A topic that is less relevant for younger homeowners is a very relevant topic for a particular segment of the market: “Why downsize your home?”. But before you assume downsizing your home is just for Baby Boomers, we want to detail how other generations (i.e., Millenials) of homeowners may see things as well. We will walk through the most common reasons someone would downsize their home. Remember that the rationale is very personal, from lifestyle to necessity, whether to downsize from a detached to a semi-detached Toronto house or from a home to a condo. It can be a big decision requiring some excellent advice.
Reasons To Downsize Your Home:
Unlocking Equity
Anyone who has owned a home or condo in Toronto over the last 10-25+ years (and some fortunate Torontonians in 3-5 years) has seen an incredible increase in value and equity accumulated. What is worth noting is that few, aside from the most elite, can accumulate this much wealth from an after-tax paycheque alone. Principle residence has been the ultimate wealth generator. Some people decide it makes sense to unlock this equality by selling their homes and choosing something less costly. Consider this: a client purchased a house ten years ago, costing $500K, and they put down 50K as a downpayment. The subsequent years have led to a house now worth $1.4 million – the value increase has been 900K (no tax as it’s a principal residence). For this example, the homeowner has paid their mortgage the entire time with a couple of balloon payments (totalling 225K). To see the total equity in this investment, we will do the math, $50K + 900+ 225K = the equity now is $1.175 million on a home worth 1.4 million. The owner may consider selling their home, buying a condo for 800K and pocketing 375K to allow other wants, including equity investment and real estate investment. Make sense? Not a bad move if you want to access some extra money.
Travel
Travel has become a massive industry. When was the last time you took a bus from one city to another? Time’s up; we ran out of time as well! If you are like us, it’s been a long time since we did this. We have been choosing air travel more and more over the last 15 years. Travel is incredibly accessible, with the cost of air travel lowering in recent years. The increased awareness of ecotourism and new cultures has people exploring. Also, the improved technology access has led to the term/career of the “digital nomad” – someone who combines travel and work. It’s incredible how many clients we have had that decision to downsize their home allows for more spending money to travel – it has allowed those who moved into condos so they could lock the door and walk away for a month without concern about their space. Millennials and retirees are the ones leading the way! We also have several people downsizing their Toronto homes to purchase a cottage.
➤ Every good investment needs a well-planned strategy. Start preparing with the following:
- Are Condos A Good Investment?
- How To Submit A Winning Offer On A Home
- The Most Undervalued Condos In Toronto
- Condo vs House Investment
- Why Parents Should Invest In Toronto Condos For Their Children
- Millennial Home Buying Trends
Retirement
As alluded to above, retirees are seeing the benefits of lessening their garden work and general upkeep. Also, the travel aspect is significant. Just because one retires does not mean that life should recede. Engaging and encouraging continued growth is excellent for the mind, body and soul! The ease of condo living is more frequently replacing the house with a large yard. The access to “retirement funds” from the house’s value can be seen as a windfall of cash for many people. Benefits: very little upkeep, no more putting out the garbage, no snow removal, security guard, the list goes on and on.
Financial Shift
Here is the topic that can be chosen or something out of someone’s control. A financial shift may occur from unemployment for many reasons, from health to retirement age to corporate restructuring. If this situation occurs, it’s best to look at the many possible options. One of which we will focus on here is that accessing capital in the house or condo may be worthwhile. Selling the current space for something that costs less may be a wise move and allowing you to weather this stage in life and to better budget for life moving forward. In our opinion, it is always wise to accept life as it is and then decide what makes the most sense for you, the individual, so that you can live the fullest and most enjoyable time with access to funds.
Life is constantly changing, and being prepared and reacting positively can go a long way for your most significant investment and greatest joys!
