Reader Question: I am 65. I have been living in Alabama since 2004. I lived with a family member who has since passed away. Now I am out on my own renting a house. I have had an excellent job with the same company since 2005. At the end of this year, I will retire and file for Social Security, and move back to Los Angeles. I plan on finding a job there. Is it in my best interest to rent or buy?
Monty's Answer: Whether or not someone chooses to own a home is a very personal decision. Many people desire homeownership but do not have the means to attain it. Others have the ability but choose to rent. There are a variety of factors to consider in such a decision. Here is a link to rent vs. own comparison that you may find helpful.
A person's finances are a primary consideration. Do you have the cash to buy a home? If you have the money, then other factors come into play. Here is a link to a cost of living calculator you may want to consider utilizing. I plugged in a city in Alabama and East Los Angeles to make a sample comparison for you. It suggests owning a home is 276% more expensive in Los Angeles. According to CoStar, a company that tracks real estate nationwide, the average rent for a one-bedroom apartment in Los Angeles is about $1,800 per month. According to Zillow, the median price of a home in Los Angeles is $758,000. A review of websites that rent single-family homes there featured homes from $1,375 to $17,000 per month.
Why are you moving back to LA? Do you have family members there with whom you stayed in touch? How familiar are you with the responsibilities involved in homeownership? Do you often have company at home? Do you have pets? Do you miss the big city vibe or the weather? Are there reasons to stay in Alabama? These are the types of personal concerns you are likely considering that may influence your decisions.
Types of housing
An often-overlooked factor in making the rent versus own decision is the type of housing you choose. Here is an article about the kinds of housing one can obtain that may be helpful for you. The cost of homeownership can vary widely with these choices. The fact you are at the threshold of retirement opens the door to yet another possibility for you to consider. When people retire, they often seek age-restricted communities, which come in many varieties. Here is a specific article about senior housing that you may also find helpful. There are links in the report to other non-biased sources of information.
Armed with these tools and data, your decisions as to how to proceed will be based on solid information.
Richard Montgomery is the author of “House Money - An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Find him at DearMonty.com.