Real Estate Downsizing
Real Estate Downsizing Steps
Real estate downsizing is not an easy decision to make. However it is a prudent and practical decision that many are choosing to make. There may be different aspirations and drivers behind each individual, couple or family choosing to downsize. But nonetheless, downsizing is fast catching up with retiring baby boomers in Canada.
Proper Planning for a Worry Free Real Estate Downsizing
Real estate downsizing is fast becoming one of the top priority for baby boomers, and even for people in their early 50s. Almost everyone would like to plan for a life without having to worry about everyday living expenses like, groceries, utilities, travel. entertaining etc.
Speaking with a financial advisor while planning for a retired life will be a good idea. Being a Realtor, I often talk with my clients and enable them to make the right choices around real estate downsizing. Real estate downsizing is the way to go as it allows one to look at reduced fixed monthly costs like lower mortgage or rent, lower utility bills and smaller maintenance costs. What they save on account of these can provide them with a more relaxed mindset or lifestyle. For some, extra savings can relate into more entertaining or travelling. Of course it also provides them with a reserve or emergency fund that they can dip into for any medical issues not covered by OHIP.
Is Downsizing Right for You? It starts with Finding out Your Home’s Worth.
Our team can provide you with a free home evaluation along with recent comparable sold data from your street and neighbourhood.
Next step is to figure out how much profit you can make from the sale of your home. An important point to bear in mind is that any money you get as profit from the sale of your primary residence is not taxable. However, you need to pay off any mortgage and of course fees associated with the sale of your home. Plus, you may want to budget the cost of new home buying.
- Listing Brokerage fee, Buyer Brokerage fee. Typically, these two amount to 5% of the home sale value + HST.
- Lawyer/ legal fee for closing the home sale. Say $1,500 one time cost.
- Miscellaneous costs, like packing, moving etc. Say $2,000 one time cost.
- For example, price of a typical 2 BR condo apartment in Mississauga is approx. $400,000 (square one condo prices as of Feb 2017)
- Land Transfer Tax on $400,000 Mississauga property. Approximately $4,500 one time cost.
The amount left after selling and buying expenses is your cash in hand. Consulting a qualified financial advisor on how to save this cash for retirement saving is highly recommended.
Where will you live is the next big question?
Whether you have spare cash or not from the sale of your primary residence, you do need a place to live as well. That’s why buying or renting a place to live becomes a necessity.
To Buy or Rent your next home will become your priority question.
Your next home will depend on your needs, budget and willingness to invest again in real estate. Your first available choice is to sell your home to buy a condo, a semi or a townhome, or even a vacation home in the cottage country. By moving from a bigger detached home to a condo or a smaller home, you stand to save on your monthly expenses.
In our experience, more and more Mississauga and nearby areas baby boomers and those nearing retirement are choosing condos at Square One in Mississauga. Central Erin Mills is also quite popular these days.
Let’s say if you were to downsize from a home to a condo in downtown Mississauga, this is what your costs might look it:
- Monthly property tax on a $400,000 property for year 2017 is $250 per month.
- Monthly condo fee of approx. $0.60 per square feet. For a 1000 sq ft condo, this cost can be $600 per month.
- Hydro bill depends on use. You can budget $80 per month for condo apartments in Mississauga.
- Cable and Internet can add another $80 per month to you monthly budget. Some Mississauga buildings offer free cable TV.
Don’t forget, if you need to spend on new furniture etc., you will have to provision some money for that too.
Your second option is to rent a condo apartment, instead of buying.
As a renter, you are only responsible for paying one rent amount per month as opposed to mortgage + condo fee if you were to buy a condo.
As a condo renter, you will likely have to shell out approx. 2,000 per month to rent a 2BR condo apartment in Mississauga. Plus you would also pay hydro, Internet and cable TV. We have seen that many people these days who don’t even subscribe to cable TV, they stream their favourite shows on YouTube.
Again, since you are moving from a home to a condo, you may have to spend on new furniture and furnishings.
End of the day, by selling your home and moving into a condo, you can save money and enjoy a hassle-free life. The lump sum savings will depend on how much equity you had in the home to begin with and how much you are going to invest again in buying a condo. If your home was fully paid off, then your net savings can be a lot. If it was partially paid off, your monthly mortgage on a smaller condo will be much less. Besides, you will save on utility bills and maintenance as well. These few hundred dollars per month can quickly add up. Add up to travelling and other activities you want to do in your retirement!
Living a hassle-free life cannot be stressed on enough. As empty-nesters one should have the freedom to do what you want. Why not reduce your liabilities or use your assets to provide you peace of mind? Call your financial advisor today! And for real estate consultation we are just a phone call 905-339-5111 away!
Downsizing Real Estate Steps – Things to do before you move!
- Make a list of the items you like and simply can’t live without. This will help you purge items you don’t need.
- Start reviewing and reducing your belongings at least three to six months before the move.
- Get a feel on room sizes at the new place to get a handle on what existing furniture might fit where.
- Simply do away with larger or even smaller items that don’t have much sentimental value. “Reduce” should be your new mantra.
- Before you chuck items in garbage, see if you should recycle, reuse, sell and donate instead.
- Stay organized by labeling three bins: Keep, Sell, Donate. Do not overload the bins, after all, one should be able to move them.
- If you can’t decide whether to keep something or kiss it goodbye, get a friend to help you decide.
- When selling household items, Kijiji ads are very helpful. For smaller items, garage sales are great.
- Use floor plans of your new home to make a plan on how you will arrange the room, even before your move.
- When packing, color-coding the boxes goes along way. You can choose different colors for different rooms. Movers will drop the boxes off at the right place, making it so much easier for you to decorate, set up the rooms.