In the real estate world, bigger isn’t always better, especially if you are looking to live more simply and to live very comfortably within your means. Downsizing a home is attractive to people of all walks and stages in life today, it is so attractive in fact, that HGTV has made a few different shows about it. There are many reasons people choose to downsize including shrinking their expenses, living a simpler lifestyle with more time to do what they want, reducing upkeep and maintenance, starting a new adventure, and moving closer to family.
Downsizing has become so popular that the average size of single-family homes is decreasing. This is great news for anyone looking to downsize for any reason. Demand Institute says that 37 percent of baby boomers are looking to move to a new home and 54 percent of them are looking to downsize.
If you are looking to downsize your home for any reason here are some things that are good to know.
Moving to a smaller home seems like a no-brainer decision to save more money. There are some hidden costs to downsizing however that many people don’t realize. Smaller homes do mean smaller price tags, but capital gains tax on the profit of your home sale can reduce your savings if you are subject to paying them.
Other downsizing costs to consider include:
- The cost to move: it is costly to pay for packaging and transportation to get your things from one place to another. Your old furniture may not fit in your new home causing you to need new furniture, and you may have things you just can’t part with that need to stay in storage because they don’t fit in your smaller home.
- The cost of living: if you are relocating to a new city it could be more expensive just to live there, something that is overseen by many people who relocate to dream destinations. You could be paying more for property taxes, HOA dues, or just the price of gas and groceries.
- Living in HOA communities: this is mentioned in the point above, but it is worth breaking down. If you downsize to a condo, special living community, or just a well-kept neighborhood with HOA dues you want to consider the extra cost as well as do your homework about the health of the HOA. Do they have a good reserve set aside and do they keep up the common areas well, or are they going to need to raise dues soon to make necessary improvements?
Downsizing your house to save money sounds very appealing, but change can be difficult. These changes can be especially hard if there are a lot of memories or comforts attached to your previous home. You might miss certain aspects about your larger home that you love such as: the space to entertain, storage just steps away in the basement or garage, an open room to host overnight guests, a kitchen to make a feast in, etc.
Going back to the HOA scenario, you could be used to being king of the castle in your previous home. Changing to living in a well-kept community where a larger entity has to sign off on any improvements you make can be difficult. This is especially true of condo type communities.
Pro Tip: “Before doing anything, make a list of your must-haves and think about the future. Will you want this home in 5 years, 10 years? Will you have this house beyond retirement?” – Orlando Home Buyer Eve Alexander
Think of Possible Future Life Circumstances
Moving into a smaller home to save money is a great idea, but don’t look for the smallest house that is livable to save money. Think about any future life circumstances that might pop up like adult kids moving back home or the need to take in an aging parent. Maybe you want to have space for friend’s or family, or grandkids to visit. All good things to think about before purchasing a one-room condo or 500 square foot bungalow.
Related: What you should know about “Right-sizing” (Finding the right size home for you)
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