Downsizing involves a situation where a homeowner sells and moves from their existing home to a smaller more manageable one. Although downsizing can be stressful, particularly for the elderly, it attains potential for good income to the homeowner. Many reasons surrounds the desire to downsize. Some include: financial necessity, health reasons, closer to family and friends, change of lifestyle or inability to maintain existing home.
The Appropriate Time to Downsize 🕑
For some homeowners, the decision to downsize is made when their children have moved out and they are in their 50’s or early 60’s. The space in the home is no longer needed and maintaining the property is no longer simple. Other homeowners downsize when they are older and are having health challenges. Another factor is financial stability. When the home’s equity is sufficient to fund a retirement and homeowners decide to downsize in order to fund their desired lifestyle.
Benefits of Downsizing 📝
Many people believe that the biggest investment owned in a property is the equity held. This is because selling it could help transform their lifestyle, give them an income stream or help to pay for their day to day living expenses.
Below are some benefits of downsizing:
- Generates income
- Results in less home maintenance
- Enables you move closer to your family and friends
- High retirement savings and low home insurance payments
- Reduces a mortgage
Downsides of Downsizing 😦
Downsizing can create a traumatizing experience and great emotional impact.
Below are some downsides of downsizing a property:
- Downsizing may wipe off many memories and possessions collected over a lifetime.
- You may be unhappy with your new home or the location afterwards.
- It may be more expensive to acquire the smaller property in your choice location.
- Your new home may have insufficient space.
- It may require you to move to another location, far from your family and friends.
- There may be changes in your age pension entitlements.
Renting after Downsizing 🤷♀️
Some homeowners do not prefer the idea of renting out their homes after becoming accustomed to owning property while others prefer to rent after owning their residence because they are unable to get a house within their budget. For others, the decision to rent is strategic, which has been incorporated into their pre-retirement or retirement plan.
The Upsides of Renting After You Sell Your Home
- Flexibility of location– you have the option to reside in a new location or begin a new lifestyle without the long-term commitment of home ownership.
- Convenience– you may opt to rent a more convenient home with desired amenities like fitness center, parking garage and package delivery service.
- Lesser home maintenance responsibilities– by renting a home, you are free from the hassle of do-it-yourself repairs or paying for a contractor. You are now free to call the landlord or the superintendent in case something goes wrong.
- Less expensive– as a renter, you are not required to pay property taxes, homeowner association dues, or repair bills. Besides, renters insurance is typically less expensive than homeowner’s insurance.
The Downsides of Renting After You Sell Your Home
- Increase in rent– your monthly rental payment can change annually. This depends on the terms of your lease as well as the laws controlling local rent in certain urban regions.
- Deprivation of tax benefits– as a rental, you will be unable to take a tax deduction on your federal income taxes for property taxes. This also applies to interest paid on a mortgage.
- Loss of privacy– as a rental in an apartment building, you may no longer enjoy a level of privacy that you are used to when you own your home, since you will be living in closer proximity to other people whose lifestyles and schedules may be very different from yours.
- Unfavorable pet policies– your landlord may restrict you from owning pets. It is advisable to check out pet policies prior signing a lease.
- You are no longer in control– homeowners decide when to carry out maintenance or upgrade their homes. Since you are now a renter, your landlord will make those decisions.
The decision is yours, to determine which is right for you to either downsize or just sell your house and rent.
If you have any more questions about how to sell your home or downsize it, contact RL Real Estate at 605-212-8431 or at email@example.com. Regan Laughlin and her team of real estate experts would be more than happy to serve you.