To not understand downsizing as a means to release cash?

[Shinynose]

I live in a 4 bed detached house and now DC are adults it's too big and requires too much maintenance, so that's a good reason to downsize.

However, people often talk of downsizing as a way to fund their retirement or help DC with house purchases of their own. I can't make the maths work.

My house is worth about £500k, a not insignificant sum. It's in The South East but in a cheaper part, in the slightly nicer part of a not that nice town.

This "nice" bit doesn't really have smaller houses, for something smaller it would have to be a bungalow, which would cost about the same, possibly more than my current house.

I could move back to where my first house was, a 3 bed terraced ex council house, but that would cost £350k and after costs would raise maybe £100k (?), a lot of money but not a lot to live on for very long, and a significant reduction in quality of life.

Is this kind of downsizing only for people who live in very expensive areas and who are prepared to move a long way from home? Or am I missing something?

Looking roughly at where my Granny lived, a 4 bed detached house with huge garden would be about £1.2-£1.4 million now, and a bungalow roughly like hers about £800,000, so similar percentage differences.

To reiterate what @beenonthebox and @Porcuporpoise have said, I know several people who have moved in to one of two near here.

One chap (having recently lost his wife) absolutely loves it. He's gone from sitting in his bungalow all day on his own (had had to give up driving some time ago and was a fall risk who was advised to have someone with him when he went outside), phoning his daughter several times throughout the day (she was trying to work), to absolutely loving it where he is now.
He goes down to the communal cafe area at the same time every morning, and sits and chats with all the other people that do the same for an hour or two. He's joined a choir, a painting class, a gym, an balance and exercise class, and he goes for walks round the corridors and round the gardens, chatting to people every couple of minutes. He volunteers in the big green house there, to keep up his love of gardening whilst not being able to dig and maintain a garden of his own.
Another lady was telling me she goes to various socials on a Saturday night, and can just walk along the corridor to get home safely. (She loves a dance). She has also joined some of the exercise classes. She says they have concerts as well, and she doesn't have to get a bus / come home in the dark - it's all on the premises.

Yes, there is a cost, but if you have the money, why not spend some on yourself during your twilight years ?

It is only with very expensive houses that a bungalow is much cheaper. In my street the 3 bedroom bungalows are more expensive than the 4 bedroom houses.

What is the cost to purchase and monthly service charges for these retirement villages and homes which provide the onsite community and facilities?

The property costs are quite cheap but the service charges are very high. £1k pcm I believe. The elderly person spends a couple of years there before going into a nursing home. The flats can’t usually be let, they do not sell well, three/four years on £48k of charges rack up, the family might realise £120k from the sale having reduced the price in desperation. Whatever is left goes to the state for the nursing home fees.

they are a very poor investment and frankly I and my 88 year old mother and MIL would rather stick pins in our eyes.

Well that's a very broad question...but based on the West Midlands I think you'd be looking at around £150 for a 50% share of a one-bedroom apartment...the fees across the board can be anything from £500 to £1000 per month, depending on how much rent you pay for the % you don't own, plus what services you are provided with, and where in the country it is.

Which is the other side of the coin based on people who don't like the idea of living in such places.

But what is the alternative?

Well, it's not a wholly accurate post, so don't worry too much about it. The village near to where I live has a waiting list for vacant properties, and applicants have to be firmly vetted before going on the list.

I don't know where the figure of two years comes from, but people I know who live in them have been there far longer.

I'm not saying the buying & selling back of the property isn't more complex than selling an ordinary property, but it's not that difficult.

I see what you mean.

What is the alternative for an elderly person living by themselves who is isolated and less and less able to manage the bills and maintenance and will need support from dc and relatives and possibly a round of carers.

Perhaps it should not be seen as an investment but the cost of a care-home lite. Due to the cost, I imagine people will try to live independently for as long as possible.

One lady I know has absolutely no family at all. This will be me, assuming I outlive my husband. I'm mid 40s at present, and far from ready to move to a retirement village, but I am not so blind as to not see why people do, and could see myself there in years to come, money permitting. I'll have no family to leave it to, and that's a fact, and even if I did, I'd still want to spend as much as possible on me before I die.

