Downsizing Property Options - Leasing Your Next Home

Downsizing Property Options - Leasing Your Next Home

When I ask my senior clients where they’re planning to downsize to, their answers include everything from a bungalow in the suburbs to a pine box! That last one is the ultimate downsizing, but maybe not the best for those you leave behind. Just saying!

So what are your property options when it comes to downsizing? Basically when downsizing, you have two broad categories of options: to rent or to buy. 

The options for renting (or leasing, as it's called in the biz) fall into three categories: a purpose-built lease, a private lease and a seniors lease. Let’s examine each of these. 

1. Purpose-built rental unit:

Rental buildings are in very short supply, especially those intended for seniors. There has been no new significant rental buildings added to inventory since the 1990s. While there are many factors affecting the supply of units in rental buildings, it's important for seniors considering renting to realize that only 10% of available units will be of this type.

(15,000 low- and moderate-income seniors in 83 buildings across the city.)

2. Private lease

The vast majority of units for rent are held by private landlords. Believe it or not, seniors are not the ideal tenants for these landlords. Shocking! Here’s a recent example:

• My lovely client, Cathy, sold her townhouse. She wanted to move to rental apartment at Yonge and Eglinton, primarily because she doesn’t drive and wanted a highly walkable location.
• In conversation with the landlord’s agent, I quickly realized that we were going to have to divulge a lot of personal information about Cathy’s financial situation since she was retired, and didn’t have a T4 slip or pay stubs to show landlords. She was, however, sitting on a pile of money in investments after selling her house. 
• When I mentioned she was a quiet, excellent tenant who wanted to stay at least 3 to 5 years, we were immediately turned down - BUZZ! - Some landlords don’t want long-term tenants. Can you guess why? Landlords are hoping for a regular turnaround of tenants to be able to adjust rent to the current market condition. If you ever hear of someone with a ridiculously low rent, it’s usually because they’ve been in the same place for many years. Many small landlords simply cannot afford to keep the same tenants long term.
• Seniors’ lease:
• A unit in a seniors retirement community can be one of the best rental options for seniors, yet when I propose this option, almost universally clients mention the perceived high cost as an objection. But what they may not realize is that the average rent from a private landlord for a one-bedroom apartment in Toronto is nearly $2400 plus utilities! For a two bedroom apartment, it’s closer to $3200 plus utilities! There are several disadvantages to seniors trying to rent from a private landlord that we can get into another time, but for now let me say that I am a big fan of this option for some seniors. It provides security, amenities, sociability, and scalable care for later. What you might not realize is that seniors' rentals in retirement communities are being redesigned to have full kitchens and en-suite laundry for completely independent living. 

There are both advantages and disadvantages to renting as a downsizer. 

The advantages are:

1. Lower Maintenance Responsibilities - No need to worry about home repairs, lawn care or property upkeep since landlords or property managers typically handle these tasks.
2. Financial Flexibility - Renting frees up home equity for other expenses, investments or leisure activities without tying up money in real estate.
3. Location Flexibility - Renting allows you to relocate more easily. It’s a great way to “try before you buy” if you are moving to a brand new location, or determining if a new lifestyle suits you.
4. Simplified Estate Planning - Selling a home and renting can reduce the complexity of managing real estate in later years, making it easier for heirs and reducing the potential estate tax burdens. 

There are of course also risks as a tenant. Among them:

1. Rent Increases - Unlike a fixed mortgage, rent can increase over time, potentially making long-term affordability an issue.
2. Lack of Stability - Private landlords can choose to sell the property, not renew the lease or change the rental terms, forcing an unexpected move. 
3. Loss of Tax Break - Homeowners enjoy a tax break on the increasing equity of a house, but any income from investment of the proceeds of the sale are not tax-free. Capital gains exemption is a major tax benefit of home ownership. 

Marilyn, my time is coming to a close, but before I go I want to make two offers to our listening audience:

1. We are hosting a webinar called “Downsizing Property Options: not just condos” Wednesday, March 12th at 4:00 pm. It’s absolutely free of cost or obligation, and I guarantee it will be an hour well spent for anyone considering making a move. You can register by going to our website, smartrealtysolution.com or by calling me, Sharon, at 416-460-5636. While you’re at our website, be sure to check out our other free, downloadable guides on a variety of topics pertinent to seniors and real estate.
2. Why not book a call with me to discuss the downsizing property options that make sense for your specific needs. I can be reached at my direct number, 416-460-5636.
3. Oh, and if you’d like a copy of this article, along with my discussion of the pros and cons of renting as a downsizing senior, please reach out. I am happy to send it to you as well. 

Thank you for today, Marilyn. This is Sharon Parenteau and these have been your SMART Realty Solutions for this week. 

Sources for further reading:

• https://www.cransoncapital.com/purpose-built-rental-article
• https://rentsync.com/resources/blog/the-state-of-purpose-built-rentals-in-the-gta
• https://www.toronto.ca/wp-content/uploads/2017/11/9021-TSS-Accountability-Table-03222016-Income-and-Housing.pdf

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