When Seniors Downsize: How to Decide What To Do With Your Home

Americans are no longer interested in buying mega-mansions but are opting for smaller properties, which cost less and require less upkeep.

For seniors, downsizing to a more compact house has significant advantages. They can enjoy their retirement years without spending as much time on chores like yard work. They also have to spend less on maintenance costs, which is significant since money troubles can be an issue after retirement.

Before you downsize, ask yourself these questions to figure out what you will do with your old property and ensure you have the money to purchase a new one.

Is Now a Good Time to Put Your House on the Market?
When you’re looking to unload your old home, the most obvious answer is to sell it. You can take the money you make and put it toward your new house.

Before you list your house, however, get a sense of what it’s worth. Look specifically at homes in your neighborhood that are a similar size.

If you do decide to go ahead and sell your home, put in the time and effort to make it as marketable as possible. For example, you should hire a professional photographer to take photos. Studies show that pictures make a huge difference in selling real estate, and can help a house sell faster and at a higher price.

Would You Prefer the Steady Income That Comes with Renting It Out?
If you find that the real estate market in your area isn’t great, hold off on selling. Property prices are projected to increase, so you may be able to close a better deal in a few years. Instead, consider renting out your property. This allows you to collect a monthly income, which you can use to put toward the mortgage payments on your new property.

If you want to maximize your rental income, keep the furnishings in the home: Furnished spaces command a higher monthly rent. Given that your new house will be smaller, you likely won’t be able to fit all your current furniture inside it. So, make sure you secure a reliable tenant who will pay on time with a thorough vetting process. This should include in-person interviews and a request for pay stubs to prove their income.

Could a Family Member Step In and Take Care of the Property for You?
Perhaps the real estate market is bad or you don’t want to deal with the hassle of tenants. In this case, consider asking a trusted family member if they want to take over the property.

You can have them live there rent-free or charge them rent, depending on your financial needs. With this arrangement, you can entrust them to take care of day-to-day maintenance and rest easy knowing you can visit the old home whenever you want. 

Since you probably won’t charge your loved ones the full rent that you would a stranger, this arrangement will not be the most lucrative financially. You thus have to make sure that you will still have the funds needed to afford the down payment on your new home.

Take the time to calculate how large a down payment you need; about 20 percent of the property’s sale price is usually suggested. Then make sure that the monthly payments won't exceed 25 percent of your monthly income. Set your house shopping budget accordingly and stick to it.

Downsizing is a big decision, one that requires careful consideration, especially when it comes to financial planning.

​Take the time to go through the above questions thoroughly and be realistic about your money needs. You don’t want to join the ranks of stressed-out Americans who are worried about insufficient retirement funds. Follow the above guidelines and you will be able to come up with a solution that best suits your needs. 

Article author: Jim Vogel of Elderaction.org
For additional information, click on the link above for Elder Action.
Photo Credit: Pexels

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