Thanks for those figures @beenonthebox. Interesting that it is structured as a share of a property not outright purchase. The cost of the property is not that high but it is the monthly fees which are the killer.

monthly fees are the killer

You say that, but my ex-neighbour was talking about this when I went to see her the other day...she didn't say how much she pays, but she did say "we pay a lot to live here", and yet said it's all manageable through having sold a house and having some income through pensions. Another point, she said the electricity was included within the fees as a flat rate...this lady has never been stupid with money, but she's always bought whatever she wanted if she could afford it.

Saying "we pay a lot to live here" was the only negative point she made, and even that was a fly-away comment as part of a much bigger conversation...she absolutely loves it where they are and the life they have.

Edited to add: When I think of the cost of the nursing home for my MIL (£800+ a week, and I'm going back a few years too), the fees for a village apartment seem much more attractive, added to which you can thank God you are still well enough to live in one, independently (with or without support), unlike my MIL who spent several years sitting in a chair without a clue who anyone was, thanks to what dementia robbed her of. If she'd have been well enough to live in a village and had wanted to, we would have signed her up without question. It would have been the stuff of fantasy, based on how her twilight years played out.

I should have said £150K,, not £150!

@blueshoes I have edited my reply to you, as above.

Yes, not sure what your ex-neighbour is paying but if it is 500-1000 a month and electricity is in that at a flat rate, then that certainly brings down the extra cost. She sounds canny with money.

I know what you mean about the cost of a retirement village being a steal compared to a care home. My mother has dementia and lives in a small homely retirement home with 6 other residents in assisted living with 24 hour carers (not UK). She sleeps most days interspersed with active days. Her care needs are relatively light and does not need nursing care. On her good days, she says she is happier than she has ever been in recent years living in the home. It is costly but she loves it. Me and my siblings have the peace of mind she is well cared, has people around her for company, activities and exercise during the day and her medical appointments handled by the home.

If there's no cheaper areas you'd consider downsizing to and your house is relatively cheap for your area, then of course you won't make much money.

People who make money from downsizing live in places with dramatically different prices within relatively small distances. Where we live, you could easily downsize from an £600k 4 bed detached to an £350k 3 bed semi and not move more than 20 minutes away. But if you already lived in one of the cheaper areas, you’d make more like £50-75k max.

Also, land is what drives up the price of a property and a two bed bungalow isn't necessarily that much less land than a house with many more bedrooms. Our current house sits on around 300sqm. A two bungalow would be on a heck of a lot more.

We have a beautiful large victorian villa, DH is an architect so does a lot of it himself. We put £120 away each monrh for home maintenance- it's never enough. Big old houses eat money. £1,000 a year sounds cheap.

Well yes if you think about them as a way of protecting your inheritance then they're not a great deal. But some people think they (or their parents) should prioritise themselves and their quality of life rather than worrying about what will pass down.

Yes, we looked into these for my MIL. She ended up staying in her home with carers. Financially it was much better for her.

We would walk away with cash if we bought a two bedroom apartment near us.

We could potentially downsize but I can't face the hassle and I don't actually want to move. We're in a great location, just about everyone comments although most visitors are care related nowadays. With hindsight the time for downsizing is in your 50s but that boat has sailed. Communal living is not for us either.

Off topic, just wondering if we live in the same town

A lot will depend on how much change you can embrace. When I divorced, my now ExH wanted me to downsize, but it wasn’t practical because a smaller property wouldn’t have cost much less than the house I’m in, and I couldn’t move the children away from him. Now, they’re older and I’m looking to the future, and I will probably relocate to a cheaper area in a year or two, and free up some equity. Might even buy two properties, and rent one out. But it’s not possible for me to do that and stay local. It depends on your priorities, I suppose.

Our 4 bed is worth about £900,000 (outer London). We could buy a nice 2/3 bed flat with a balcony further in for about £500,000. We wouldn't need cars anymore as transport links are so good in London so that would be a saving, our council tax and utilities would be lower, no need to pay a gardener or cleaners and £400,000 to invest. Of course we would have to pay ground rent and maintenance charges on a flat but overall, we'd,still be ahead of the game.