When assisted living is on the horizon, there’s one question that looms: What should seniors do with the family home? Most of us dream of passing our homes to our children someday. But in the face of rising assisted living costs, many seniors are realizing that’s no longer an option. If you’re headed to assisted living and wondering the best way to handle your home, this guide can help.
The High Cost of Assisted Living
Nationally, assisted living prices average $4,027 a month for a studio apartment, with higher rates for one- and two-bedroom units. That’s approximately what the average retiree earns in a year before taxes, and seniors living on Social Security alone get by on much less. With these numbers, it’s not hard to see why so many seniors consider selling their homes to pay for assisted living.
Selling a Home to Pay for Assisted Living
Selling a home can be a smart way to afford assisted living. However, it’s important to do the math first to determine if the proceeds of a home sale can reasonably cover assisted living fees.
Assisted living facilities vary in price, and some cost more than the national average. However, seniors on a budget can still find a facility thanks to the wide range of assisted living options. Since pricing depends heavily on individual needs, it’s best to set up tours of facilities to get an accurate estimate of what you’ll spend on assisted living.
Once you understand what assisted living will cost, compare it to home prices in your area. Homes in Scotts Valley sell for an average of $925,000, following an upward trend as the community’s housing market grows more competitive. That could make it a good time to cash in on your investment, but in order to understand exactly how much you could net from selling, you’ll need to do a comparative market analysis to determine what your home is worth. For a basic CMA, look for recently-sold listings in neighborhoods like yours, and choose properties similar in size and condition to your own. This will give you a rough idea of your home’s market value before talking to a realtor.
Renting: An Alternative to Selling?
With the exception of continuing care retirement communities, most assisted living facilities don’t require an upfront lump-sum payment. Rather, payments are made in the form of monthly “rent.” That opens another option for tapping into your home to pay for assisted living: renting.
Two-bedroom units in Virginia Beach rent for around $1,300 a month on average. While that’s not enough to pay assisted living costs in full, it could supplement income enough to make it affordable. That’s especially true if your mortgage is paid off or close to it. Keep in mind, however, that living in assisted living means you’ll need to hire someone to manage your property. Expect to pay around 10% of the property’s rental income toward property management. On the upside, capable property management can increase your unit’s marketability and reduce vacancy rates.
When Keeping the House Makes Sense
For some seniors, the cost of assisted living doesn’t necessitate major financial adjustments. Rather, they’re looking for a way to keep their home in good shape until it’s time to pass it on. While it’s possible to bequeath a home while living, your loved ones will receive more favorable tax treatment if they receive it as an inheritance.
Again, renting may be a wise option. Vacant homes are prone to decay and vandalism, and renting ensures the property is maintained and generates income to cover ongoing expenses. You may also choose to rent the property to family below market rate, although giving loved ones a break on rent has tax implications.
For most middle-class seniors, paying for assisted living means making major changes. However, it doesn’t necessarily have to mean selling the house. If you’re determined to keep the house in the family, try renting it out while you move to assisted living. But if you’d prefer your old house taken off your hands, get in touch about selling your property for a great price.
by Andrea Needham
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