A lock-up-and-go with minimal maintenance vs parking your money into a property that could appreciate in time: Grant Smee, MD Only Realty.
DUDU RAMELA: When retirement age approaches, many breathe a sigh of relief. This is a time to relax and enjoy all that you have worked so hard and so long for. Where you rest your head at night is essential for peace of mind. Do you rent or do you buy that piece of property?
To help you make that decision we’re joined by Grant Smee, managing director at Only Realty. Thank you very much, Grant, for joining us. There are different circumstances for different people and the decisions that they make. Let’s explore both scenarios. Why would somebody consider renting after retirement?
GRANT SMEE: Thanks for having me here. I think the biggest reason for renting is that you want the flexibility of not being committed to a property that you need to maintain and look after, and that you can you’ve got …… , for example, if you want to in the future. So it’s really about where you want to live.
It’s also eliminating the cost of owning. If you, for example, have a big home, eliminating the maintenance costs and the carrying costs of that, and downsizing a little bit into a space where you don’t have the cost of ownership, for example, levies and maintenance. And then it’s really a lock-up-and-go. So it is quite easy for you lock up and go travelling, for example.
DUDU RAMELA: And what would make you want to buy?
GRANT SMEE: That’s a difficult one, because retirement age is something that’s difficult to define these days. Are you retiring at 60, or retiring at 95, for example? So it really depends where you are in the stage of your retirement and stage of life, and how your health is
The reason you want to buy is firstly stability in terms of knowing that [the property belong to you] because with renting comes the potential increased cost in rental, or the landlord may decide to sell and then end your lease.
So owning the property gives you that certainty around your home and where you are. So that’s the biggest reason. And then, part two, it becomes an asset that you would then leave to your estate for your heirs.
DUDU RAMELA: You sort of touched on some of the advantages and disadvantages of each. So maybe let’s look at renting your home. You talk about it being easy to lock up and go, and you can travel with peace of mind.
What are some of the advantages and disadvantages of renting a home after retirement?
GRANT SMEE: The big thing certainly is in renting a home you’ve got to make sure that you’ve got a monthly income so you can pay your rental. So you’ve got that monthly outgoing, the monthly commitment to pay the landlord. Or you could, for example, pay annually in advance. But the reality is it’s still an outgoing. So one of the disadvantages is that you’ve got this monthly rental income that you’ve got to pay.
However, the advantage (of renting) is that a lot of the maintenance is taken care of by the landlord.
As long as it fits within ‘fair wear and tear’, or the exterior of the property, that’s not your not your liability, and it would be for the landlord’s cost, as well as rates and taxes and levies that are applicable against the property would again be for the landlord. So it could be in certain situations cheaper for you to be renting rather than buying a property.
DUDU RAMELA: And when we look at buying property, what then would be an advantage and a disadvantage?
GRANT SMEE: The first advantage would be if you were, for example, selling your family home and you were downsizing, and you could buy the property with some of the cash or pay the property off in cash, you don’t any more have that mortgage or the carrying costs. You then don’t have that monthly outgoing and the commitment of paying a monthly amount. So that’s the first thing. You are parking your money into a property, which could appreciate in a period of time.
If you’re living in a sectional title scheme, you’d be paying levies, you’d need to take care of maintenance of the property. If you’re buying a freehold property, then you need to look after the garden and pay for its care. And there’s a lot of other maintenance costs associated with the ownership of the property.
DUDU RAMELA: Somebody’s probably thinking right now, why do I need to deal with all this admin and stress when I can go to a retirement village.
GRANT SMEE: Look, there are huge advantages. Retirement villages are set up, taking into consideration the age and health of old people and individuals, and they [organised] around convenience. There are complexes or retirement villages that have levy controls in place to ensure that levies don’t increase too much. And levies in retirement villages sometimes do include costs associated to healthcare. So if you do have health issues, that’s potentially something that you need to consider.
Traditional sectional-title complexes aren’t set up for healthcare, whereas retirement village do have those options available.
DUDU RAMELA: Thank you very much for your time this evening and helping us make sense of that. Grant Smee, managing director at Only Realty.
*Article sourced from MoneyWeb*
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