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Downsizing - know your numbers before doing anything

New policy from the Labor Government to encourage the sale of the family home has put downsizing back on the agenda for many in their autumn years.

Our aging population has become increasingly cash-poor and asset-rich, which has become an issue since the recent spike in food and fuel prices. The option to downsize and using the profit from the sale of a family home to finance lifestyle, has become increasingly attractive.

Hanging onto the family home can become needlessly expensive once the kids have left home. As you get older, maintenance becomes burdensome and cleaning and gardening steals hours from your week.

However, if you get your sums wrong, you'll find yourself in no better position, or worse. So, discuss your downsizing plans with your financial adviser.

Below, we've highlighted the most common downsizing mistakes – so you can avoid them!

Wishful thinking – It's easy to inflate the true value of your property, especially after the prolonged period of price growth that peaked in 2021. With interest rates rising, you need to be realistic about how much buyers will pay. Market moods change quickly. So, seek advice from an agent (we'd be happy to help) or even hire an independent valuer. This will avoid flawed assumptions in your financial planning.

Resist renovation – Given that cash is king in retirement, it's probably not a great idea to splash out five figures on a new kitchen or bathroom to enhance the attractiveness of your home. Instead, spruce it up with some cosmetic improvements, but don't risk your cash at this stage in life. Consider staging your home instead when it comes to sale time and put your furniture in storage.

Under-estimating costs – Do not assume every small property is substantially cheaper than a family home. If you're considering a townhouse or apartment, get clarity on costs you may not be used to as a house owner, such as management fees and strata. Again, working with real numbers is important when planning your retirement.

Budget for fees – Selling a home can incur around 5% in fees once you've paid the agent, marketing costs, your lawyer, bank fees and so on. It's not a small amount of cash, so make sure you budget for these.


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