As baby boomers downsize, a small but growing number of them are choosing to rent rather than buy a home. The number of Americans between ages 50 and 74 who rent has increased between 2004 and 2013.
This trend is expected to accelerate even more in the coming years. "We are seeing an increase in this type of renter, albeit still not a majority,[Baby boomers are] living longer and tapping into their home equity to pay for that extra 10 years of retirement [that previous generations have not had to fund due to shorter life spans].”
Interestingly, older renters and the younger generation of renters live alongside each other quite well. Older people love the fact that there are younger people in the apartment communities because it makes them feel young. Young people love having older neighbors because they know they’re around all day long.
However, landlords and management companies usually want to see that prospective tenants have sufficient funds to cover the rent. Retirees may have amassed significant assets or they may be skating by on a fixed income, but they don’t typically have employer pay stubs to prove their income.
In the snowbird case, they may want to go rent in Florida for the winter, or maybe they’re going to rent in both places. Some rentals offer a checklist of items that can be used to verify someone’s ability to pay the rent: W2s, pension letters and so on.
Here’s how retirees can give landlords or management companies peace of mind.
Documentation of financials. Depending on the landlord or management company, you may be able to provide copies of statements for IRAs, 401(k)s, Social Security or bank accounts or pension letters, according to Williamson. Continuance of income is another consideration. For purposes of a mortgage, Williamson says the lender would want assurance that any income needed to cover the mortgage will continue for at least three years. For a lease, the management company would want to see 12 months of continuance.
Third-party statement. For prospective tenants who’d rather not share detailed financials with their management company, a letter from an accountant, banker or trust beneficiary may suffice. An accountant might prepare a letter stating that he has “been their accountant for 20 years, and based on their tax filings and income, they would be able to meet their obligation on a monthly basis.
Larger deposit. While money sitting in a bank account can be a moving target that the management company can’t control, providing a larger deposit to cover any potential future shortfalls is more attractive to landlords because that’s something that we do have control of. That renter has a lot of skin in the game. Or rather than giving a large deposit to the management company, funds could be saved and conservatively invested in an escrow account.
Adult guarantor. If these other options don’t work, perhaps an adult child or other relative can provide a guarantee that they will pay the rent in the event that the tenant cannot. However, this option should be considered a last resort because of the potential complications for the family.
US News - Money