Do the math before downsizing

Downsizing the family home is becoming an increasingly attractive option for aging property owners who may be asset-rich, yet cash-poor.

Once the children have flown the coop, hanging on to the family home can become needlessly expensive, maintenance can become burdensome and cleaning steals hours from your week.

Now that property prices have achieved record levels in the past 24 months, this could be an ideal time to downsize.

Just make sure you seek independent financial advice to make sure it’s the right move for you to help achieve your goals.

This checklist will help you think about whether downsizing may be an option.

Wishful thinking

It’s easy to inflate the true value of your property, especially after this prolonged period of price growth. But with interest rates rising, you need to be realistic about how much buyers will pay. Market moods change quickly. So, seek advice from an agent or even hire an independent valuer. This will avoid flawed assumptions in your financial planning.

Resist renovation

Given that cash is king in retirement, it’s probably not a great idea to splash out five figures on a new kitchen or bathroom to enhance the attractiveness of your home. Instead, spruce it up with some cosmetic improvements, but don’t risk your cash at this stage in life.

Under-estimating costs

Do not assume that every small property is substantially cheaper than a family home. If you’re considering a condo or apartment, get clarity on their management fees. Again, working with real numbers is important when planning your retirement.

Budget for fees

Selling a home can incur around 5% in fees, so make sure you budget for these. 

Taxing times

Make sure you speak to your accountant or financial advisor to see how the sale of your property will be considered by the IRS. The sale price and time you have owned the property will be taken into consideration.