Would You Share Your Home To Earn Income in Retirement? 44% of Americans Say Yes
Many Americans view owning a home as an investment that they can cash in on in retirement, but even homeowners who are nearing or in retirement feel unsure about their financial security. A survey of homeowners ages 55 to 85 conducted by Silvernest found that nearly half (49%) feel underprepared financially for retirement. As a result, some are looking for creative ways to earn income in their golden years. The survey found that 44% of homeowners in this age group would consider home sharing — mainly for the passive income — and 26% are more likely to consider it now than five years ago.
Social Security Schedule: When the First COLA Checks Will Arrive in January 2022
Social Security 2022: How the COLA Will Increase Benefits for the Average Senior Couple
Here’s a look at why this unconventional income stream is becoming increasingly popular.
Home Sharing Makes It Easy To Earn Significant Income in Retirement
“A big reason more people are looking at home sharing in recent years is that there are very few options out there that let you quickly generate $10,000 a year in passive extra income,” said Riley Gibson, president at Silvernest.
Retirement: $1M Is No Longer the Standard Nest Egg
This extra income can help retirees feel more financially secure.
“Even pre-pandemic, many Americans were concerned about their financial health, facing a cost of living that continues to soar and worried they don’t have enough stowed away for retirement, particularly now that retirement periods have near doubled with longevity,” Gibson said. “Those have been big drivers for people to start seeking out new ways to earn supplementary income. The idea of leveraging their homes as an asset is very appealing because they can basically earn the equivalent of what they might make at a part-time job, plus split utilities and other bills.”
Many Retirees Have Unused Rooms
Another reason that home sharing is popular is that it’s a great way to make use of an asset many retirees already have.
“There’s a huge amount of untapped inventory out there,” Gibson said. “Findings from an analysis of Census data suggest that there are as many as 33.6 million spare rooms across the country. If we look at the boomer population, 80% of them own homes, and many have unused space gathering dust that could be rented out to generate extra income.”
The Stigma Associated With Home Sharing Is Decreasing
In recent years, home sharing has become more of an accepted way to bring in passive income.
“We’re seeing people across all age groups more receptive to the idea of renting out space in their homes,” Gibson said. “A few decades ago, it might have come with a certain stigma, whereas it’s viewed as a lifestyle choice in this day and age.”
Retirees Can Benefit From the Social Aspect of Home Sharing
For some retirees, home sharing has an appeal that goes beyond the financial.
The Other Form of Self-Care: 4 Steps To Improve Your Financial Wellness
“Many older adults have experienced significant social isolation due to the pandemic and are looking for the companionship that comes from home sharing,” Gibson said. “This ranked second behind income as the biggest benefit of home sharing in our study. Another big draw is that they can often find renters willing to help around the house, such as helping change lightbulbs, running errands or driving them to the store, in exchange for a discount on their rent. This turns into a win-win, and we’re seeing more of these arrangements among our home sharers.”
Easy Things You Can Do to Start Preparing for Retirement Now
Worried About Social Security Not Being Enough?
Is Home Sharing Right for You?
If you’re among the 44% of Americans who would consider home sharing in retirement, take a closer look at some of the pros and cons to decide if it’s the right choice for you.
Pros of Home Sharing
“The most obvious benefit is the ability to turn unused space in your home into passive income that is recurring and reliable,” Gibson said. “Over two-thirds of those we surveyed are actively looking for new ways to earn income in retirement and this is a highly attractive option.”
Modern Money Etiquette: Is It OK To Ask Someone How Much They Paid for Their House?
Then there are the benefits that go beyond earning passive income.
“Less obvious are the benefits around companionship and having someone around the house that can share the load when it comes to chores, maintenance and even things like grocery runs,” Gibson said. “We see a lot of older adults who want to stay in their homes as long as they can and stay independent. While it may seem counter-intuitive on the surface, sharing space may be one of the best ways to extend your independence.”
Economy Explained: What Is a QLAC and Should It Be Part of Your Retirement Plan?
Deciding whether or not home sharing is right for you really comes down to your own preferences, however.
“There’s really no singular characterization of a retiree who might be a good candidate for home sharing, as it really depends on personal situation and motivation,” Gibson said. “It could be someone who’s divorced and looking to offset their mortgage payments by bringing in rental income, someone who might have been forced into early retirement and needs help making ends meet, or even a married couple who want to bring in some extra funds to help with home improvement costs.”
Cons of Home Sharing
That said, home sharing will not be a good passive income option for every retiree.
Discover: 27 Ugly Truths About Retirement
“Home sharing is a very personal choice and can mean giving up privacy, and can sometimes mean sharing personal spaces like the kitchen or TV,” Gibson said. “It is also something that needs to be done safely and thoughtfully. Posting an ad on Craigslist or not properly vetting a potential roommate can easily lead to issues.”
In addition, it’s important to keep in mind that a home-share situation is not a substitute for a home health aide or in-home caregiver.
“Home sharing is not a great fit for someone who needs real in-home care, as it’s not meant for that,” Gibson said. “It also may not be a great fit for someone with limited space but who is looking to have grandchildren and guests visiting regularly. Our advice, though, is not to dismiss it is as an option too soon. Part of the beauty of home sharing is being able to find the right and most compatible roommate for what you want. Are you a homebody and don’t want to give up too much privacy? Find someone who needs an affordable home base, but wants to be traveling most of the time or works long hours in the medical field. Home sharing arrangements come in all shapes and sizes, so be open about what you need and see if you can find someone who fits those needs.”
More From GOBankingRates