Who knows, the idea of selling the family home after you retire and then renting might just catch on.
A recent Personal Finance column put this idea in play and the response suggests it's getting some serious thought. Readers have asked whether you have to pay HST on rent. The answer: No, you do not. They have also asked if there's a good online directory of properties available for long-term renting. If anyone knows of any websites like this, by all means let me know.
Toronto resident Alain Rivet responded to the column with an e-mail saying that renting is an "eminently sensible" option if you own a house in that city and your kids have moved out. "My only hope is that your worthy readers hold off until I've sold my 'castle,' so that I get to cash in at maximum value."
Another reader appears to be a renting pioneer. "I sold my house for $200,000 in 1980 and invested the proceeds in mainly mutual funds with an investment company," he wrote in his e-mail. "This has paid off through the years and we are not burdened with lawyers and real estate people."
Whether you're an owner or renter in retirement, you'll most likely have to sell the family home at some point. For help with that, check out ForFutureSale.com, a website where you can list your home for sale long before you actually want to move. As in up to five years before.
"We believe there is tremendous potential to attract many home and business owners, farmers, cottage owners, etc., who have a reasonably good idea that they will sell their property or business at some point in the distant future," wrote Mike Roelofsen, whose company ZR Future Group is behind ForFutureSale.com.
Lots of people don't think it's a good idea to sell the family home and rent, and one reader in particular didn't like the pro-rent math presented in that earlier column (read it here). The gist was that you could conceivably generate a 5-per-cent after tax return if you invested the money you made from selling the family home.
"If your home sells net for $600,000, typically, this capital is to be protected," wrote Eric Bornstein, a chartered accountant with Soberman LLP. "Perhaps an after-tax return of 2 per cent can be achieved - perhaps!"
Perhaps a different perspective on this might help to fuel the rent-versus-buy debate. The equity in your home is neither safe nor protected. Any U.S. homeowner can tell you that, and so can anyone who bought in Toronto in the late 1980s.
If you want to invest with equivalent risk to owning a home, then 5-per-cent returns after tax may be achievable through the use of tax-efficient investments such as dividend stocks. If you want to be very safe in how you invest the proceeds from selling your house, then 2 per cent after tax will be a challenge in today's low-rate world.
Mr. Bornstein raised another issue, which is that a dollars-and-cents analysis doesn't address the emotional benefits you get from owning your own house. Adrian Trembling, a reader from Toronto, echoed this point by noting that older renters would be at the mercy of landlords who might decide to sell.
"Older tenants can find it stressful to receive notice that they must move because a rented condo or house is being sold and can be disturbed that they are required to provide access to prospective purchasers prior to the sale," he wrote.
A popular downsizing option in cities is to sell the family home and buy a condo because of the reduced requirement for upkeep compared with a home. But one condo-dwelling reader in Toronto warned that long-term maintenance costs are not to be underestimated as a big expense.
Condo fees are supposed to cover both short- and long-term costs, but he said that residents may be asked to pay special assessments to cover the cost of big projects. He said he's heard of assessments as high as $35,000 to $50,000.
The original column on the renting option for baby boomers made the point that now is a good time to sell because it allows people to lock in the excellent gains of the housing market in recent years. A few readers underscored this point by noting that Canada's aging demographic skew suggests sellers may at some point outweigh buyers in the housing market.
Want to put a value on your house as an investment, factoring in all your costs over the years? Then try an online calculator suggested by a reader: calcxml.com/do/inv04. Like the answer you get? One option if you're a baby boomer in retirement is to sell and then rent.
PLANNING YOUR ESCAPE
ForFutureSale.com is a new website where people advertise homes they would like to sell - not immediately, but at a future date. Whether they plan to buy or rent in the future, retired baby boomers can use the site to see what level of interest there is in their home. Here's how it works:
Cost to sellers
$79 (free registrations are being offered as a startup promotion)
Cost to buyers
For sales up to five years down the road
How it works
Display your home and wait for potential buyers to express serious interest; when it comes time to sell, you can do the transaction privately and avoid real estate commissions.
Types of properties
Houses, condos, cottages, farms