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rob carrick

Baby boomers are a bunch of house huggers, but there are exceptions.

One is a guy we'll call Joe. He e-mailed a short while ago to ask for some feedback on his idea of selling the family house and cottage, and renting his family's next home.

A quick summary: Joe's got a big house, a big mortgage and he's worried about the housing market in the years ahead. His main question: "Would a move like this be considered radical, or could it become a trend?"

Let's see what a sensible financial planner says. She's Barbara Garbens of B L Garbens Associates, a Toronto-based fee-only financial planning firm (she charges an hourly rate). "I don't consider this radical," she said. "In fact, I'm seeing it more with seniors and people approaching retirement."

That's a surprise because in a survey I wrote about recently, involving 1,500 homeowners aged 50-plus, half of the participants said they'd never thought about selling their homes to generate retirement income. Four in 10 people were unwilling to consider any one of five possible ways to exploit the equity in their homes (read more about it online at

Joe's no house hugger, though. He's calculated that he would have roughly $700,000 available to invest if he sold his four-bedroom house in a small town not far from Toronto, and a cottage that the family doesn't visit much any more, partly because his three daughters are getting older. If he were to invest, he wonders what rate of return he could expect.

Joe was inspired by the story of a Vancouver woman I wrote about last year. Worried about what seemed at the time to be an overpriced housing market, she and her husband sold their house and moved into a rental (read it online at Almost a year later, that move looks brilliant as a result of falling home sales and prices in the city.

Nationally, we saw a 15.8-per-cent decline in sales and a 1-per-cent drop in prices in February. And this week, Royal Bank of Canada's 20th-annual home ownership poll registered the biggest drop since the survey's inception in the percentage of people who plan to buy in the next two years. The rate fell to 15 per cent from 27 per cent last year. "In general, the real estate market has softened," Ms. Garbens said. "So I think [Joe] is probably right to be concerned that we might go into a prolonged downturn. It's anybody's guess."

Joe's had some experience with weak housing markets. He and his family bought a home in a nearby community in 1989 for $180,000 and sold it in 1999 for just $7,000 more than that. Ms. Garbens said there would be two benefits to him and his family if they got out of their current house and rented. First, they'd save money on monthly expenses by not paying for home maintenance and property taxes. Second, they'd have a very big chunk of money to invest.

How much of a return might they get on that money? Ms. Garbens said 5 per cent after fees is the maximum she'd feel comfortable using, but let's say 4 per cent from a diversified portfolio. Over 15 years, that rate of return would turn $700,000 into $1.3-million. Add Canada Pension Plan and Old Age Security benefits for him and his wife, and there's a solid base for retirement. "He's going to be okay, as long as he's not an extravagant spender," Ms. Garbens said.

A benefit of staying in the home is the potential to capitalize on future price gains. Provided it's a principal residence, a house can be sold tax-free. But Ms. Garbens said houses in smaller communities may not have the potential to appreciate like those in bigger cities. Joe said his house has risen about 2 per cent annually for the past five years, which is much less than in Toronto.

Renting a home will require a lifestyle adjustment that many people don't want to make. But on the financial side of the question, Ms. Garbens said she has no issues. "I don't have any negative feelings about selling and then renting. There's a certain freedom when you don't have to worry about repairing a place."

Ms. Garbens said an alternative to renting would be to sell Joe's current home and then buy a smaller house. He'd cut his monthly spending that way, have a house he and his wife could live in for years to come, and still end up with some money to invest.

Joe wants to know whether it could become a trend for boomers to sell their homes and rent, but it's too soon to tell. Still, he's asking good questions. "I think he's right to consider this strategy," Ms. Garbens said.


No ordinary Joe

A Globe reader we'll call Joe (because he wants to remain anonymous) wonders about the idea of selling his large family home and cottage, investing the proceeds and then renting. Here's a portrait of Joe and his family:

Age: Joe is 52, his wife is 49

Occupation: Joe is self-employed; his wife works for a university.

Children: Three, ages 15, 17 and 19

Purchase price for the family home: $640,000 (added $100,000 in renovations)

Size of home: Four bedrooms

Mortgage balance: $375,000

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