At some stage in our lives we’ll reach a point when it’s time to consider whether we should downsize to a smaller home.
This important decision point can arise for a number of financial or personal reasons.
More often than not, it’s because we’re heading towards retirement or the kids have moved out and the idea of moving into something smaller seems to make sense.
Whatever the reasons it’s important to weigh up the pros and cons of downsizing before you make such an important and significant decision.
With this in mind, here are my top five thoughts on the ups and downs of downsizing…
The Five Ups
1. Financial Benefits
In simple terms, the larger your home, the higher household costs.
You just have to check your utility bills and council rates to know what I’m talking about.
Specifically, it costs a lot more to heat or cool a large home than it does a smaller one.
And the same principle applies when it comes to other things like watering and maintaining a larger garden or running those electronic devices that seem to multiply when you have more rooms or spaces to fill.
So by downsizing you can significantly reduce your overall household expenses.
2. Family Togetherness
Larger homes with multiple inside and outside living areas can provide mini sanctuaries that help us get away from life’s stresses.
But they can also act to separate and segregate family members such that while they may be living under the same roof they’re not really living as a close and cohesive unit.
A smaller home can help rebuild or strengthen the family bond by bringing everyone closer together.
3. Less Time Spent on Home Maintenance Chores
Most of us hate doing household work like vacuuming, cleaning, gardening and everyday maintenance, all of which eat into our personal and leisure time.
These tasks also become that much harder the older and busier we get.
While moving into a smaller home won’t eliminate these chores altogether, it will certainly reduce the time we have to spend on each thereby freeing us up to spend more time doing the things we enjoy the most.
The bigger our home the more stuff we own to fill those spaces like bedrooms, inside and outside living areas and walls.
Downsizing a home presents an opportunity to downsize our belongings or declutter.
Unnecessary items can be given to family and friends or donated to charity, sold to generate a bit of extra spending money or relegated to the tip.
It’s amazing what we accumulate over the years and downsizing presents as an opportunity to get rid of those items we don’t really need or want.
5. A Fresh Start
Moving to a new property and location can be a bit daunting, but it can also be a great opportunity to start a new and exciting chapter in your life.
New neighbours, new sights, new friends and new experiences could be just what you need to reinvigorate and reenergise your life and your relationship.
If downsizing is viewed positively it can reap many long lasting rewards.
The Five Downs
1. Costs of Moving
While there may be some financial savings, there’ll also be financial costs.
Things like the cost of selling (agents fees, marketing costs, legal costs) and buying (stamp duty, legal costs) and moving costs can add up to ten of thousands of dollars and these need to be taken into account when assessing whether to downsize from a financial perspective.
2. Finding Somewhere to Live
Conceptually downsizing can make sense but practically it can cause problems.
It may not be a simple case of trading big for small because you may not be able to find the right type of accommodation (including aged care if that’s what you’re after), the right location or even an alternative that’s affordable.
With more and more people likely to downsize over the next ten years or so, demand for smaller properties in sought after locations can push the price up to prohibitive levels.
Furthermore, when you go small you may have to compromise.
For instance, the downsized property may not be as “nice” as the family home and may not have the features you want, like having no garden as opposed to a smaller one.
3. Move Away from Family and Friends
Downsizing often means moving to a new location due to property affordability and availability.
This can be hard especially if you’ve lived in your current home for a long time and have made life-long friends who you may not see as much because of the tyranny of distance.
It can also be hard to move if you’ve currently got access to great amenities like transport, shops and recreation facilities which may not be to the same standard where you’re planning to go.
4. Emotional Pull
One of the biggest challenges of downsizing is breaking the emotional connection with the family home.
There’s no doubt you may have spent many happy years and created some great memories, especially when kids are involved.
The fear for many is that these memories may fade or not be reinforced if you move.
I felt this way when I sold the family car after ten years.
Our kids basically grew up in that car and we had many fond memories.
For us it was a tough, but necessary decision to sell.
5. Unwanted Lifestyle Changes
When you downsize you may have to compromise on your lifestyle.
For instance, you may lose the family pool, home theatre or a big backyard, and this can have a negative impact on your ability to entertain and do the things you enjoy doing.
In addition, you may find you need to move to higher density living meaning you’re closer to your neighbours and/or are sharing common facilities (like a driveway or garden).
And assuming you downsize the number of bedrooms, it makes it tougher to receive overnight visitors or welcome the kids back if they need to return to the family home for an extended period.
As a closing thought, it might be a good idea to discuss your downsizing plans with someone who has actually done so themselves.
They’ll be able to provide some useful insights and help you avoid the problems and pitfalls they encountered.
SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
PREFER TO SUBSCRIBE VIA EMAIL?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.