I have been snooping around the ‘net and have found some decent yeilds in
retirement homes/villiages.
However, last night I was warned off them by someone a little more property savvy than myself.
Anyone got any input for me?Hi Flanno40
i think you are on the right track, as this is going to be a huge growth industry with the ageing population we are having. For what reasons did you friend warn you off ?
i can only guess it has to do with the more hands on you need to be with something like this as it is more of a business than a passive investment ?regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
I was warned off due to financiers supposadly not in favour of them but that was all he would say.
All I see is a govt regulated income and a steady sream of tenants over the long term.(without being too morbid)
And an income that is increased along with the CPI twice yearly also.Plus tenants that aren’t likey to “trash the joint”hi flanno40
i’d talk to the mate again see what he knows, it might just be the banks treat it as a commercial loan?
i like the idea, keep looking into it and let us all know how you go
regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
Hi Flanno,
The issue as far as many banks are concerned is they are reluctant to (don’t) do an 80% lend – they have issues with the suitability of these properties as security.
Depending upon the lender there are/could also be issues with using any subsequent growth in value as security for other lends.
Anything under around 50 sqm (give or take a little) creates the same issues.
Be aware if credit is ever squeezed it will be noon-conventional property lends that will feel the pinch first.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
I have found high yields in the Sydney area and was wondering the same thing.If positive income is our main reason for investing wouldn’t this be a fantastic idea considering it is the only +ve IP’s available in the Sydney metro area?
sg
Hi Shane,
If you are cashflow focussed and have sufficent equity to use for other ‘deposits’ then maybe.
Edit Inserted – But bear in mind lenders don’t do 80% lends as such you will also use more equity than would otherwise be required.
However make sure you check the figures out to ensure the good gross figures do not become marginal net figures. Often there are high costs involved in retaining and maintaining these units and what looks good on the surface may not be glowing underneath.
You will also need to check the management agreement that is in place on the property – some devil may be hidden in the detail.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Thanks for your input Derek,
Yes I couple of valid points re hidden devils and a heads up for Shane too,,, be aware of admin fee’s and body corp – 1 example I have is $6741 pa
food and laundry came to $2300 plus I found a “sinking fund” ??? (what the?)
I’m finding the gloss soon scratches off.Originally posted by flanno40:“sinking fund” ???
Hi Flanno,
Sinking Fund is a levy imposed by the Body Corporate which is put aside for upkeep projects on the complex.
Some BC groups have an annual levy that build up over time so that major works can be undertaken, often without the need to charge special levies in their place.
Anyone buying into older complexes should investigate the health of the books to determine how much is held in reserves.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Flanno,
try to do a search on this topic, it has been discussed a few times in the past as well.
About a year or so ago I did some research on these retirement units.I agree with Derek:
Most, if not, all lenders will treat it as a commercial loan and will only do 60% lends and at a higher interest rate.And read the contract carefully and thoroughly, there may be more costs than you initially think.
Also, you may find out that all the outgoings, e.g. management costs, laundry service will increase annually by either 3% or according to the CPI adjustments, whichever is the most.
An annual increase of income is not guaranteed.The success of the smooth running of such village depends very much on the management.
The ones I researched had management contracts for something like 20 years!If there are any particular questions you come up with, feel free to PM me and I could dig out some more info I collected at that time to see if I can help.
Celivia
Be very careful and have your solicitor read any fineprint in the ‘contract of sale’.
A Real Estate colleague informed me that when you go to resell the retirement unit you may be in for a shock. There are some agreements that you have to share the profits on sale with the current property management. [ohno]
Duncan
just wanted to send a big thankyou to all who contributed to my question ….. just so much help and info is truely amazing !!!!
Flanno,
The stories I’ve heard of selling a retirement unit is, the management takes thirty percent of the purchase price.Plus management keeps all the capital gain.In other words, there’s no capital gain.
The only way to be involved in a retirement village is to own the whole thing yourself.That costs big money. Profits are huge. That’s why the big boys (companies)own most of them. The churches used to be the only people interested in them once.Even the churches now screw these poor bastards out of their last dollar.Some churches charge a large portion of the retiree’s pension, even when the poor bastard bought the place.
The RSL village at Collaroy Plateau(NSW)is the largest retiement village in Australia.
They never stop building. Today they don’t care who you are, first with the money wins! The R.S.L.bit means nothing.Money money money.
I wouldn’t touch them.A very good chance of being burnt.bbruham.[withstupid][inlove]
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