Whether you’re an empty nester, recent retiree, or consolidator who refrains from hoarding too many possessions, moving from your current home to a more compact and lower maintenance residence can make a lot of sense.
But downsizing to a more manageable footprint can be challenging, especially in a tricky real estate market. Weighing your options carefully before moving down can help you avoid big regrets later, say the experts.
For starters, consider if you fit the criteria to benefit most from nest condensing. “The best candidates to consider downsizing are individuals and couples who have a house that no longer meets their needs. For example, a house with a large upstairs may not be suited for someone with mobility issues, who could benefit from a smaller home on a single level that is easier to get around in and maintain,” says Cara Pierce, certified housing counselor with ClearPoint Credit Counseling Solutions in Fresno, Calif.
Baby boomer or not, anyone who feels he or she is living beyond their means also should consider downsizing.
“The reasons can range from feeling overindulgent with your property’s size to having an empty nest to simply realizing your need to embrace a more frugal lifestyle,” says Samuel DeFranceschi, associate broker at New York-based Nest Seekers International. “Learning to use less and become more efficient and consumer friendly are all positive actions that can help your wallet [and] the environment.”
The exciting feeling that comes with starting fresh, the ability to make new friends, and the opportunity to de-clutter your life are other advantages.
Prior to pulling the trigger on downsizing, however, it’s crucial to plan carefully and ponder all the ramifications.
“You need to consider medical issues, including things like future needs for wheelchair access and space for an in- home caretaker,” says Regina Leeds, professional organizer and author of “Right Size … Right Now!” (Da Capo Lifelong Books, 2015). “If you love to entertain, you may feel at a loss in a small space. Claustrophobia is another big issue no one addresses. And while it may be easy to downsize furniture, remember that your downsizing may include clothing, jewelry, hobbies and memorabilia, which can be difficult areas for many.”
Additionally, although you may be able to save money on reduced utility and maintenance costs in a smaller property, be aware that unloading your home and buying another one involves closing costs and possibly steep taxes, such as capital gains, when you sell your larger home. Also, you could end up paying more in property taxes on your next residence, depending on the area.
Despite these potential financial hesitations, mortgage interest rates remain relatively low and sellers have a lot of leverage in many areas around the country.
“The market for sellers is fantastic right now, and we particularly see this in larger homes,” says Tyler Whitman, head of sales for TripleMint, a real estate brokerage in New York. “Many millennials are starting families and seeking these larger homes by the masses, so now is a great time to sell your home for a higher price and reinvest those funds into a home that makes more sense for your current lifestyle.”
For some, downsizing to a smaller single family home, condo, townhome or other owned property can be more costadvantageous than renting, especially in markets where rental units are scarce and costly. For others, renting can be a safer bet.
“Downsizing to a rental means someone else’s taking care of the bulk of your maintenance,” says Niccole Schreck, senior brand manager for Rent.com. “Plus, the costs of renting are fairly fixed — you know what you’ll be paying for on a monthly basis, whereas when you own a home costly hiccups can occur at any time. And you’re usually only locked into a one-year lease, which means you have more flexibility in terms of where you choose to live.”
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