The Hidden costs of downsizing, by Norman Green.

By Norman Green

The hidden costs of downsizing

Did you know that moving from a $250,000 house to a $150,000 house could save you BIG money?

Let’s talk numbers.

Such a move could increase your yearly income by $3,000. In addition, it could reduce your annual expenses by $3,3250. This saves you about $6,250 a year. It is worth it!

There could be more, but apart from saving you money, downsizing could actually cost you money too.

Downsizing expenses can creep into your savings draining all the efforts to save and in this guide, i will give all the tips to avoid such a scenario from ever happening.

LET’S GET STARTED. THE TRUE COST OF DOWNSIZING

Let’s take the case of John and Mary (not real people though). This is a retired couple owning a home mortgage-free.

They can sell their home for $250,000 sounds good right?

The couple wants a smaller home, that is a little closer to care facilities. Luckily, fate is on their side.

They have managed to find a home worth $200,000. They can manage that and the balance, $50,000, they hope to add it to their retirement account.

It is time to sell their old home for the new home. During the sale, the real estate commission takes about $15,000.

The new buyer of their old home really negotiates the closing costs of $5,000.

What I did not tell you is that John and Mary plan on paying for the new home in cash, they want nothing to do with the mortgage. After all, they are not getting any younger right?

Because of this, they incur an upfront tax and insurance costs of $3,000. The moving costs add up to $2,000.

Obviously, the new home requires some improvements which absorb $12,000. By the time John and Mary are settling in, they only have saved $13,000.

That’s not all, depending on where John and Mary buy their new home, they could be paying more in taxes because the new home will be placed on an updated tax schedule.

TAXES

Taxes are one of the hidden costs of downsizing that you need to be really careful about. When John and Mary sold their old home, which they had for so long, a large portion of their equity will or may go to the federal and state capital gains taxes.

The mistake I see many people doing is downplaying this cost. In the case of John and Mary, since they are a married couple, they can exclude up to $500,000. For a single person, they can exclude up to $250,000.

Like previously mentioned, the new home can attract more property taxes. Remember, depending on when they bought their old home, they could be placed on the old tax schedule. But the new home could be on a new tax schedule, which means more in taxes. However, it is important to note that this will depend on the location where you are moving into. Some cities offer tax relief options for seniors.

HOME IMPROVEMENTS AND REPAIR COSTS

This is the other thing we touched on in our example. However, we touched on the home improvement and repair for the new home, not the old one, which in actuality may be needing some repairs. Not unless you want less for your home, home improvements and repairs play an extremely important role.

Your old home may be needing some cosmetic repairs that are necessary.

“A lot of homeowners just let landscaping slip,” says Nancy Newquist-Nolan, a Realtor with Pacific Coast Realty in Santa Barbara, CA, who specializes in downsizing. “Older homeowners in particular just don’t have the energy.”

still, the new home may need some customization and repairs to suit their own needs. Maybe some new furniture or some decorations and this costs money too!

THE MOVE

It May sound easy, less complicated but it is all that! Not easy and is very complicated. However, if your family members are willing to help you move, then it becomes easy. But if not, then you will be forced to hire a moving company. On average, professional movers will charge you about $10,000-$15,000.

But, to avoid this hefty cost, you can choose not to move during the summer season, but move during winter. You see, most families want to move when their children are out of school, and that is during

This will help you cut costs because most movers are busiest during the beginning and end months.

LIVING EXPENSES IN YOUR NEW HOME

You have to budget for the living expenses for your new location. Additionally, you have to factor in some costs such as homeowners association fees and or the condo dues. In some cases, these costs may go up. Higher than you expected.

It is important that you check out the supermarkets in the new area, or even the restaurants and shopping centers. Find out more about the place, talk to people, as many as you can get, just to get a feel of the place.

Still interested to downsize? Or does this all sound complicated than you thought? If so, it may be a good time to talk to Norman Greene one of our VIP agents in San Francisco, or you can talk directly to Eric Lawrence Frazier MBA, a mortgage professional with over 30 years of experience. You can reach Eric at 800-2611634 ext. 703.

ABOUT NORMAN GREEN DRE#01337466 | SAN FRANCISCO

Norman Green worked as an entertainment promotor for twenty years, where he learned and honed the art of promotion. During this time, he promoted local events as well as a regional concert. He is one of the few African American brokerage owners in San Francisco and has been a proud owner of Re/Max Prestigious Properties located in the beautiful west Portal area. Over the years Norman has gained extensive knowledge in the real estate business. Norman has assisted in all aspects of real estate including building from spect, purchasing, remodeling, flipping, and other investment-type activities. To read more and to connect with Adrian, go to; https://www.thepowerisnow.com/normangreen/

ABOUT THE POWER IS NOW MEDIA

The Power Is Now Media is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, and is headquartered in Riverside, California. We are advocates for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. The Power Is Now Media corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com.

Sources

https://www.oversixty.com.au/finance/retirement-income/the-hidden-costs-of-downsizing https://theprovince.com/opinion/columnists/can-you-afford-to-downsize-five-hidden-costs-and-surpriseexpenses https://smartasset.com/mortgage/the-hidden-cost-of-downsizing-your-home