When it comes to downsizing, Rachel Lane and Noel Whittaker can help you dot every "i" and cross every "t" to make sure you plan well to ensure a smooth transition.
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From start to finish - they explain the Whys, Wheres, the Numbers and much more.
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You may have spent years (and a significant amount of money) making your current home your "forever home" so downsizing can be emotional. It helps to offset any sadness with excitement about your new home and the happy times to come. Like any big decision, it is going to take some research.
Know your Why?
Understanding why you want to downsize is a crucial first step. Knowing what you want to leave behind, what you want to keep and those you want to change helps you understand the driving force behind your decision. You may seek a "sea change" or "tree change" or you may simply want a low maintenance home in your current community. There can be financial motivations too: paying off debt, freeing up equity and reducing property related costs. The combined outcome can mean more time and money to spend doing the things you love.
What can you afford
Moving costs. While that may seem obvious, many people simply compare the price they are selling their existing home for with the price of their new one, but this is a recipe for disaster - because the cost of moving can easily run to tens of thousands. You need to break it down into selling, moving, and buying costs; this will make sure you are not left short when it comes to how much will be available to spend or invest.
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 from). Identifying the people and places that you want to be close to can help you narrow down your Where.
Consider the accommodation, taking into account the spaces you'll need - a second bedroom if one person snores, a room for visitors, an outdoor space to enjoy your morning coffee.
While you may be fighting fit, 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 in retirement communities, are often designed with future care in mind. Look at your new home for challenges, such as narrow halls and doorways.
Understand
Whether your new home is a freehold, strata title, leasehold, licence, or a granny flat arrangement - you need to sign a contract which 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
In freehold or strata properties, you may 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.
In retirement communities, there is the weekly or monthly fee that you pay to live in the village and often there can be an exit fee.
Your exit fee will typically include a Deferred Management Fee 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 renovation costs, marketing and selling fees.
Breaking down the cost into the Ingoing, ongoing and outgoing will show what you will pay upfront, while you live there and when you leave and make comparing different options easier.
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 you will have to invest or spend, how much age pension (and other benefits) you can receive, your cash flow, and your longer term financial position should the need for aged care arise.
The Where and Why of your downsizing decisions are just as important as the contract you sign and the 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 ($29.95 plus post and handling).
You can buy it through downsizingmadesimple.com.au where you'll also find a range of useful exercises, checklists and calculators.
