Downsizing motivations commonly include downsizing because adult children have moved out of home, a desire to embrace city life or because you feel your home has become too large, tiring or expensive to maintain.
However, downsizing is a major financial decision and requires planning to ensure it is successful. Don’t downsize without seeking expert financial advice.
Study the real estate market and seek advice from local agents to gauge the true value of your home, and the expense of a smaller property.
You may be able to sell and have enough to buy two properties – one for yourself and another to supplement your income. That’s a great way to retire early – but only if you do the sums correctly.
Ultimately, downsizing should simplify your life and provide you the opportunity to fulfil many of your ambitions.
Here are 14 tips to ensure downsizing is a success:
1. Prioritise your desired lifestyle over property or location. Downsizing is less about real estate and more about how you want to live your life.
2. Avoid delaying a decision. If you know it’s time to go, then it will only get harder to downsize as the weeks and months go by. Don’t downsize too late in life. You want to be fit and healthy enough to take part in your new community.
3. Don’t make the decision after a life-changing event. Consistency is a more loyal friend than change at times of emotional upheaval.
4. Don’t ignore your children’s feeling. They also have strong emotional ties to the family home and may be upset with your decision, or need convincing.
5. Moving to a new area and then deciding you don’t like it is a frequent mistake. If you have a dream of living in a small town, try renting for a year to see how it goes and check you really do enjoy the lifestyle. Rent-testing can help you avoid a financially painful error.
6. Do not assume that you’ll save buckets of money. Work with your accountant or financial adviser to assess the true financial benefits and whether you can afford it.
7. Ask yourself if you really have to buy a smaller place. Maybe you can rent. Some see that as dead money but perhaps the interest on the cash from the sale of your house more than meets the rent. Don’t close off your options. At least with a rental, you won’t pay rates and maintenance bills.
8. Do your homework on the local real estate market. Don’t take generalised media reports as sufficient evidence.
9. Ask agents who know your area to value your property, and estimate the cost of moving elsewhere. Good agents are your best friend when preparing to downsize.
10. Budget for all the costs of moving. These will eat into your savings if you don’t keep them in check.
If you’re going to an apartment, don’t forget to include the strata fees in your budget.
11. Don’t buy where any views might be built out. It’s annoying to the point of making you want to leave, and you’ll lose a percentage of the value of your investment.
12. Don’t keep all your furniture. You need to let go and furnish your smaller home appropriately. Large furniture can make a smaller house or apartment feel pokey. When that happens, disenchantment sets in.
14. Avoid storage. It’s a waste of money and eats into your savings and lifestyle. If you’re going to downsize, then get real. Your stuff has to go, not sit in a dusty locker.