Buying into a retirement village is very different to buying a standard residential home.
In a retirement village, you buy a “right to occupy” the unit, in the form of a long-term lease or licence. Your upfront payment is called an “ingoing contribution” and is kind of like a bond, in that it is repaid back to you when you leave.
Your leased area is the internal area of the unit. Basically, you are responsible for everything inside your leased area, and the village (similar to a body corporate) looks after everything external to the unit, including the gardens.
While you live in the village, you pay a fortnightly fee that covers all of the operations and maintenance, including rates and insurance, repairs and maintenance, staffing and administration. The fee is around $170-$250 per week, depending on the size of your unit. There are legal restrictions around annual fee increases to keep them affordable.
After you leave the village, the unit is refurbished and on-sold to a new resident. Your ingoing contribution or bond is paid back to you, less the costs of any repairs required and the accrued exit fee. The exit fee is how a village operator makes money – it is a fixed percentage of your purchase price accrued on a daily basis. For example at TriCare’s Runaway Bay retirement community, our exit fee is calculated at 3.5% per year.
It is important to note that buying into a retirement village should be considered a lifestyle decision, and not as an investment. People buy into retirement villages for easy living later in life, not to make money betting on capital gains in the property market!
