Author Topic: Best way to downsize - logistics?  (Read 2783 times)

CopperTex

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Best way to downsize - logistics?
« on: September 02, 2013, 11:17:03 AM »
Early next year my husband and I will have enough equity in our $400k house to downsize into a $250k and be mortgage free.  Was wondering your thoughts on the best way to do this? Should we A: wait until the house sells to start searching for a new home - the benefit of this would be having cash in hand and not having to pay costs of taking out a loan but the risk would come not finding what we want before needing to move out.  Temporary, in-between housing is not an option because of the nature of my husbands business - he sells collectibles on Amazon and our 2.5 car garage is packed to the brim with his inventory.  The aspect of moving all this stuff into storage and then again into the new home would be daunting, but the main issue would come from the lack of income that would occur with the inventory in storage.  Option B: Take out a loan for the next home and start searching and find something before selling the current home.  My main issue with this is paying the bank fees, etc. for a loan that will be immediately paid back upon selling of the first home.  Paying a second mortgage while the house is on the market is not a problem for us and we live in a low risk area, I'm sure the house will sell fairly quickly but hate the thought of paying for a loan that is such a temporary thing.  Any advice? Is there a third option I haven't thought of? 

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Re: Best way to downsize - logistics?
« Reply #1 on: September 02, 2013, 11:21:47 AM »
What is the average time on market in your area? It's been quite a brisk market in our area and I have heard of sellers putting a reverse contingency in the contract. Basically, it tells the buyers "If we [sellers] can't find a house we like within x days of accepting your offer, we can back out of closing."

CopperTex

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Re: Best way to downsize - logistics?
« Reply #2 on: September 02, 2013, 11:31:49 AM »
According to movoto.com the average days on market in my area is 71 days - not sure if this is good or bad, but it seems average to me.  I'm guessing the reverse contingency is only doable in a good market.

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Re: Best way to downsize - logistics?
« Reply #3 on: September 02, 2013, 11:57:50 AM »
Our current median days on market is 48. You have outlined all the options I can think of. Time of year (both in how quickly you can sell your house and in number of listings you will have to choose from when you buy) may be a consideration too.

Peony

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Re: Best way to downsize - logistics?
« Reply #4 on: September 02, 2013, 01:04:22 PM »
Perhaps you could build in to the listing for your house (and subsequent contract of sale) a provision stating that you will need to lease back the garage from the new owners for a period of, say, 3 months (or whatever seems right to you) from the date of closing? That would buy some time to find a new place without disrupting the business too much. I don't know if that would be feasible in your market, but it would be worth discussing with a knowledgeable real estate agent. Companies do "sale/leaseback" arrangements often; I don't know why it couldn't be done with a residence as long as everything is spelled out clearly between all parties. I'd probably have a lawyer draw up that contract.

MC

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Re: Best way to downsize - logistics?
« Reply #5 on: September 03, 2013, 11:18:55 AM »
It may be worthwhile to consider the possibility of renting some short-term space (office or other).  At first glance, this may not seem mustachian.  However, consider the trade-offs between the scenarios.  If renting a short-term space allows the income to continue to flow in, and helps you mitigate other costs in the process, then it may be worth it.   My company deals with similar decisions on warehouse space, and sometimes the answer changes once you price out the scenarios.

Your advantage is that you don't need anything but space to store and access your product.  Other renters might want upgrades to the space before moving in.  In the commercial/industrial area, you might be a good fit for someone looking to cover the costs of their empty space.

I don't know how full your garage space is with this inventory, but from the perspective of selling your home, it seems like it's always easier to sell with less stuff taking up the space you are trying to show.  So, not having the inventory sit there may make selling quicker.

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Re: Best way to downsize - logistics?
« Reply #6 on: September 03, 2013, 11:43:33 AM »
I generally loathe storage space rental. However, if you husband's business has positive cash flow with the expense of necessary rental space, then the benefits of showing a less cluttered looking house may make that the best option.