Support, guidance & advice for todays primary carers
The Who, What, Where and Why of Downsizing
You may have spent years and a significant amount of money making your current home your “forever home” so thinking about downsizing can be emotional. It helps to offset any sadness about leaving with excitement about your new home and the happy times to come. Like any big decision getting your downsizing decision right is going to take some research. Here’s some exercises to help you make your next move your best move.
Know Your Why
Understanding why you want to downsize is a crucial first step. Knowing the things you want to leave behind, those you want to keep and those you want to change can helps you understand the driving force behind your decision. People decide to downsize for a variety of reasons, some want a “sea change” or a “tree change” – a different lifestyle, many want a more manageable, low maintenance home, while others are motivated by proximity to family and friends and social connection.
There are also often financial motivations for downsizing too: paying off debt, freeing up equity to invest or spend, reducing home maintenance costs and having lower property taxes and utility bills.
The combined outcome can give you more money and time to spend doing the things you love.
Work Out Where
Where you live affects how you live and it’s something you can’t change without moving again. So, think about the people and places you want to be close to (or far away from). Whether it is family or friends, the beach or a favourite club identifying the people and places that you want to be close to can help you narrow down where to downsize to. Don’t forget to take into consideration what you don’t want around you, for example if you don’t like noise then you may want to stay further away from places where people gather. If you’re considering a move across state lines and anticipate frequent visitors, proximity to an airport could be a practical consideration.
Consider the accommodation itself, taking into account the spaces you’ll need – a second bedroom if one person snores, a room for regular visitors an outdoor space to enjoy your morning coffee – think about how you will live in the space.
While you may be fighting fit now, it’s wise to contemplate your future needs, especially if your plan is to stay in your new home long term. Ask yourself “What happens if I need care?”. Modern homes, including granny flats and those within retirement communities, are often designed with future care in mind. Examine the home for potential access challenges, such as narrow halls and doorways and cramped bathrooms.
Few people plan to spend their days in an armchair watching television, but if you don’t plan anything else that’s what you can find yourself doing. So when you’re thinking Where to downsize to ask yourself “How will I spend my time?”. If you are thinking about moving into a retirement community there is normally an events calendar, grab a copy and circle the things that interest you.
Understand What You Are Signing
No matter what form your new home takes – whether it’s a freehold, strata title, leasehold, licence, or a granny flat interest – you will need to sign a contract. Your contract spells out your rights, responsibilities, and costs. Your job is to ensure that you understand it and that it has a fair balance of these three elements.
Of all the downsizing options granny flat arrangements can be particularly complex as they involve family, are not necessarily on commercial terms and if it goes wrong the whole family can be affected.
Crunch The Numbers
While the purchase price of your new home may be obvious there’s much more to consider when it comes to the cost of your new home.
In retirement communities, exit fees can be complex, they typically include a Deferred Management Fee (DMF) as a percentage of either your purchase price or future sale price and there can be shared capital gains or losses with the village operator, along with potential expenses for renovations, marketing, and selling fees.
In freehold or strata properties, you will likely need to factor in stamp duty, owners corporation fees, and the potential for special levies. While granny flat arrangements are typically with family that doesn’t mean they are free. The authors provide a simple exercise called the ‘ingoing, ongoing and outgoing’ that you can use to work out how much you will pay upfront, while you live there and when you leave.
In most granny flat arrangements you don’t get any of the amount you have paid back. In some cases, because of state based laws, you may actually need to pay to have your granny flat removed and the landscaping reinstated after you leave.
Armed with the knowledge of what your new home is going to cost you can get a clearer view of the bigger financial picture. How much money will you have to invest or spend, how much Age pension (and other benefits) you can receive, your cash flow, and in the longer term your financial position should the need for aged care arise. The Who, Where and Why of your downsizing decisions are just as important as the contract you sign and its associated costs. Ultimately, getting good “bang for your buck” from your downsizing decision often comes down to how you invest your time and who you spend it with.
This is an edited extract from Downsizing Made Simple (2nd Edition) by Rachel Lane and Noel Whittaker. Downsizing Made Simple will be in bookshops for Christmas and is also available to order online from www.downsizingmadesimple.com.au.
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