Retiree’s eventually come to a time when they start to consider the next stage of their life. For many, their kids have moved out, the grand kids are at school and they want to travel more. Having a big home and all of the time and financial cost that comes along with that may start to feel like a burden. They may start to wonder if the house they have called home for so long, simply doesn’t suit them anymore.
The thought of moving is a huge and complex decision. For many, their home has special memories attached to it. They raised their children there. They have shaped it to be exactly how they wanted it over many years. On the flipside however, the gardens which they once loved to nurture now feel like work. Many of the rooms of the home are now not being used. They may also want to travel during the colder months and enjoy their freedom.
Once the decision has been made to move, the next major decision is what to do with the property.
Ultimately, the two main options are:
1. Keep the home as an investment property to rent out
2. Prepare the property for sale and go through the sales process
Everyone is different and what suits one person or couple won’t suit some another. To help evaluate this, we have prepared a list of factors you will need to consider before deciding about which way to go:
What are your goals for the next ten years?
When you start breaking down what you would like the next ten years of your lifestyle to look like, you may start to see a natural course of action. Consider establishing some short, medium and longer-term goals. Start with the next 3 years, then move on to 5-8, then 10 years down the track. Consider flexibility, proximity to your children and grandchildren, interest in travel etc.
How much inside and outside space do you need/want?
If you don’t have or are not planning to have a caravan, boat or similar sized vehicle, an apartment or unit may be more than adequate size wise for you. However, if you enjoy hosting regular dinner parties or having people stay over, you need to consider how much space you require to fulfil your lifestyle needs. If you are a single, a retirement village may be a good option for you. Some have dedicated activity co-ordinators to ensure an active social life and often require very little outside maintenance. The purchase of these properties usually does involve conditions like age restriction and some require a regular payment as well as the initial buy-in cost (kind of like rent) which needs to be taken into consideration
Are you prepared for the reality of owning an investment property?
Having an investment property is essentially a business requiring a different mindset to what you may have had before. You will be inviting tenants to live in the property who may not look after it the way you have yourself.
You will need to budget for maintenance and running costs like property management fees and landlord insurance. You may or may not have an existing mortgage on the property which adds financial complexity. It is advisable that you seek financial advice to be able to best assess if this option is viable for you.
You should also get a rental appraisal done by an experienced property manager who services your area to get a good idea of what rental yield you can expect. They will also be able to guide you in relation to other aspects of the property that may affect your outcome.
On the positive side of things however, you will be earning rental income on the property, as well as hopefully achieving growth in value over time. This option is great for boomers who have achieved a good level of financial security and don’t want to let go of a truly great property.
Is there anything that needs to be done to prepare for sale?
If you have decided that you are going to sell, a great next step is to consult a trusted real estate agent who trades in your local market. Not only will you be able to get an idea of what you will achieve by going to sale, but you can get their advice prior to committing to any costly renovations. Often small cosmetic improvements can drastically improve a sale price, however major renovations do not necessarily guarantee a healthy return on investment.
Does it make sense for you to rent for a while rather than immediately buy again?
Whether you decide to lease out or sell your home you will need to consider where you will live next. There is a growing trend amongst baby boomers to rent rather than buy when the stage of downsizing comes knocking. By signing a 12 month lease, rather than purchasing, you remove the pressure of having to find a property to purchase (and all of the work involved in property purchase) within the settlement period. This way you can rent a home in an area you think you may like to live, or even try out a few different locations or styles of homes to work out exactly what suits your lifestyle and needs. You may also decide that a rented home (with far less responsibility for maintenance) makes sense given you want to be away travelling more. There are lively to be financial implications (it may affect your pension etc) if you have sold and not purchased, so it is important you discuss this further with your financial advisor.
What to do with all of your excess stuff?
One great tactic that baby boomers (or anyone else planning a move) can use to kick start the process of downsizing is to immediately start reducing their personal items. Not only is this liberating but on a functional level it allows you to determine know how much living space you will really need. By sorting through your possessions, it may give you greater acceptance of the next stage of your life, but you also might find that you can make some money from selling it on eBay! This process can take time and patience, so starting the process 6-12 months in advance is the best approach.
Although we have covered a number of the key factors, every situation is different so there will likely be some other important considerations you will need to work through to make a final decision. Just remember that there is no right or wrong answer with any of this. Look at the decision from as many angles as you can in particular from financial (getting advice from your financial advisor and a real estate agent) and psychological (talk it over with friends and family) points of view. Good Luck!