For all of its benefits, downsizing as a senior can be a logistically complex process. One of the biggest decisions seniors and their families will face is what to do with the old house. Essentially, you can either sell it, rent it, or keep it in the family. In this guide, we will go over the main considerations you need to keep in mind when making this decision.
How Much Is My Current Home Worth?
The very first thing you need to figure out is exactly how much your home is worth. This is especially true if you’ve been living in it for a long time. You can use an online home value estimator to generate a bespoke report with all the information you need.
How Much House Can I Afford?
The other important figure to keep in mind is how much you can afford to spend on your downsized home. This will depend on whether you choose to sell your old home or not, and so it will likely inform your decision. Either way, it will help you set a budget so you don’t overspend.
If you don’t want to sell your home, you will need to rely entirely on your current savings and income to downsize. Again, an online tool can be useful in determining your budget based on your income, your savings for a down payment, and your spending. If the result is enough to buy your ideal downsizing home, you don’t need to sell, although you may still want to.
If you choose to sell, it’s important to understand that you are not likely to make a profit. According to Discover, many seniors forget the hidden costs involved in downsizing, from moving costs to homeowner’s association fees or the higher prices in accessible urban areas. This is why it’s crucial you do all the calculations before deciding on anything.
How Much Could I Charge In Rent?
If you want to keep the house but still make money on it, renting is the best option. It is also a smart move in terms of the current market, since single-family rental homes are the largest growing sector of the housing market.
First, however, you need to figure out how much you could charge. This is quite easy to do by checking trends in your local area. If you are interested in turning your house into a vacation rental, try Vrbo’s calculator to get an estimate on how much you could get.
Do We Have Time To Manage A Rental?
Renting is a part-time job, and you should only consider it if someone in the family has the time (and interest) in taking up the work involved. Alternatively, you could consider hiring a property management company, which would charge on average 8-12% of your monthly rental value, plus expenses. If you don’t have the time to be a landlord or the budget to pay a management company, renting is not a good option.
Is The House Likely To Gain Value?
According to Investopedia, the biggest indicator of whether a home will increase in value is its location. Keep an eye on factors like the development of the local neighborhood and home value trends will help you determine whether it might be worth holding onto the house for longer. If so, then renting for a few years could be the best choice.
Downsizing makes a lot of financial and practical sense for a lot of seniors. By moving to a house that is better suited to your changing needs, you can save money and time, all while ensuring your own safety and comfort. However, it’s important to not rush things. When figuring out the logistics of the downsizing, including what to do with the old house, always take your time and do your research. This will allow you to make the smoothest, most effective transition into your new, simpler lifestyle.
By: Jim Vogel