If you are considering downsizing your living space and moving to a smaller home, you aren’t alone. Triton Financial notes homebuyers are increasingly opting to purchase smaller properties, thanks to the many benefits of a more compact space. The cost of the mortgage and real estate taxes are typically less, for one thing, as well as the insurance and maintenance costs.
Additionally, the physical demands of tending the property are decreased. For seniors who want to spend their retirement enjoying life, this aspect offers major appeal. Instead of time and money going toward tasks like yard work or cleaning, they can focus on enjoying hobbies and socializing.
There’s no doubt that downsizing can be a smart move. Before you can make the transition, however, you have to decide what to do with your old home.
Money in the Bank
The most obvious option is to simply sell your old home and apply the money toward your next abode. Depending on how much equity you have, this might mean buying the new home outright, or at least making a substantial down payment.
According to Forbes, you can expect to pay anywhere from 5 to 20% of the total sale price as your minimum down payment, depending on the type of loan you select and how much you decide to put down. Before you earmark funds for a down payment or anything else, do some number crunching. The last thing you want to do is stretch your retirement income too thin.
You want a good offer, so take steps to make your home as competitive as possible. Holding an open house allows you to connect with multiple potential buyers at once. Stage the house properly beforehand by clearing away clutter, adding aesthetic touches like flowers, and hiring a professional cleaning service to get it sparkling.
Steady Source of Income
Selling doesn’t always make the most sense. The real estate market in your area may be in a slump, for instance, meaning you would be better off waiting and selling when prices pick up. While renting can bring in passive income, Landlordology points out you have to find reliable tenants who will pay in full and on time—or face the stress of chasing down money.
Another idea is to rent your house to vacationers if you’re living in a location that has lots of tourists visiting each year. In this case, you’re best off easing your burden by enlisting the help of a property management company. A management company can perform services such as screening guests, installing a digital lock for an extra layer of security, and taking care of cleanings before guests arrive.
Keep in mind that you likely won't be able to fit all your current furnishings into your new, smaller property. As such, it may make sense to simply rent out your old home furnished. This allows you to charge more. Getting new furnishings for your new space can also be refreshing, allowing you to start with a clean slate after downsizing.
Invite a Loved One
Alternatively, you might consider asking a family member to take over your old house while you downsize to a new one. This means you don’t have to deal with the worries of having tenants. You may also enjoy the idea of keeping the home, which likely has sentimental value, in the family. Finally, if you have a trustworthy person living there, you know your loved one is taking good care of the property.
Giving the house to a family member is the least profitable of your options. It also can be pretty tangled, tax-wise and in terms of legalities, even if you’re thinking of charging a nominal monthly rent. Many seniors find it’s best to touch base with a lawyer to sift through the ins and outs.
Whichever of the above options you choose, plan ahead. Weigh the financial pros and cons of each choice—buying, selling, or keeping it in the family—and be realistic about what will work for your budget. You don’t want money to be an ongoing worry. After you figure out what you want to do with the old house, you can focus on finding the perfect new home and enjoying the easier life that comes with downsizing.
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