Buying Retirement Village Units

i’m currently looking into it. from what i understand you buy into a body corp type setup and they get 85% of their pension to house and feed them etc. i have been told they are pos geared property, but not having done much in the way of due dilligence, i simply do not know.
one question i do have is: the government subsidises alot of it, but you have to “buy the beds” at a cost. since there is only so many beds they sell at a time, and i know for a fact alot of the beds owned are not being used (actually they havent even started building the retirement villages yet) how do these people selling this intend on getting the beds?
any one done anything like this? i too would love to hear your thoughts etc on it
cheers
shaun

Hi Lawry, do you mean the units you see advertised as Two for One? They usually sell for under $200K per 2 under one title? Which ones are you after? I looked into buying units from SunnyCove, also looked at the ELders ones.

I’d recommend to have an independent valuation done, because the valuation they provided was quite a bit higher than the valuation I had done.

I have been trying to get a loan for these, but lenders are very cautious to lend against them.
I couldn’t get a loan I was satisfied with, so I let it go. Most lenders refuse to lend for these units, unless you want to offer another security like your PPOR
I think most people buying these units must be paying for them out of a LOC or offer another security.

The returns were not bad, but the success of the investment relies a lot on the expertise of the management.
Yes depreciation is very good something like $8K or 9K the first year.

The thing that I didn’t like was that somewhere in the contract it said that you can expect growth in your annual income as the CPI increases. But it also stated that the management fees increase by 3% every year, or in line with the CPI, which ever is the highest. Not sure if I like this fact. I thought management fees were pretty high.

If you want more details about the SunnyCOve ones, I still kept the info so feel free to email me and I can look things up for you.
cvanzal@bigponddotcomdotau
Regards Celivia

I agree Mortman, I don’t think you can get rich on the CG from these units!
Income growth is the only thing that they promise you can expect.

I wonder if in the near future with all the baby boomers growing older, it would be easier to borrow for these units as there would be much more demand.

On the other hand, there only may be demand if the govt keeps paying the rent, but I’m not really sure if I would trust the govt to keep handing out these pensions and subsidy for another 20+ years to more and more pensioners. One day (soon?) the pension might disappear and rental payments will have to be made out of people’s superannuation, I suppose.

It’s a very high rent they’d have to pay for such a small unit (they’re under 35 m2 as far as I know), incl all the fees such as management fees, not sure if this will work for people who have an low or even average superannuation income.
Gee I’m not sure about a lot of things, aren’t I. Anyway, the future will tell!

I never thought I’d say this, but may be it’s a blessing the lenders didn’t want to lend me for those units! If they all find them too risky, may be they are.[xx(]

Anyway I have since found out that people on this forum are getting a much better returns on their IPs than you could possibly get from these units.
[] I think it was only 7% or so of net return (correct me if I’m wrong).

Celiva / Mortman
Re these retirement units,You mentioned finance being hard to get for them.
Well,I found it to be the opposite.My broker told me her contacts at banks were favourable towards them because of high demand.

You have to remember, there are different types of retirement villages with different conditions and financial structures.

I basiclly bought a free standing unit in an over 55’s village.the only outgoings apart from the usuals as with any property is the body corp fees which are $210.00

You are correct in saying capital growth will not be spectacular, but as one in a portfolio of properties it has it’s benefits, IE:very low maintenence due to the type of tenant.Generally long leases. Good security.Reliable rental payments.reasonable purchase price.

I bought off the plan so that also gave stamp duty savings, and being new,good depreciation tax savings.and builders warranties.
I have said it before, and I still believe these a great starting point for first time investors.

Bye,

I know Dolf de Roos raves about retirement accommodation as an investment, because we have a large bell curve in the population (globally as well as Australia) where the demand for this kind of housing is growing. Just like other factors which can show you predictable statistical probabilities of supply and demand, an ageing population is one of ’em.

now old people’s accom at a beach suburb, i reckon would be the bees’ knees.

Another variation is the in-between version of the 3 bedroom house with fruit trees and large section which the older people are moving out of, and into a low-maintenance (i.e. all on one level, not too much gardening) rental unit within walking distance from shops – which they live in prior to assisted care.

i think older people can make perfect long-term tenants – they just want to settle and not move around constantly so that could mean a good many years. and that there’s a definite plus to buying rental accom which is old-people friendly.

Like any strata thingie I would be wary about anything that has high management fees which could rise. Unless you own the whole thing, of course.

cheers-
mini

C2,
i was going off an uproar in Queanbeyan (satelite town of Canberra) where the locals were complainng of a lack of beds and the closure of one of the old peoples homes’. the reply was that the beds had been sold, ie how many old people they could have there subsidised by the Govt.
One of the arguments the locals used was that alot of the subsidisation (or beds) were not being filled throughout NSW and in fact a large percentage of beds were bought by developers with the intention of building old people homes and several years later the plans are not even off the drawing board yet. I know the mayor of Queanbeyan quite well (i used to date his daughter) and i was asking him about this when this discontent was happening a year or two ago and he said this was correct about the beds being bought. i may be wrong about what was actually said – after all it was a couple of years ago.
I think ive just confused everyone a bit more havent i?