Downsizing usually means to move to a smaller house, but in the context of this series of articles I mean moving to a cheaper house. If you own your own house in a metropolitan area, even if you haven't fully paid it off, it is likely that you will have equity in your house. However, on a very low income you can't just go to the bank and get a loan against that equity, so you will need to release it by selling.
The idea is that you sell your house and then move to one that is considerably cheaper. Depending on how much equity you have, this may mean either that your mortgage becomes smaller and more manageable, or you end up with a cheaper house owned outright and some extra money that then becomes your initial deposit to do something else with. Generally you will need to move to a different area to get the full effect of downsizing, and this is most likely to mean a regional area.
Finding the cheaper house may be the hard part. For some people, they only want to stay in their current area, and haven't downsized because everything in their area is just as (or more) expensive than their current house. If you are in this situation, you have to decide what is more important - living in a particular area, or your financial situation. If the financial situation wins, start investigating other areas. Do your research, don't just blindly buy the first cheaper house you see.
You do not have to downsize just once. For example, you can downsize to a house in a regional city that can be subdivided, and when you are finished with the subdivision and have more money to use, you can move again to another house that again has some opportunity for value adding, following the techniques of renovating to sell or even building to sell, depending on your ability. You might decide to keep your previous houses as investment properties and earn money from rent, or simply sell them.
You might not 'downsize' at all, you might simply buy a house of similar value to your current one that has better opportunities. Perhaps your current house can't be subdivided or isn't well set up for taking in lodgers, and you are just moving so you have more options.
But no matter how you look at it, downsizing is by far the best way to get a big jump start if you have a lot of equity. What you then do with the new opportunity you have created is up to you.
Continue reading to the first of the techniques to make money from real estate - sharing your house.