The hectic changes in the world over the last few years have many people reconsidering their priorities and deciding whether to make a major shift in their lifestyles. Downsizing, once thought to be something you only do when you’re older, is becoming a popular choice for people at every stage in life. And why not? Selling a larger home can help you simplify your life so that you no longer have to worry as much about your finances. A smaller house doesn’t just cost less; it’s less work to maintain and can allow for more free time and peace of mind. 

Once you’ve made your decision, the next step is to determine which course of action is best for you. The options can seem endless. Many people follow the traditional path of selling the family home and purchasing a condo or townhouse. However, buying a house is always a big commitment and is not always feasible. If you’re unsure of what you want to do, a strong case can be made for selling your existing home and renting for the time being.

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When Renting May Be Better Than Buying

The standard advice to buy a home instead of renting may be ideal in most situations. But everyone is different, with individual needs and goals. One piece of advice can’t cover every scenario. When is buying a better choice? 

Ownership makes sense if you have a concrete vision of where you want to be for the next few years and have the means to buy the right home. However, most people don’t have such a crystal clear picture.

If either of the following is true, renting might be the better option, at least temporarily:

  • You are on the fence about your next steps. If you don’t know whether you want to stay in the city, or even in the country, then renting may be the better choice in the interim.
  • You are considering a career change. Will your new position require you to relocate? Buying a home only to resell a short time later may be more trouble than it’s worth. Plus, if you sell within 12 months or less, you could get penalized by the new anti-flipping tax.

Getting the best possible results from your sale will empower your next move, whatever it may be. The resources below will help:

The Financial Benefits of Renting

As mentioned earlier, renting does not allow you to build equity. This is a massive disadvantage for first-time buyers trying to save for a down payment while paying thousands of dollars in rent every month. 

However, it’s a different story if you are mortgage free. Selling your current home will leave you with a significant influx of cash. Presuming the house is your primary residence, you won’t be subjected to any tax. Whatever is left in your account after taking care of your closing costs is yours, free and clear. Plus, selling and renting leaves you with the cash on hand to act when and if an opportunity to buy the right property arises.

There are a few other financial considerations when choosing between renting and buying once your existing home sells.

  • When interest rates are low, housing values typically rise. This means you’ll end up with more money once your transaction closes.
  • When interest rates are high, property values can decrease. However, higher rates work in your favour when you have money in a bank account. Depending on how much your home sells for, the interest alone may be enough to cover your monthly rent. 

If you’re uncertain about what to do next, renting sometimes makes perfect sense.

When and if you are ready to buy your next home, the following tips will help in any market:

The Pros and Cons of Renting Vs Buying

There are some advantages and disadvantages of renting once you look beyond the financial aspects. What are the downsides?

  • It can be challenging to go from the mindset of a homeowner to a tenant who no longer has a say in what to do with the property. 
  • You will have to get your landlord’s permission before performing any upgrades to bring the home to your standards. And do you really want to spend your money fixing up a house you don’t even own?
  • The landlord could decide that they want the home for themselves or a family member. Additionally, they could choose to sell to a new buyer who wants to live in the house. In either case, you may be asked to leave, which means starting the moving process all over again.
  • The real estate market is unpredictable. Some people decide to rent after selling in the hopes that prices will go down, only to see values soar as time goes by.

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As a long-term solution, renting after downsizing isn’t for everyone. However, there are also many benefits that could work in your favour, including:

  • Renting is far less expensive in the short term. The rental deposit pales in comparison with the down payment of buying a house of any kind. And tenant insurance is also much less expensive than homeowner’s insurance.
  • Unless stated otherwise in your lease agreement, all routine repairs and maintenance to the unit are the landlord’s responsibility. (Damage by you or a guest in your home is a different story, however.)
  • Unlike buying a home, renting does not require a major commitment. Once your lease expires, you’re free to move on if you desire.

The decision to buy or sell is never one to make lightly. The real estate market fluctuates, and the rules for renting can also change. Fortunately, expert advice is just a phone call or email away. A local real estate agent can help you make the best decision for your situation, from helping you achieve maximum results from your sale to finding the perfect new home that suits your needs.

Do you have questions about what you should do after your home sells? I’ve worked in the local real estate market for over 20 years and am happy to guide you on your journey so you can proceed with confidence. Contact me today at damir@damirstrk.com or call 416.884.7925 for more information.