THOUGHTS ON DOWNSIZING By John Lang (Article)
Eventually we all do it. The time will come when with gladness or misgivings we decide to relocate to a smaller abode. Most of us have relocated, some of us many times. While claiming no expertise in any aspect of this process, my recent experience might provide answers for those who expect to go through it. Looking back at my recent experience, it is the downsizing factor that differentiated this relocation.
Why downsize? Do you occasionally discover rooms or furniture you have not seen since the kids moved out? Are you weary of cleaning and heating rarely-used wings of the mansion? Perhaps relocation is part of a long-held plan to buy a condo in Ottawa and spend winters in a kinder climate. Whatever your motivation for relocating, I expect downsizing is the aspect you will find most challenging.
Most of us simply have too much stuff. Almost all of the houses on our street have a garage but few can be used to shelter a vehicle, filled as they are with unpacked crates and boxes from the previous move. Sound familiar? Many of my previous neighbours also had a storage shed in their backyard. Have you seen the storage space allotted to the average apartment or condo these days? It’s about 4’x4’. Do you store your own snow tires? Got bikes? OK, you get the picture. Chances are you’ll need to be getting rid of a lot of stuff. But before describing divestiture, I would like to touch on other aspects of moving/downsizing.
Real Estate Agent or DIY Home Sale?
We used an agent and are happy with the result but it’s expensive. Agent fees and staging costs totalled nearly 5% of the sale value. We listed in late-January when there were few homes on the market. The property sold in a week for a little above asking. I have no experience with any of the flat-rate agents but, for the potential savings involved, I regret not having considered using one. If you do use a traditional agent, negotiate the fee down to 4%. You do not have to wait until spring to list your home. Beat the crowd.
Staging is worthwhile in a hot market but it’s pricey and paying for it for more than the initial month means it ain’t working and extending the effort is probably not worth it.
Rent or buy 1:
Much has been written, most of it ill-informed. No, tenants are not suckers who are “paying the landlord’s mortgage”. To assess the relative merits of buying and renting you must measure the unrecoverable costs of each approach. These are:
What you pay in rent.
The sum of mortgage interest payments + upkeep + property tax + insurance + capital costs (what you could be earning on the equity you have in the house). Generally, these add up to 5% of the market value of the house. So, rent for a $1m house should be about (5% x $1m) /12 = $4,167/mo. If it’s less, the landlady is subsidizing her tenant. Be aware that these numbers are generalized averages.
Rent vs buy is often a close call. Ownership is not the slam-dunk that realtors and mortgage lenders assure us it is. For the source of my comments on “The 5% Rule”, see Ben Felix on YouTube here.
Rent or Buy- II:
Apartment vs Condo?
You’re on your own with this one. Condos combine attractive features of both ownership and tenancy. They also combine the disadvantages of each. I view a Condo Board as another layer of government in my life. Years ago, when I submitted a motion to my board that rather than divide the total total power bill equally between units we should each have our own meter, they smiled as they voted me down. Needless to say the smilers mostly had innumerable kids and were running their appliances non-stop.
Capital Gains Tax on Principal Residences
This has been in the news lately. Could the tax man be about to kill the only great tax break available to average Canadians? Surely not, you say. Just because a question about the sale of your principal residence has been added to the T1 Tax Form, and just because the revenue department has hired consultants to advise whether it would be a good idea does not mean they will actually do it, even if the consultant has stated publicly that it’s a no-brainer to levy capital gains on homeowners. When asked about it, our prime minister tweeted “To be clear: We will NOT put a 50% tax on the sale of your home,”. Asked on another occasion, he said “No current plans.” Are you feeling reassured? Wasn’t the carbon tax preceded by five years of denials that it was coming? Surely only a government deep in a financial hole would stoop to taxing the sale of our principal residences...oh, wait...
Investing Home Sale Proceeds to Pay the Rent
Be aware that safe investments earning 5-6% are hard to find these days. Pundits say we will be lucky to realize 2% for the foreseeable future. By the time you read this, conditions will have changed but for better or worse, who knows?
Getting Rid of Stuff
I said somewhere above that divesting yourself of your material goods will be the biggest challenge you face in relocating to smaller premises. If you are over-attached to your possessions you will be disappointed that others fail to preceive their true value. A few years ago, I was chatting with neighbours on the street in front of our house when another neighbour approached and asked us whether anyone would like a mahogany dining table with 8 matching chairs. For free! On realizing she had no takers, she said “You spend the first 20 years of marriage saving to buy furniture and the last 20 years trying to give it away.” Be prepared. Before entering the world of Kijiji and Craigslist with your antiques and heirlooms, examine other options. For example, rather than break up matching sets (“I only need 3 of your dining room chairs”), explore whether a professionally-managed estate sale could be arranged. You could check out Mary Frances at Abraxas Appraisals and Liquidation. View some of her estate sales and get an idea.
Donating to charities can be a good option but their receptiveness changes with their needs. Last time I checked, Habitat for Humanities does not want large items unsuitable for smaller apartments; Goodwill will not accept bookshelves or beds. You will need to check their websites for a current list of acceptable items. They might come pick it up. All those books? In Ottawa I have called the Rockcliffe booksale people here to come and pick up my cartons of books. Post-Covid I expect they'll do it again.
Dymon Storage will put your sale items on display at one of their storage centers. They advertise, allow buyers to examine the goods and collect from purchasers on your behalf. All they charge is the storage fee for the space required to display your items. Does that sound like they have an incentive not to see the goods sold? Hmmm...
Finally, Kijiji and Craigslist. These are wonderful resources but you need to understand who is your audience. Buyers looking for furniture on Kijiji are typically young, financially stretched and needful of a bed for the apartment they rented this morning. “Would you accept half the asking and throw in that coffee table I see you also advertising? Would you deliver?” You can get a good idea of the market by searching Kijiji for the items you would like to list there.
If you adopt the attitude that selling on Kijiji is like recycling and you would be willing to give your things away to someone who will make good use of them, you will probably enjoy your Kijiji experience more than you otherwise might. This applies especially to common items such as IKEA beds and bookshelves. Listing an item as free is a good way to get attention and move it. I am told that more valuable items, such as artwork, jewellery, silverware, china and collectibles can be sold for reasonable amounts to people looking for the specific items but patience is required.
I admit I was saddened by the sight of prized pieces of furniture being carried out the door by persons who had finally responded to the price of ‘FREE’. I especially admired the ingeniously designed solid teak, single pedestal, 4’ diameter circular dining table that pulled apart and with leaves sat eight. No metal hardware. Just teak. We had it made to order in Bangkok. But I was consoled by the look on the faces of the young couple who came to pick it up as they examined it and slowly realized exactly what they were getting.
We had decided to get rid of everything and start over. “You cannot begin a new era with old furniture”, someone once said, probably. It’s a new era for us and for our furniture.
Tags: John Lang