Is Downsizing Your Best Choice?
While there might be certain financial and personal benefits to moving to a smaller home (minimize chores, a more functional space), saving money may no be one of them. According to David Mele, president of homes.com, “There are times when it could have the opposite effect.” In truth downsizing could actually result in higher taxes, depending on where you relocate to. Additionally, moving expenses need to be factored into a decision, as does the possibility of a new lifestyle. Here are some other points which demonstrate why a move to a smaller home may actually prove quite costly.
1. The home that you need to sell may need updates to make it more salable in terms of décor and functionality. The home website, Remodeling, estimates that in 20018, an average bathroom renovation costs $19,134, and a mid-range kitchen renovation can easily exceed $50,000. Additionally, you may have deferred certain maintenance issues.
2. Certain areas of the country in the past few decades have experienced sharply increased real estate values. This can result in a very high capital gains tax. A home that was bought 30 years ago in some regions can be worth a million today.
3. When you move from a larger house to a smaller space, you may need to pay for storage for the items that no longer fit. Storage can range from $75 to $200 a month.
4. The new location you may want to move to may have higher property taxes. So, sometimes a smaller home can cost the same or more in taxes than the larger home you’ve sold.
5. A lifestyle change can also be costly due to longer commutes to your place of employment, shopping, entertainment, etc.
6. Another question to consider is if you have children, will you want to place them in private school in your new neighborhood due to a multitude of reasons. Perhaps in your old residence, the public school was of high quality and nearby.
7. Home insurance premiums could actually be higher in a smaller home, depending on the location.
8. While condos are a popular downsizing option, they typically have association fees which could cost hundreds of dollars a month. And, as the years pass, the association fees can increase. Also, bear in mind that a modest association fee of $300 adds up to $3,600 a year, much of it spent on landscaping and maintaining common areas, as well as some exterior maintenance. Vincent Averaimo, a partner with Milford Law in Milford Connecticut asks the potential downsizer, “Do you already spend a total of approximately $3,600 a year in landscaping and snow removal.”