Maybe your children have grown up and moved out, and you no longer need the amount of space you once did. Or maybe you're a younger family but are struggling to keep up with the mortgage payments and maintenance costs that come with having a larger living space.
There are plenty of good reasons to downsize, and while it's a common practice among retirees, that option is on the table at any stage of life. But if you're going to trade more square footage for less, you'll need to make sure your new home meets your needs and also does a good job of helping you achieve the financial objectives you have in mind -- namely, saving money. With that in mind, here are a few key things you should look for in a smaller living space.
1. Lower property taxes
When you downsize from a larger home to a smaller one within the same neighborhood, you can generally bet on your property taxes going down. But if you downsize in conjunction with moving to a different area, you may find that those taxes stay the same, or even go up. And if your goal in downsizing is to save money, that's the opposite of what you want. Before you downsize and move to a different zip code, see what taxes you'll be looking at -- and make sure they don't thwart your financial plans.
Property taxes are a matter of public record, so you can generally check a county's online database to get a sense of what you'll pay. Or, use sites like Zillow (NASDAQ: Z)(NASDAQ: ZG) or Realtor.com (NASDAQ: NWSA) to get at that information -- do a general home search by zip code, and then click on different listings to see what their taxes look like.
Another option? Once you have your eye on certain neighborhoods, call the tax assessor's office associated with the townships they're part of and ask what the local tax rate looks like. You can then multiply that rate by the home prices you're looking at to see what your tax bill will be. For example, if you're looking at a 2% tax rate and a $200,000 home, that's $4,000 in annual property taxes.
2. The right location
Adjusting to a smaller amount of living space is difficult enough in its own right, so the last thing you want to do is move someplace where you're compromising on all the amenities and conveniences you once enjoyed. If you're going to downsize to a new neighborhood -- one that's more affordable on the whole -- spend some time there first to see what living there actually entails. If moving means giving up access to shops and dining within walking distance, you may want to choose a smaller home a few blocks away from where you are now.
3. Affordable HOA fees
Many people who downsize from a larger home to a smaller one wind up moving to a townhome or condo. And often, that means being forced to join a homeowners association (HOA) and deal with the fees that come with it. If that's the route you're taking in the course of downsizing, make sure those fees don't eat too heavily into the savings you're hoping to reap. And also, make sure your HOA's rules aren't too restrictive so you don't wind up unhappy.
4. Ample storage
Giving up square footage often means losing out on some storage -- but that doesn't mean you should go from several walk-in closets and a generous pantry to one tiny bedroom closet and a couple of closed-off shelves in your kitchen. If you don't have enough room for your basic belongings, you're not going to be thrilled with your new setup -- and, you may have no choice but to pay for storage, which will only take away from your savings.
It's more than possible to downsize and still enjoy a nice, comfortable home. Just be sure to make that decision carefully so you wind up content with your new abode.
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