Are Canadian retirees likely to follow the trend developing among their counterparts across the border? The lifestyles and finances of American retirees are changing. Those with active lifestyles are finding out that renting in retirement is the better fit for them.
Generally, nothing brings the greatest satisfaction to would-be retirees than mortgage-free home ownership on or before retirement. A growing number of retirees, however, see renting as the better option because of lower expenses and financial flexibility.
In truth, renting in retirement can either be a strategy or a necessity depending on one’s situation.
Selling the house as a retirement strategy
Some retirees believe that selling the home is the best strategy to retire early and live retirement dreams sooner than later. But the move is contrary to the goal of a paid-off mortgage to ensure a stable retirement.
Others taking this route said it opens the way to live a lower cost lifestyle in another country. Their nest eggs even grew due to savings on taxes and home ownership expenses.
If you’re considering this strategy, you can invest some of the proceeds of the sale in RioCan (TSX: REI.UN) and have indirect ownership in real estate. This $8.49 billion real estate investment trust (REIT) could make you richer because of its 5.49% dividend.
A $300,000 investment in the stock can produce $20,587.50 in annual income. You’re a co-landlord in high-quality real estate properties in key markets such as Calgary, Edmonton, Montreal, Ottawa, Toronto, and Vancouver. RioCan chose these urban areas because of the strong potential for rental growth.
Apart from having a diversified and top-caliber tenant portfolio, RioCan has partnerships in several development projects with two other prominent names in the real estate sector, Killam and Boardwalk.
In 2020, RioCan should be carrying out the conversion of the majority of its 225 retail properties into mixed-use properties. The mixed-use rental property market is more profitable than concentrating merely on the retail property market.
Selling the house because of necessity
Selling the home is the last resort of people nearing retirement, but don’t have enough savings to fund their retirement. Thus, renting becomes a necessity more than a strategy.
If you’re facing this situation, you can sell the house and rent. Invest part of the sale proceeds in Slate Retail (TSX:SRT.UN) to generate investment income. This $564.26 million REIT owns a high quality and growing portfolio of grocery-anchored real estate properties in the U.S.
As of this writing, you can purchase the stock at $13.15 per share. In return, Slate Retail will reward you with a hefty 8.64% dividend. At that high yield, $300,000 worth of shares would double in value in a little over eight years and you would have a monthly passive income of $2,160 as well.
Slate Retail generates stable and recurring revenue, as nearly 100% of its tenants are prominent grocers and food retailers in America. With the U.S. economy picking up due to higher consumer spending, this REIT should continue its revenue growth this year. It’s also pursuing highly accretive acquisition opportunities.
Rental income
Ditching your mortgage in favour of renting during retirement depends on the circumstances. But if a retiree needs to create rental income just like a landlord, RioCan and Slate Retail are the top choices.
