How To Prepare To Downsize
Usually, home owners downsize just once – so it’s little surprise that the task can be daunting, particularly if you have lived in your current residence for a long time.
Here are some simple tips that will ensure downsizing is a much smoother process.
Measure your space
The most obvious difference for downsizers is the difference in size of your next home. Downsizing usually involves losing some floor space, which in turn requires reducing your furniture.
If you’re aware of the rough size of the homes you are considering, particularly if you’re downsizing to an apartment from a house, then you can quickly get an understanding of what furniture you have room for and what you may need to find storage for. You may even consider selling or giving away some of your unnecessary furniture and items.
Many downsizers have too many rooms in their homes, each with a bed and often including bedside tables, chests of drawers and other furniture. Compare the number of bedrooms with your new desired homes as a first point. For some, having a guest room is critical – particularly when having family over to visit.
You should then consider what other floor space you will be losing, such as second living rooms and entertainment spaces, as well as external floor space. If you’re losing a garage, shed, carport and other features, be aware of the new space constraints.
Make two lists:
- The features you must retain (a spare room, a garden etc)
- The features you can live without (a garage, a swimming pool etc)
Take these lists with you when looking at new places to buy and share them with your real estate agent so they know your requirements.
Consider shared spaces
If you are downsizing into an apartment, particularly if you are not used to apartment living, you will be confronted with the requirement to “share” certain spaces in the building. This may include gardens that you had previously had full control over, as well as any number of features from cinema rooms, gyms and communal dining rooms to pools and car parks. Be ready to share these spaces.
For many, this will be a warm welcome as you move into a community that values knowing its neighbours, however it does present its own unique challenges. Get a feel for the apartment blocks or villas you are looking at by visiting with the agent at different times and taking note of how busy the shared facilities are. You may also want to ask how the facilities are managed – there may be rosters that allow you to have exclusive use.
Some smaller homes, even if not apartments, may not offer the size and extent of private amenities you have been used to. While this means there is less maintenance, which includes lower costs, it also means you may not be able to fit in everything you currently have in a residence. Decide what is important to you and your future lifestyle and prioritise these when shopping for a new home.
Often, downsizing – particularly when downsizing within the same suburb or area – will mean you walk away from the sale of your home and next purchase with a substantial sum left over. Depending on your age and circumstances, these funds can come in handy to help pay for your retirement. However, there may also be tax implications and it could impact your pension. Often, the pension is means tested but doesn’t include the family home in the test. There are suggestions the law could be set to change, so in the meantime it’s worth taking professional advice.
For those looking to downsize into a more “upmarket” area, such as closer to the city or into a prestige location, you may find yourself taking up a substantial amount of your equity and even needing a mortgage.
Seek advice from your accountant, financial planner and possibly your broker about the implications before making a decision.
The content does not take into account your personal objectives, financial situation or needs.
Readers are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice. All information is current as at publication release and the publishers take no responsibility for any factors that may change thereafter.