Thursday, January 2, 2020 / by Nicole Solari
Seniors Should Ask Themselves These Questions Before Downsizing
Downsizing a home can be freeing for many seniors. With a smaller home comes less responsibility and fewer expenses. But before seniors can begin enjoying these perks, they need to decide what to do with their current home. If you are downsizing your home, asking yourself these questions can help you make the best decision for you and for your home.
Do You Know How Much Home You Can Afford?
Whether you are selling your home to pay for the new one or funding your home purchase another way, figuring out affordable home options is important. To do this, you will need to determine how much you will need for a down payment, as well as how much you can put towards housing expenses each month. Carefully calculating these expenses will encourage you to set a reasonable budget for your smaller home and prevent you from purchasing more home than you can actually afford in retirement. In setting a goal price for your new home, it may also be helpful to think about the cost of accessibility upgrades. On average, retirees can expect to pay $9,000 for home modifications that will help them age in place safely, but some remodeling projects can be as much as $40,000. Finding a home with these sorts of features can be a challenge, so seniors should budget to make changes on their own. If you want to give your new home budget some wiggle room, you could also look for financial assistance with modifications.
Keep in mind that you will also need to budget for movers, especially if you have a lot of items and/or you intend to move a great distance. While a local move can start at $800 altogether, you can expect to pay $1,000 or more per room if you’re moving out of state or across the US.
Can You Make a Profit By Selling Your Home Now?
If you need to maximize the profit on your home sale, timing can be important. While listing your home on certain days of the week can help it sell faster and perhaps even attract higher offers, you should know that the state of your local real estate market can have an even bigger impact on the profitability of your home sale. For example, knowing whether your local market is a buyer’s or seller’s market can help you determine whether you should sell your home now. If the local market is more favorable for buyers, with more homes listed than there are buyers looking, you will likely need to accept lower offers on your home, and your listing could sit on the market longer. So if you are in a buyer’s market, you may want to consider renting out your home instead of selling it. Renting out your home will allow you to keep paying the mortgage without affecting your retirement budget, and setting up your home as a rental can be simple. If you do not feel comfortable taking on landlord responsibilities, you can also hire property managers.
Should You Consider Keeping Your Home for Family?
Are you close with loved ones who live near your current home? If so, and if you can afford it, you may want to consider keeping your home, especially if you plan on buying a new home in a totally different location. You can even keep your current home and still turn a small profit by turning it into a vacation rental. Owning a vacation rental can be an easy way for retirees to generate some extra income while also having a place for family members to gather for holidays and special occasions. You could also set up your new home as a vacation rental if it’s in a more desirable destination and you plan on traveling back and forth during the year.
If you’re planning on taking this route, it’s usually a good idea to use the services of a property manager. When choosing a property management company, look for one that can handle all your bookings, have your home cleaned and maintained, and provide 24/7 support for your guests. Another option for keeping your home is to offer it as a real estate gift to your loved ones. This sort of transaction can come with hefty tax penalties, though, so have a professional walk you through the process if you decide to take this step.
Downsizing to a smaller home can make retirement less stressful. You just need to figure out the best option for your current home to make the most of this transition. When deciding what to do with your old home, think about your income, research your local market, and determine which option will make you feel the most comfortable.
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Article courtesy of our partner, Jim Vogel at Elderaction.org