Looking to downsize your house? I did so a couple of years ago and am aware of some of the issues involved. Many people consider downsizing before or as they retire. That may or may not be a good idea, its an individual choice, but here are some of the issues you may need to think about it.
Downsizing To A Smaller House
Downsizing to a smaller house? Dream or nightmare? Well it worked out well for us - here's our story
Downsizing The House: Our Story
I wrote this page as an extension of a discussion. I left a comment on a page describing a Luxury Retirement Communities saying I wouldn't much like living with a bunch of oldies (full disclosure I am very nearly 50 and my partner is very nearly 60). In response "pcunix" wrote his story about why he moved to an over 55 retirement community.
Our Story - Downsized To A Tent - And Back.
(Note: I live in New Zealand - your dollar and housing market may vary). I'll try and keep this short - we bought our first house as a couple in 1998 - it was big 200m2 - but neither of us were young and we'd never lived together with a significant other before. It seemed like a good idea - it was: his cat and my dog fought like hell! Also I was quite keen to try some renovation ideas, and he didn't say no (well not loudly enough).
We renovated it extensively - and in the end it did brush up quite nicely. Here's the video I made when we sold it: (Note we still had quite a large storage unit at this stage - if you are selling decluttering first is my number one tip.)
The House We Sold
It took about 4 man days to get it looking this good for the photos!
200m2 to 4m2 - Less Stuff Is Great!
Things moved on - we had a standard midlife crises: packed up our belongs put them in storage, rented out the house and moved to Australia. We bought an 1986 Landcruiser, a tent, and drove 35,000kms in 6 months. After 6 months is a 4m2 square tent the 60m2 2-bedroom apartment we rented in Perth appeared palatial!
Eventually we returned to New Zealand, and even before we moved back into our house we had decided to move back in we'd decided to sell it. It was simply too big. We'd lived for 2 years with what fitted in the back of a truck (the apartment was semi-furnished) - we returned home with a couple of extra bags air freighted plus 20kg luggage each.
We realized that although the house was beautiful it had some disadvantages:
- we had a lot of capital tied up in an asset whose main purpose was to house a lot of stuff that we hadn't needed or missed in the previous three years;
- it took 2 of us about 2 hours to clean it a week;
- the gardens had always been a bit on the big side and we were paying a lot for lawns and tree chopping;
- it was built in 1947, and even after the renovation it needed continual maintenance, and tradesmen weren't getting any cheaper;
- we would be up for another $10k to get it painted inside the next 10 years;
- the power/gas bill was around $400/month in winter.
We looked around and realised that we could downsize, release about $100,000 of capital. More importantly we realised that we would greatly reduce our house related outgoings if we bought a newer property.
Although we'd successfully rented out this house when we went to Australia - it was too big and expensive to make a perfect rental property. As we are still considering moving overseas we wanted something that was both easy to lock up and leave, and that could be rented easily if required.
What Are the Downsizing Options?
So having decided we wanted to downsize the question was to what?
Over 55 Community
By coincidence we'd rented a flat next door to this local over 55 community. Its a very central location (used to be sports grounds) and is known to be one of the better ones. It combines individually owned villas, with various levels of aged care. Although we actually know people who have moved in there - I'd feel like I was nearly dead if we moved into somewhere like that. Most residents appeared to be well over 70, and probably going to be needed nursing or other care soon.
We now live near another one - and its an energetic 20 minute walk to the nearest shops - or a on a bus route that runs only peak hour. I feel sorry for the residents who must be isolated if they don't drive.
The other issue with many of these communities are that they have excessive fees. In this specific case you are paying for having a nurse on call - I don't need a nurse on call (neither does anyone really given that NZ has a free ambulance service), and I'm certainly not paying for it!
Apartment or Flat (Condominiums as the Americans Call Them)
Wellington is a vibrant city, compact and easy and safe to walk around. There is a lot of inner city apartments which range from shoe boxes for the rental student market to large and luxurious. The large and luxurious apartments tend to have views to die for. But in our price range it was more likely a view over an inner city, or the next door building.
Many of the better apartments are in retrofitted buildings that were once commercial. As a geologist, I was very aware that some of these buildings were not up to earthquake standard, and this was before the devastating Christchurch earthquake. Although we could have got parking, its a nuisance for friends to have to pay to park to visit too.
I also don't like the resale value of some of the less than stellar locations, the fact that you are buying little if any land, means that this a fast depreciating asset.
I've lived in a townhouse complex before, and would do so again The issue is that levy that you pay for upkeep of common areas and building insurance and maintenance. This can be really quite high, and moving into retirement its a potential issue. Also you the body corporate can have restrictive rules about pets and whether or not you can rent your house.
The Townhouse We Bought
I'd call it a townhouse, because although its fee simple, so no levies, its actually joined to the neighbour's and there 4 house that all look similar on what was once, a single section.
In other words there is very little garden!
Why we bought it:
- its low maintenance, although its wood, it has aluminum windows (wooden ones costs a fortune to paint), and newish, built 2005;
- its about 8 minutes walk to a good sized mall, train/bus station hub, which is slated to be redeveloped in the next 10 years;
- its quiet. We had been on a cul-de-sac and didn't expect to be on another one - but we are!
- its drive on access (this is not always the case in Wellington - those hills again);
- it has 3 bedrooms so I have my own study! It felt spacious and light the moment we walked in, and has great indoor-outdoor flow (the windows are bifold doors);
- its lock and leave, soon after moving in we went overseas for 2 months. There was a big storm and my sister-in-law sent her husband round to check the outside of the house to make sure it was OK. The neighbour came out to see what he wanted!
- its highly rentable, the twin house next door is rented at a very acceptable level and hasn't been empty in the last 18 months, with only one change of tenants;
- its a nice neighbourhood - there is a family from Brazil next door with young teenagers, and some older teens renting next door, one of whom is a talented guitarist who sometimes plays outside. A 50ish women owns another house on our shared drive, and she keeps an eye on all of us, while the pair in front often take their caravan (RV) away for the weekend.
Moving is a Big Deal
We moved 5 times in 6 months - maybe I should have read a guide first? Maybe I should write one!
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Downsizing Your House
If you are consider downsizing your home I'd suggest you think about the following:
- do you like your current location? We moved a couple fo suburbs over from what is considered a "superior" suburb to an average one. Its made very little difference to us in practice - in both places we have nice neighours and mix of renter and owners.
- have a plan B, our plan B is moving to Asia, this house would rent easily to decent tenants who would rent it for the same reasons we bought it. If you decide to sell is saleable? Houses that are rentable tend to be saleable as well.
- what are the on-going costs and how likely are these to go up? Because our house if fee simple - we can paint it any time we want - or not. We don't have to pay into a sinking fund over a number of years - which may or may not suit our cash flow. We pay for our own heating so when we go away the power bill is practically zero.
- think carefully what you do and don't need in a house, but be flexible. We thought we really needed a garage, the place we bought only has drive on access and a shed. In reality - its fine, now I'd say I really must have off-road parking, I don't need a garage. On the other hand we really had to have to separate studies, and we got that with a 3-bed house. I'm sad to have lost my double spa bath, but at least I still have a bath (which was a must have) - which I could upgrade!
- get rid of stuff! Really, so many people need huge houses just to keep stuff they don't need! You may not get this if you haven't moved recently - my parter didn't until we looked at the storage locker we'd had and wonder what the heck did we need all this stuff for? If you haven't looked at it or used it in the last 12 months you probably don't need it!
- we don't have a spare bed, or a spare room (we have a study each), but its a lot cheaper to put visitors up in the local motel than to pay for room that is rarely used!