nothing,” he said.
It’s also important to note that you don’t want to take too much risk with any funds you will need in the near future.
You are also assuming that the housing market will “cool off” and there will be a more interesting home at a better price in the future, he said.
In that case, renting can make a lot of sense for families looking to maximize their current home value without buying another property at all-time high prices.
He recommends you stick with a 12-month lease when you rent, noting that many rentals will allow you to break the lease early, but you would be responsible for the monthly payments until the unit is rented to someone else.
“This could still be cheaper than paying an increased monthly rent for a shorter period of time,” he said. “Just make sure to check the lease to see what your options are for breaking the terms early.”
Email your questions to Ask@NJMoneyHelp.com. This story was originally published May 25, 2021.
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