Seniors who can afford to own a house don’t necessarily always want to own a house. Many prefer to rent an apartment or townhouse instead. These adaptable individuals may want to spend their money elsewhere, investing savings in assets more liquid than property.
Perhaps they’ve just sold a house and they aren’t quite sure yet where they want to live. Or, maybe a couple wants a place here, plus another in Florida–a scenario conducive to renting.
Whatever the reason, renting often makes sense. You can cut living expenses by renting.
Even if you’ve paid off your mortgage, as a homeowner you don’t get a free ride. Paying for maintenance of a house, plus hefty real estate taxes, can become a real economic burden.
Many seniors want to keep down monthly expenses since, after retirement, they’re usually living on a reduced income, according to Linda Forman, an Evanston certified public accountant and past vice president of the Illinois CPA Society.
“When you rent you don’t have big overhead expenses,” she said. “Sometimes the monthly outlay for rent is less than the upkeep and taxes on a house.”
Although you may have a great urge to buy a condominium after selling a house, that’s not always the best decision either. Forman cautions seniors to look carefully at the monthly assessments charged by condominiums.
“These can be quite steep,” she said. Also, watch out for buildings that need a major repair. Special assessments can really hurt if you’re living on a fixed income.
You may actually be able to increase your monthly income by selling your house and investing the proceeds elsewhere. Most homes have appreciated nicely during the current economic expansion. Now may be a good time to cash out, so to speak, and rent an apartment. Financial advisors suggest putting money in interest bearing investments that generate monthly returns.
Tax law changes have made renting easy. In May, 1997, Internal Revenus Service rules were modified so that any single person can take a nontaxable gain of $250,000 on the sale of a principle residence. For couples, the exempt amount is $500,000. Homeowners must have lived in the house for at least two of the last five years.
Previously, homeowners had to buy another, more expensive, house within two years of the sale of their residence. People over 55 years old were allowed a one-time nontaxable gain. But if seniors weren’t ready for their one-time exemption, they would have had to buy another, more expensive house in order to avoid the capital gain.
“There isn’t that pressure to reinvest anymore,” said Forman.
This gives seniors a lot more flexibility if they decide to rent and delay the purchase of another house. Plus, renting can be a nice break from the stay-put mentality of home ownership.
For instance, One Superior Place, a new high-end rental building in Chicago at State and Dearborn Streets, is getting a fair number of empty-nesters who no longer want to own property, according to Tricia Wertheim, leasing director of the building.
“It’s like living in a condo, but they don’t have to buy,” said Wertheim.
She added that renters like the idea of not having to hassle with the details of ownership.
“They can pick up and move when they want,” she said.
The 809-unit building is 75 percent leased. Monthly rents for two-bedroom apartments start at $2,196.
Though many rental buildings, especially those in the city, have recently been converted into condominiums, leasing agents say there are still lots of apartments for rent.
“Seniors should plan on looking for an apartment about two to three months in advance of their move,” advises Kathy Talarek, an executive at Relcon, an Oak Brook-based apartment referral service. (Relcon Inc. is a division of Chicago Tribune Co.)
Apartment referral services, such as Relcon, are plentiful. These services, most of which don’t charge renters, conduct a computerized search of available apartments. Renters get a list of properties with rent ranges and building features, such as whether or not pets are allowed. Most referral services make their money by charging landlords for a listing in the database, so not every rental building is listed.
A good referral service should be able to tell you whether a building is appropriate for seniors. These buildings may not be listed for seniors-only. But by the nature of their location and accessibility, they may have attracted a fair number of seniors anyway.
Of course, renting an apartment in a retirement community is another alternative. Rental agreements may differ from those used by landlords of regular apartment buildings because retirement communities often offer a host of services, such as meals. Lists of these communities are available from local senior centers and social service agencies.
Resources
– Relcon Inc. publishes Mature Adult, a guide to more than 400 senior residences and care facilities. The guide lists rental apartments as well as active adult communities, assisted living and Alzheimer’s care facilities and nursing homes. Rent subsidized buildings are included. The book contains handy maps and phone numbers for senior services. For a free copy, call 630-645-6055. The Web site address is www.matureadultchicago.com.
– Another helpful guide is SeniorAlternatives. This booklet lists retirement communities, assisted living care and nursing homes in the Chicago area. Also included are home health services. For a free copy call 1-800-350-0770. The Web site is www.senioralternatives.com.
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Jane Adler is a Chicago-area freelance writer. If you have questions or information to share regarding housing for senior citizens, write to Senior Housing c/o Chicago Tribune Real Estate Section, 435 N. Michigan Ave., 60611. Or e-mail adler@megsinet.net
