This Is the Biggest Challenge Seniors Face as They Downsize

For seniors who have lived in one place for many years, the task of downsizing and picking up
to move can be daunting. But if you plan to move—whether with family, into an assisted living or
senior community, or just into a smaller home—you should think about what to do with the
house you’re leaving behind.

Choosing to Sell Can Earn You One-Time Profits

If your mortgage is paid off—or the market is excellent in your area—selling can prove
profitable. Deciding to sell your house involves letting go forever, though.

If you want to sell, look at your neighborhood’s current property listings and the average cost
homes are selling for (in Carmel, that number is $332,000). Consult a real estate agent for
advice on how to price your home. A knowledgeable agent can also provide insight into the
current market in your area.

Appraising your home is another step that can provide information to guide your decision to sell
(or not). An appraisal is an unbiased opinion about how much your home is worth. Of course,
you may find that your property is not as valuable as you thought—at which point other options

apart from selling come into play.

Opting to Become a Landlord Might Mean Consistent Income

Another option when you plan to move is renting your home out. If you have paid the mortgage
off already, rental income can be beneficial—especially in retirement. However, if you still owe
on your home, you’ll need to investigate the local rental market for pricing trends.

Low rental income that doesn’t cover the mortgage leaves you paying for a home you won’t be
living in. Plus, unless you plan to manage the rental yourself, you will need to pay an agency to
handle the lease for you. Fees for property managers or agencies typically range between four
and ten percent of the monthly rental rate, according to The Balance.

The Balance suggests hiring a property manager in certain scenarios, such as if your new home
is far away from the property, you have little experience as a landlord, or you don’t want the

challenge of interacting with tenants.

Passing Your Home to Family Presents Unique Challenges

If you find it challenging to sell your home but don’t want the hassle of renting, there is another
option. Keeping your home in the family can prove to be a smart financial and personal
decision. You don’t lose the emotional ties to the home, and you also don’t have to oversee the
maintenance of the property.

You can charge family members rent, or you can offer them a place to live for free. In exchange,
they can manage the upkeep of the home and keep it in good repair. Renting to family can
present unique tax challenges, Forbes states, so it’s crucial that you understand the tax laws
surrounding your rental agreement.
In short, charging a family member less than the “fair market” rental price means you cannot
use rental expenses as a deduction. At the same time, you must still pay income tax on the rent
you receive.

Alternatively, you can also transfer real estate to your child or another family member. However,
the process quickly becomes complicated. In most cases, if you give a home to a relative, they
must pay a gift tax on the amount the real estate is worth.
Strategies such as selling the house for $1 (or another menial amount) don’t bypass this tax
issue, either. SF Gate highlights. The difference between the house’s value and the sales price
is still considered a gift. Also, if your relative later sells the home, they must pay a capital gains
tax on the proceeds.

Ultimately, you can choose to leave your property to relatives with fewer tax problems if you
place it in a trust. However, this option means you still own the home until you pass away. Then,
your family member takes ownership of the house. There are also legalities to the process that
are difficult to navigate.

While moving out of the family home is common for seniors, what to do with the property is a
deeply personal decision. Whatever you decide, it’s vital that you feel good about the choice

and do what’s right for you.


Photo via Pixabay.


Written By:
Jim Vogel
Elderaction.org