Among the many offers I have seen floating around I have found CahFlow positive income in a retirement home. The complex has about 20 small 36m2 units. What I was wondering is has anyone ever invested in this type of deal before. I know the place has been up for sale for about 1 year. So I know it may take a while to sell off in 5 years time. Who knows.. But it does return positive cashflow and is a very cheap option.
Anybodys thoughts and knowledge on this would be great.
Cheers
GlenRetirement units are referred to as Niche Properties. They are aimed at one particular area of the market therefore banks see them as being risky. Other Niche Properties are holiday houses and caravan parks.
They will only loan about 70% of the value (may depend on which bank you use).
‘Eat rich food, barbeque a yuppie’ [greedy]
Hi Starscream, I haven’t done this type of investment before, but i guess it will come down to doing all of your investigations about the real value of it, weekly holding costs, how much choice you have in renting it out? How do the cost of living expenses for the residents compare with other similar villages – ie will the village down the road appeal more because it takes less of their residents pension fortnightly leaving them with money to live!!! I haven’t heard a lot of good about these investments, but I am with you in the thought that they show good returns, why wouldn’t you look at it? For me it would depend on how much money down, what else might that money be able to do, how certain am I about income from property, how much say do I have in its management? and stuff like that. Don’t discount the option, just go and ask lots and lots of questions. I would!
Cheers
CDCastleDreamer
I know of a house where an elderly lady lived til she died. Having come from the depression era she was prone to stashing expensive antique jewellry away.
Anyways, the house was sold soon after and the new owner arrived to find piles and piles of newspapers in every room. He quickly ordered a skip and dumped it all.
weeks later, the new owner was talking to a relative of the deceased. It seems that her amasssed fortune was not distributed to any relatives.Check the mattresses and get a metal detector for the grounds.[whistle]
lifexperience
Hi Starscreamer,
I think I read a few issues back in the Australian Property Investor mag of someone purchasing or discusing the merits of retirement village units. I work in disability and we have an ever expanding aged population and a far from ‘expanding’ increase of births. If it’s cachflow + and with ABS stats showing that the niche market of retirement homes will be needed then it could be a good wicket. In fact, why didn’t I think of this????
Good luck!Hi Starscream,
One of the critical issues is the banks willingness, or otherwise, to lend on something that small. As Rugbyfan indicated you will need to contribute proportionally more than normal for a deposit.
Often rents are indexed to the pension and as such you may well expect regular rental increases.
Make sure you check out the costs involved as some retirement villages include a ‘full service’ and as a condequence you may find your costs are somewhat higher than expected. Aslo check out the management rights and relationship between you and the complex managers – there may be some hidden nasties.Also consider that retirement homes are a new field and as such capital growth and resales maybe an issue.
Derek
[email protected]Read my comments? Think I can help you? PM or email welcome.
You should do a search on this forum about retirement villages and pensioner units, they have been discussed a few times in the past and you might find more useful info there.
ABout a year ago I was also looking into buying one of these units, or rather they came per 2 units under one title. SInce they are pretty small as you say, they coupled 2 of them for sale.
I decided not to go ahead with the purchase because they were so hard to finance, I think they were treated as a commercial loan and I’d be able to only borrow 60% of the value plus at a higher interest rate.
Yes it was CF+ but not hugely, just something like 6 or 7% yield.
There was heaps of depriciation, because these units were brand-new, something like $9000 a year but it included furniture package.
THe last lender I tried who went to value the place, came back to me saying they valued it about $30K under the asking price. (I guess because of all the furniture included which the bank won’t lend against).
About the occupancy rate, this was extremely high, almost 100% with a waiting list. Rents were paid by government and rental subsidy.
Management fees (on-site manager) etc were extremely high I thought.Just be careful and if you go ahead, make sure to read the contract from cover to cover especially about things like management fees, because in the contract I read it said management fees go up every year either 3% or with the CPI increases, whichever was higher!
I’m not sure the aged pension actually goes up as much as CPI, so your income may start to lag.
Same with the laundry service and other costs. Things like that, look out for these traps.Hey Starscream, considering its been on the market for over a year, Im assuming
a) you know a bit about the area
b) you know about it’s reputation
c) you know its location relative to amenities & hospital(s)
Also, since no-one has gone to the sign-up stage, you’d be able to negotiate & get it a bit cheaper Im sure… just another advantage which may make the larger deposit not as bad…(“,) $$$ HoLdEnCoMmOdOrE $$$ (“,)
Hi Guys,
other problems with retirement villages, you cant use them to securities other investment properties, what equity is put into them, cant be taken back out… maybe through a refinance… but most banks wont let you, use them as a security…
Cheers,
sisVery good point, sis, this is so true! Makes you think twice to bother about these kind of investments, doesn’t it!
Also, if this property has been on the market for a while, what will happen when YOU want to sell it, good chance that it may be a VERY slow process, years even. THese retirement villages are popping up everywhere esp QLD and people can easily buy a brandnew one, or one OTP with full depreciation. SO older units sell for less and slower. [thumbsdownanim
Another option is to invest in aged care with the developer and make some high returns. I guess the one benefit is that these are monitored and regulated by the government. I have heard some villages pool the rental so that if your unit is vacant for any given time you still get a return. Rental is also linked to cpi. Is the unit you are looking at fully furnished as this would be more attractive to retirees.
You gotta have a smooth exit strategy, and I would be very nervous about buying something that takes 12 months+ to sell.
Just speaking to my mother and funnily enough this topic basically came up. [blink]
One of my aunties went into a retirement village where the owners had to occupy the residence themselves, demand far outweighs supply and the value of the ones purchased a couple of years ago have gone up a great deal (20-30% in two years I think). Of course it doesn’t help anyone here I think but it does supply that there is very healthy demand for retirement facilities.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
