Baby boomers and millennials may not like the same clothing or music, but they’re finding common ground when it comes to real estate. Together they comprise the fastest growing segment of apartment dwellers in America. The younger generation has long found the rental life a convenient bridge between college dorms and homeownership. But why are boomers leaving behind the “American dream” of owning their own home for apartments?
A growing number of baby boomers enjoy the freedom of rental life, where repairs and upkeep are a phone call away and a wide range of amenities is available under one roof. Freed from the burden of home maintenance, empty nesters can focus on the things that make their later years fun, such as leisure, travel and community involvement.
Interesting New Neighbors
Modern apartments often make neighbors out of millennials with high-paying tech jobs and boomers who are flush with retirement funds and equity cashed out of their homes. This pairing provides a golden opportunity for the two generations to learn from each other and create mutually beneficial bonds.
But does it make sense financially?
For millennials, the flexibility of renting can be an asset in the early years of a career, when job changes may require relocation. Renting also makes sense as millennials build savings for a down payment on their first home.
But renting runs counter to the traditional financial advice for baby boomers, which recommends owning a home free and clear in retirement. Boomers must consider the advantages and disadvantages of renting.
Here’s what boomers gain by renting.
Renting eliminates the worry about unexpected repair expenses. Landscape maintenance is someone else’s job, and some communities offer security protection as well as entertainment offerings. You can replace your property insurance with a comparatively low-cost renter’s policy.
What boomers lose may be substantial.
Boomers who sell their homes and move to apartments lose the opportunity to live rent-free in an asset they own outright (assuming they’ve paid off their mortgages). They also forego the tax deduction for property taxes. Retirees on fixed incomes may find they’ve replaced one worry – home maintenance – with another as they watch their monthly rental expenses creep up while their incomes remain fixed. And after years of having the freedom to decorate as they choose, former homeowners who move into rentals may chafe at the restrictions landlords place on what they can do to make their new apartments feel like home.
Related – Buying Versus Renting: The Pros and Cons