Considerations for Renting the Family Home When Moving into a Senior Living Community
Most older adults who are moving to a senior living community choose to sell their home as part of that transition. However, for some older adults, the idea of selling their beloved family home is what prevents them from moving into a senior living community. The good news is that for many people, they do not have to choose between the two.
There is a third option that people often overlook- renting the family home when moving into a senior living community. This allows you to keep your beloved home in your family for your heirs or turn it into an investment, while not having to live in an undesirable or unsafe situation or environment.
Here are some considerations when it comes to renting your home.
Do you own it free and clear? While it can still work if there is debt against the home, it certainly simplifies things if you own it outright. If there is debt owed on the home, this monthly payment will need to be deducted from the gross monthly rent collected. You will also want to make sure there is enough extra to cover other costs (see below).
What are the holding costs of the home? You will want to know what your property taxes, insurance, and maintenance costs will be. Are there other costs to calculate- HOA, landscaping, water, trash, utilities (or will your tenant pay these)? There will be additional costs to cover between tenants such as carpet cleaning, painting, repairs, and vacancies. Also, it can be easier to hire a property manager to oversee managing the property if you are in a senior living community, which will average about 10% of the monthly rental income. (Having a family member manage the rental property may be another option, but not always the best option.)
Is there a rental demand for your home? Once you know how much it will cost to continue owning the home, do some more research on what kind of rent you can draw. Is there demand for your type of home in that location? Are there other similar rental homes sitting vacant? This can help you decide if it would be suitable as a rental home.
Is your home located in an HOA community? If so, be sure to check with the HOA to learn any important rules or restrictions that they may have on rentals and/or renters.
In addition to generating monthly income, there can be tax benefits associated with renting your home. Talk to your tax advisor to determine how you can benefit financially from being a landlord. Also, consult with your attorney about the need for any legal documents, such as a Power of Attorney should you become unable to manage the responsibilities of being a landlord (for your own protection).
Although it is not a small decision, the good news is that if you find that being a landlord isn’t for you, you always have the option of selling the home at a later time. Either way, renting out your home when moving into a senior living community can be another option to consider.