Farrell: Rent or own? Which is best in a senior cooperative?

Q: I am very interested in senior cooperative housing and have my name on a waiting list. I am 65 and plan to retire in a year or two. I currently own my condo and the mortgage is almost paid off. I am doing fine financially. A couple of my friends are questioning my wisdom and wonder why I don’t move into senior rental instead. They are concerned about the cost of buying a share and fear I may lose that money.

What appeals to me about the co-op are the daily activities offered, the possibility of acquiring friendships and that maintenance is taken care of. I am single. I would appreciate your thoughts on buying vs. renting.

Diane

A: A big issue we all face is where to live out our elder years. Owning is the most common choice: More than eight in 10 Americans own their home at age 65, according to the Employee Benefits Research Institute. Many stay in their current home, familiar with the neighborhood and comforted by the memories. Others downsize into a smaller place. There are a number of other options geared toward seniors, among them active adult communities (both owned and rental), accessory dwelling units (mother-in-law apartments and granny flats), assisted-living facilities and continuing-care retirement communities.

As with all housing choices, the decision involves a combination of finances, risk trade-offs and lifestyle. Assuming your finances support living in a senior housing cooperative (it appears they do), you desire the lifestyle (which you do) and you’re comfortable with the investment risks (my sense is yes), then I don’t see why you wouldn’t embrace the co­operative choice.

There’s nothing wrong with senior rental — far from it. But I think your lifestyle desires point you in another direction and your finances support the move.

One of the benefits of senior cooperative housing is that the adult active community is built around social engagement. The not-for-profit housing complex is owned and controlled by members. You own the land and the building by buying shares in the cooperative. You get the tax benefits of homeownership without the stress of maintaining the asset. You have a vote in the affairs of the complex. In addition to the price for your shares, you’ll also pay a monthly fee. The community of owners has a stake in its success.

That said, a drawback to consider is if your health deteriorates you’ll probably have to move since they don’t offer medical services. You’re dependent on the cooperative’s board and members maintaining the facility over time. If the living space deteriorates, it will be harder to get a decent price for your shares. Your investment in the unit also is subject to market changes. During the worst of the housing crisis, people who wanted to sell their shares couldn’t or had to accept a low price. “The value will vary, like all real estate,” says Lisa Dunn, a real estate agent with a senior focus.

I would strongly recommend hiring a financial planner or attorney with expertise in senior finances and cooperative contracts so that you really understand the rights, obligations and risks before signing a contract.

Senior rentals tend to offer fewer community services. They also don’t require an upfront investment, so it’s easier to find one that fits your budget. Renting can be a smart move for active seniors who want a home base but plan to spend much of their time away.

Chris Farrell is economics editor for “Marketplace Money.” His e-mail is cfarrell@mpr.org.

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