Monday, September 22, 2008

Downsizing Your House

An important part of my retirement plan involves selling my house near Halifax and buying one in a more rural location in Nova Scotia. This will help in a few ways:
  1. I will extract some equity from my house by buying cheaper. I can invest that equity in my retirement fund
  2. As a result of having a smaller place in a more rural area, my property tax will be lower.
  3. A smaller place will theoretically be cheaper to maintain, though this can vary depending on initial condition and construction materials and methods.
If you plan to take advantage of this at some point in your life, it's important to factor in the costs associated with such a move. If you use a real estate agent to sell your house, a large part of the selling price (typically 5%) will go to the agent. This is somewhat negotiable, so don't be afraid to ask for the best deal possible. Or, you can try to sell privately. There will still be some dollar costs (signs, advertising) and there will definitely be some costs of convenience. But, if you're comfortable with the time and effort required, it can save thousands. Also, there can be legal fees, surveying fees, and some jurisdictions have a deed transfer tax. Then there is the actual, physical move of all the crap (oops...fine furnishings and valuable heirlooms) from your old house to your new house, as well as storage if you don't take possession of your new house before selling the old one. Does your new house need work? Painting? New windows? Are you really going to be happy with that ratty old sofa in your new house? Is it time for new appliances?

I hope to sell my house for at least $175,000 (its assessed a few thousand higher than that) and buy a house for about $130,000 (a specific house I know I would like in the area I'm interested in is assessed a few thousand lower than that). So, my selling price less 5% real estate fees less $130,000 is $36,250. Allowing for the other expenses listed above, I hope to net $20,000 out of the deal. I think that's a pretty conservative estimate, but there are too many variables for me to be comfortable depending on a much higher number. I'll also save about $500 per year in property taxes.

What about you? Would you move to save money? Would you downsize in other areas of your life, like cars for example?


Claire said...

Hi simple bachelor

I am also thinking about downsizing and buying property in nova scotia - the problem i have is immigration - I am British

What is the weather like in NS in the winter?


The Simple Bachelor said...

Hi Claire

The weather in Nova Scotia in winter is pretty good compared to most of Canada. The Atlantic Ocean moderates the temperature somewhat. Having said that, I think you would find it colder than a typical UK winter. It snows more often than it rains.