About 50% of Americans nearing retirement are in the process of making an ironclad plan for their future. This can encompass a financial plan, tax plan, and estate plan to name a few. Having a real estate plan alongside these is also very wise. Your home is one of your largest assets and making these decisions ahead of time will truly pay off later.
This series addresses being able to stay in your home vs. moving and either renting it out or selling.
You may already know that your end goal is to be able to stay in your current home. In order to grow older in your space, you may need to begin making modifications or do remodeling sooner rather than later when it becomes urgent and you have less energy and resources to do so. What I see most with clients is that they widen doorways, install more railings and lighting, and add walk in tubs, grab bars, or make their shower areas more accessible. Sometimes, if they want to stay in a home with stairs, they put in an automatic lift on the stairwell.
Remodeling for aging is not the only concern. Some retirees may need income from their current property, and there a few different ways to handle this.
The first is a trend of note - ADU's (accessory dwelling units, sometimes called granny units or grandma suites). San Jose, Sunnyvale, and other Silicon Valley cities have loosened their restrictions on building these in yards of a certain size. Usually they do need to be owner occupied, so you'd either need to live in the main house or in the ADU itself - this may be an option for renting out part of your property to be able to stay and receive the needed income. Each city's rules for ADU's can be found on their official city website. Some who decide to stay rent a room to a family member or friend they know they'd be able to live with.
If you need income from your home and renting part of it is not an option, getting equity out of your property through loan products may also be possible.
I'd like to quickly mention reverse mortgages. They of course have a bad reputation and in most cases aren't the best option - but it may make sense for some. They're very expensive loans that allow you to take equity out of your home - the debt accrues monthly until you move and sell or pass away and your heirs and estate settle out the loan. Interest keeps accruing on the larger growing amount (which includes fees), so do make sure you fully understand this product with your financial advisor.
Doing a refinance to get cash out can also sometimes be possible with lender programs that utilize asset dissipation (also called asset utilization or asset depletion) - these loans qualify you based on your assets, not solely income. Often you need to show you'd be able to pay your loan for 3-5 years based on the assets you currently have.
No matter whether you're staying in your home, deciding to rent it out or move, I see many clients benefit from starting to go through their belongings to organize and declutter. This change of lifestyle helps them enjoy the space they have, eliminates safety concerns (like extra belongings being stored near fire hazards), and clears egress pathways in case of an emergency.
Read more of Kelsey Lane's Retiree Home Selling Series: