Can anyone help me. I am thinking of purchasing a one bedroom unit in a retirement village as an investment property. Would anyone know anything about this type of property/ Can anyone tell me if they make a form of investment. This pensioner units have a return of 7% which doesn’t like much.
thank you
car
These types of investments can seem good on the surface, but they usually come loaded with different fees. Fees like body corp and management can be excessive and quite easily wipe out any sort of decent financial return.
But people do invest in these, at least they know there probably wont be any wild parties. Besides a 7% return on the one you’re looking at is a bit dismal.
Keep looking, the pots of gold are out there…G7
Hi Carmen,
In addition to the ‘hidden costs’ mentioned previously you will also need to check to see whether or not you can secure finance at 80%. Lenders tend to treat ‘retirement villages’ as a riskier proposition and you may find you need to contribute more equity or cash than would otherwise be the case.
The capital growth market is as yet largely untested and may be somewhat problematic.
Derek
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http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Carmen,
I looked at these retirement units abot 18-24 months ago but lenders find these units very risky.
I think that most people must be paying for these units from a LOC, or come up with at least a 40% deposit.Also, it concernes me that lenders find these units risky because it might mean that they probably won’t let you use this unit as a security for your next property either.
Management fees are usually quite high, and even though you might be told or shown that the return (I assume you are talking about net return?) is 7%, somewhere in the contract [sleepy2] it will likely say that you can expect annual income growth in line with CPI increases, BUT it also says, perhaps in small print, that management fees increase by 3% annually OR in line with the CPI- whichever is higher.
[hmm]
So I don’t ‘get’ the income growth thing they try to attract people with- OK income might grow but so will the outgoings.Oh, just adding something positive as well: apparently these units do have a very high occupancy rate- almost 100%. I did check out a few villages and these units were ALL occupied and the management had waiting lists as well.
Celivia
Hi Carmen, had a look at this at a time when my mum was thinking of going into one (glad she didn’t). Looking at the fine print (not sure if all retirement villages are the same), there was a clause that when she eventually sold, she had to pay for the unit to be totally renovated and if there was capital growth over the period of holding the unit, the company running the retirement village received a cut (can’t remember what %age) of the growth. So we quickly moved on from that idea!!
Yasna & Simon
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