People of all ages and backgrounds may at some point decide to downsize their home. The reasons can vary widely. When children grow up and move out of the family home, parents may be left with an empty nest that's too big for them. Others opt to live in a smaller space because it's in a desirable neighborhood, close to work, or downtown near amenities. Many adults 55 and older are leaving the suburbs behind and moving into condos or lofts that are easier to maintain. Sometimes the choice to downsize isn't actually a choice. Some unexpected life events, such as a divorce or unemployment, or a housing market crash, may force you to find a smaller home for financial reasons. Regardless of the circumstances, when life happens and you've got too much house, it's time to think simpler.
Downsizing doesn’t have to be a completely negative experience! Here are some ways to make the transition easier:
1. Consider the Long-Term
If you’re thinking about downsizing your house, planning ahead will help ensure your transition is a success. Do you need extra space for that freelance business you’re planning to start? Only you know if you can spare that extra space or if losing it would be more of a headache than it’s worth!
As you look for a new home, make sure it fulfills your physical and emotional needs as well as your financial ones. Just because you can find a bargain doesn't mean the home is worth it. After all, if you're going to make the effort to move, you should do it right.
Also, consider possible scenarios you may not expect, such as adult children moving back home. If that happens, what’s the plan? Is it important to you that your new space be able to accommodate life’s surprises?
2. Consider Function
Moving from a large home full of your stuff to a smaller space can be tricky, and while it's easy to say, "just get rid of your extra stuff," doing it is much harder.
Lifehacker.com advises, “Before you do anything—before you even move and know how much space you have to move into, the first thing to do is take a close inventory of your belongings. Ask yourself, if everything you owned was lost in a fire, what would you replace? Take stock of the things that are actually important to you, and the things that you could live without, or could actually replace or downsize along with your living space.”
You can benefit from cleaning out the clutter from those closets. Sell what you don’t need and take that money to the bank! Or donate it to a local charity and get the bonus of a tax benefit. Wouldn’t it be nice to have less to clean and more money in your pocket?
If you're moving into a smaller space with someone else and combining households, making sure you both bring only what you really need and really want, and that you're both on the same page about exactly how minimal your new home will be.
3. Consider Hidden Costs
Although there are more than a few benefits to downsizing, it’s important to evaluate any costs that may add up quickly.
Downsizing may save you money in those monthly mortgage payments, but what are some costs that may not be so obvious? Does your home need any repairs to get it market-ready? What about your old furniture and appliances—will they fit into the smaller place, or do you need to bump up that budget for more space-efficient pieces?
Remember to plan for the possible costs of moving, property taxes, storage, or even higher HOA fees.
According to hgtv.com, Kerri Fivecoat-Campbell says that when they sold their home two years ago, they weren’t able to make as much on it as they thought they would and then their small house cost more to build that they originally anticipated. So instead of spending $45,000, they wound up owing their bank $70,000.
When it comes down to decision time, you may find that taking that leap to a smaller space will save you BIG time—or that you can save just by staying right where you are.
4. Consider the Benefits
It's safe to say homeowners typically don't daydream about buying a smaller home. But minimal maintenance is definitely an upside to not living large. After all, the time and money you used to spend on cleaning and upkeep can now go toward fun things.
Financial benefits of downsizing also include paying down debt or boosting your retirement fund. Or, use the proceeds from selling your current home to pay cash for a smaller one. Just imagine what you could do with no mortgage holding you down! it’s important to note that Kerri Fivecoat-Campbell (from the hgtv.com example above) says that despite the initial underestimation of expenses, she is seeing a return on their investment in downsizing. She estimates that she and her husband save $500-$600 a month with a smaller mortgage, less property tax and tinier utility bills.
A Voya Financial survey suggests many retirees understand the financially practical reasons for downsizing, with 39 percent of respondents saying they had adjusted or would adjust what they spend on housing in retirement. If a retiree sells and buys another home for half the price, he or she could invest the proceeds.
There may be even more benefits to you, based on your individual situation and goals.
5. Decide What Works Best for You – and Get Help
Two of the most common concerns when looking for a place to live are size and location. You're looking for something more suitable or more economical, and your search should reflect that fact.
Ask an experienced real estate agent to help you determine what your home is worth and show you options for cutting costs. A true pro knows what it takes to get top dollar for your current home and negotiate the best deal on a new one.
When it comes to low maintenance and convenience, a townhouse, condo, loft or co-op, is a popular choice. You won't have to worry about fixing the roof or mowing the lawn. But keep in mind that these homes are managed by homeowners' associations (HOAs), which may have monthly fees and community rules, so research the HOA before buying.
Also consider buying in up-and-coming neighborhoods: you might find an affordable home that could potentially increase in value once the area is fully developed.
Research builders that specialize in smaller homes. And if you like really small homes – also known as “tiny homes” – there are builders who specialize in that.
Your real estate agent should know where the smaller (and good-quality) houses are.
Sources: daveramsey.com; lifehacker.com; hgtv.com; wikihow.com
Photo credit: Freepik.com
