It’s a question at any stage of life, but asked significantly by people in retirement: should I buy, rent or lease? There is no one-size-fits-all answer, and contrary to conventional wisdom, it may not always be best to own your own home in retirement. At Comfort Life, we’ve put this question to a number of experts over the years: rent or own? Albert Yu, a Toronto Chartered Accountant says, “it depends.” Two key factors that can affect whether it is best to buy, sell or lease are: stage of life and total finances. There are other factors, also.
Here's a broad overview of each option, with a summary of advice from finance professionals, and a look at how each option affects retirement plans and other variables.
The ownership option, offered by some retirement condominiums and other active adult communities, has a firm foothold in the retirement residence and communities sector. Market value condominiums are attached or linked to a retirement residence offering a range of amenities, including housekeeping, personal support and health services, available for a fee.
The condos are marketed to healthy and active seniors, who want to age in place and be able to access certain services as needed over time. Services may be available to seniors within the complex as the need arises. This ownership option may appeal to a couple, each of whom needs varying levels of support from a retirement facility. A one-bedroom retirement condominium in Greater Toronto starts at about $240,000, while a two-bedroom suite can go for $300,000 or more. A monthly fee covers amenities and meals; other services can be purchased individually. Read more about retirement home condominiums in Canada.
Ownership is traditionally seen as common sense, but it is not necessarily so in all cases. Renting gives you more freedom to leave at any time, to travel if you like, and it frees up your home equity (assuming you have been a homeowner in the past) for other purposes. As a homeowner you are also subject to market fluctuations that can greatly impact your investment in your property.
Most retirement home residents are tenants; they pay a monthly fee for their accommodations and accompanying amenities. Across Canada, monthly fees range from $1,800 to $4,500 depending on the size and location of the accommodations, and the quality and array of the amenities.
The fees cover room and board, perhaps light housekeeping, and use of amenities. Personal support and health-care services are generally available for an additional fee. Retirement homes are privately funded and as rental accommodations, fall under the Tenant Protection Act, which requires a written tenancy agreement for each resident. You can read more about the option of retirement home rentals.
Renting offers freedom from the responsibilities of ownership (and property taxes, etc.) Some people choose to invest money elsewhere, in things such as the stock market and other ventures. All of these investments come with risks that vary from risks associated with home ownership, of course. On another hand, renting is also seen by some as putting your money in others’ pockets. Finally, renting may be subject to increases over time.
For some time, the retirement lifestyle landscape has included life leases, which give seniors a stake in a community but do not involve traditional home ownership. Residents buy a lease or leasehold interest in their accommodations, giving them a right to occupy their unit and use amenities, such as dining rooms and recreation facilities.
Life lease communities tend to be sponsored by non-profit organizations, which provide the capital to build the development. Life leases vary greatly in cost, depending on location and the amenities offered by the community, but buying into a development tends to be lower than market value. Read more about life lease retirement homes.
An ideal situation that some may find themselves in is that they have enough money from the sale of their home and/or other investments to buy a smaller home outright and have a nest-egg left over, with which to invest in other assets or ventures. This spreads risk while optimizing opportunities to actually continue to grow your finances in retirement.
For many, though, the decision as to whether to buy, rent or lease is not so simple or easy.