Love It or Leave It?

When the kids fly the nest, they realise they’re knocking around a MOTAT-sized aircraft hangar. It may be time to list your home, not love it if:

• You have no-go zones in your home. If you have rooms in your home that you barely enter – perhaps a second lounge that’s rarely used – you may be paying to heat, clean and maintain space you simply don’t need. Many who downsize realise in hindsight, how unnecessary an oversized home really was.
• Your clutter is a burden. Larger Kiwi homes often become storage units for clutter. Sorting through years of accumulated possessions can feel overwhelming.
• Cleaning and maintenance are taking over your life. Maintaining a large home is time-consuming and physically demanding. Do you really want to mow that Pavlova Paradise-sized lawn on the weekends? A smaller home means fewer chores, freeing up time for travel, hobbies or simply relaxing.
• Your house is too big for your budget. The financial reality as people near retirement is often there’s not enough money in the KiwiSaver pot to shut down your computer come age 65. Downsizing may free up capital and also reduce living expenses. Selling a large home can unlock equity, reduce debt or provide financial freedom. Some homeowners downsize within the same area, while others move to more affordable regions where they benefit from a smaller or cheaper home and lower living costs.
• You don’t want a mortgage in retirement. Paying the mortgage off or down significantly gives more options in retirement. Not everyone wants to work until they drop, although some do choose to stay in the workforce for reasons other than money.
• Your lifestyle would benefit from a change. Many people in their 60s choose to move into town for cultural life, more rural for a slower pace of life, or even into retirement villages for social engagement, security and amenities such as gyms, pools and entertainment spaces. There can be environmental benefits to moving into a smaller, newer home.

Don’t wait until it’s too late. One of the biggest mistakes homeowners make is waiting too long to downsize. Many only realise their home is too much to handle when mobility or health issues arise, making the transition more difficult. One moment they’re aged 55 and mobile, and the next they’re 75 with health problems. Adult children sometimes find themselves burdened when this happens. Moving while still active and independent ensures you retain control over the decision.

A no regret downsize. Anne Clifford had no regrets about downsizing her move from the Pakuranga family home to Hobsonville Point to be near her children. Clifford surprised even herself, however, by settling for a walk-up apartment, not just a smaller property. It was only when Clifford spotted the Universal Homes Te Uru 2 development and discovered she could have an apartment with its own street level front door, that she realised apartment living could be for her.

Not having a garage, washing line or patch of land to cultivate didn’t turn out to be the dealbreakers she would have expected. She has her own designated off-street parking space, a large deck for growing pot plants and some veggies and an excellent washer/dryer, plus sunny spots inside, to replace the need for a clothesline.

Clifford’s advice for those contemplating downsizing is that doing so helps us to shed what is no longer relevant as people move through life’s stages. “It is surprising how we adapt to a new reality, where we can fully enjoy this new lifestyle and its varied freedoms,” said Clifford.

Practical steps to take. Whether for financial freedom, lifestyle improvement, or a desire to live with less, there are some steps to be taken to “right size” your home. Start by decluttering and assessing your actual living needs. Visit smaller homes and even consider renting for a while to see if you can live comfortably in a smaller space or a different location.

Downsizing the rental portfolio. As Kiwi landlords age, some will decide it’s time to sell off their rental portfolio or at least consolidate in order to reduce debt and gain an income off the properties. There are many reasons to do this. It may have become too much hard work to manage, even with a third-party property manager.

Or the plan was always to liquidate the investment portfolio at a certain age to enjoy the retirement savings. That reduces ongoing responsibilities such as repairs and tenant relations. The capital can still be invested in KiwiSaver or other hands-off retirement investments.

Investment property owners should take financial and tax advice before making any decisions. While New Zealand doesn’t have a capital gains tax currently on investment property, there are some rules investors should be aware of. Bad planning could lead to tax on the gains in limited circumstances such as the Brightline test or the Inland Revenue Department’s Associated Persons rules. It’s also important to give tenants proper notice under any financial penalties.

Selling a rental property is not that different to an owner-occupied property. There will no doubt be some work to do, to get ready for sale, and the usual legal process to go through. It may be easier to sell the property once it’s empty, however, that’s not always possible.