THE AMAZING SECRET THAT RETIREMENT VILLAGES DON ’ T WANT YOU TO KNOW...
Retirement Living Options
As an ever increasing number of baby boomers head into retirement, many are seriously assessing their retirement housing options. Some prefer not to venture too far from family and friends while others are keen for a sea or tree change. If you are retired, or are on the verge of retiring, you may be considering the option of modifying your family home and ’ ageing in place ’. However, a significant number of retirees have already recognised the many advantages of moving on. These boomers have recognised that the family home is now larger than their current needs and comes at a high cost in terms of expensive utility bills and tiresome maintenance. Those embracing the downsizing phenomena get to enjoy a new property that is more manageable and accommodating as they age. Many have bought into communities that have the benefit of added security and companionship. For some, selling - up allows them to release the equity in their home in order to fund a new lifestyle, giving them the chance to travel and do all those things they ’ ve previously never had time to do. If you do want to move, the choices had previously been somewhat limited. You could move into a smaller home, an apartment or a retirement village in your chosen area. However, there are now greater options.
Buying into a Retirement Village can be a costly mistake
There is no doubt that retirement villages can be a great option, however it can come at a high cost. On top of the purchase cost, there are transaction costs such as stamp duty and legal fees as well as the future costs of council rates, strata levies, exit fees, refurbishment costs, capital gain sharing fees and the like.
So before you decide to buy into a retirement village, you should know that there is another proven retirement living option available with huge financial advantages.
So what ’ s the secret?
There is a more affordable alternative!
A more affordable alternative
A more affordable retirement living alternative is a community now known as a lifestyle village or land lease community. They have previously been known as manufactured home villages or residential parks.
When you consider both the financial and lifestyle advantages, lifestyle villages are a compelling option that could save you thousands of dollars in your retirement.
In lifestyle villages residents own their own home and lease the land from the village in which the home is located. The fact that you are not paying any part of the purchase price for the land component immediately represents a significant saving on your purchase price. Depending upon your preferred location this could be a 6 figure saving upfront compared to a smaller home or strata property. Also, because you are only buying the home and not the land, there is no stamp duty payable on the purchase and no ongoing council rates to pay. A manufactured home is an appealing option as the homes are built in a controlled factory environment and then transported to and installed in a land lease community. Not only is the quality of the build outstanding but they represent excellent value for money.
New and pre - loved manufactured homes generally range in price from $130,000 to $500,000 depending on the size, style, specifications and location of your home.
Like retirement villages, lifestyle villages also charge a weekly recurrent fee for the occupation of the site and use of the communal amenities and facilities. The weekly site fee varies depending on a number of factors but typically can range from $150 per week to $200 per week. Unlike many retirement villages though, if you are a pensioner and your home is in a residential land lease community, the weekly fee you pay to the operator is eligible for government funded rent assistance. This acts as an effective subsidy of the site rent payable. Since residential land lease communities are not retirement villages, they are free from normal retirement village industry practices. Lifestyle villages typically do not require exit fees, deferred management fees, refurbishment fees or a capital gains sharing fee when you subsequently on - sell your home. A significant proportion of retirement villages have complicated contractual arrangements with their buyers. The complexity of these agreements means that buyers have to spend money getting their lawyers to review the documents to ensure that the buyer is properly informed of all the costs. The purchase agreements for retirement village properties govern the entry price or purchase price for those properties and may also outline any additional costs to be payable at the time of a future sale. These often include deferred management fees or exit fees. In addition, it is not unusual for retirement village contracts to impose obligations to refurbish the property before selling and may also require an owner to share any capital gain the property may have made between the date of purchase and subsequent sale.
It needs to be noted that there is significant variation in deferred management fees/ exit fees charged by retirement village operators. However, it is not unusual for fees to be between 2% and 3.5% calculated per annum for the first 10 or 15 years. The total percentage payable on exit is generally calculated having regard to the period of ownership multiplied by the annual percentage as a proportion of either the original purchase price or subsequent selling price. This could mean that if you bought into a retirement village, you could be required to hand over somewhere up to 50% of the value of your home when you sell it. These fees are generally not payable when you own a home in a residential land lease community. As advised above, some retirement village operators also require you to pay a proportion of any capital gain in the property ie: the difference between the original purchase price and the sale price of your property. This is often calculated at between 25% and 50% of the capital gain, but can be as much as 100%. So, if the charge was 50% and your home had increased in value by $100,000, you would be required to pay $50,000 to the operator. Residential land lease communities do not generally require exit fees or capital gain sharing fees. It is arguable that a strata title apartment or townhouse does not have a recurrent charge once you have bought in, but there are many which charge a high weekly strata management levy or sinking fund charge. These can be equivalent to a recurrent fee in a retirement village or residential land lease community. In addition, these types of properties will see you liable to pay council rates with no ability to obtain rent assistance from the government.
What is rent assistance and how does it work?
Rent assistance is a non - taxable allowance provided by the Commonwealth as a supplement to income support payments to help eligible individuals/couples and sharers to meet the cost of private rented accommodation. Rent assistance is generally not payable to an income support recipient living in their own home. However, there are exceptions to this general rule that includes a resident that owns a manufactured home where they pay a recurring fee to the operator of the community for the site. The amount of rent assistance you will receive depends upon whether you are a couple or a single person. It will also depend upon the amount of the site fee. The Centrelink website includes useful information to help you work out how much you would be entitled to.
Although it shouldn ’ t be the sole factor in any housing decision you make, cost is, however an important consideration.
Although a straight comparison is difficult because these are different housing options with different forms of tenure, the entry and exit costs for a residential land lease community are generally considerably less than the costs associated with a retirement village or strata unit. As a result, when you buy into a land lease community you will be left with more money in your pocket to travel or invest as you see fit.
There are lifestyle benefits too!
Those buying into a land lease community don ’ t just buy a home, they secure themselves a new lifestyle. It enables them to maintain their independence whilst joining a community of like - minded individuals, at a similar stage of life. Many enjoy the social contact, interaction, companionship and informal care networks that it provides. The communities have a wide variety of amenities and facilities that benefit their residents. These can include community centres, swimming pools, tennis courts, croquet lawns and bowling greens. They also have active social groups running men ’ s sheds, arts and craft, bowls, bingo and bus trips, to name but a few. Lifestyle villages offer additional security for residents so that they can feel safe and secure in their living environment. For example, staff on call after hours for any emergencies and secure boom gate access. Most lifestyle villages are in desirable locations that have been carefully selected with the needs of retirees in mind. They are often close to hospitals, doctors, shopping centres and local attractions.
Want to know more about the lifestyle you can enjoy in a residential land lease community? You can visit our website for more information including details of our communities around Australia.
Hampshire Villages have residential communities across New South Wales, Victoria, South Australia and Western Australia.