Investing in Retirement Home

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  poboy on 21/08/2016 - 17:11

  Retirement homes that are part of a village? If part of a village, you will have to pay a percentage of a sale back to the village. This percentage usually slides up, before being capped (approx 40-50% - but varies).

  • 

    peuwayaqdq on 21/08/2016 - 19:21

    I don't think it is part of a village. I have impression, at least from the one I visited before, that only occupier can buy the one on the village?

    But I am sure there will be body corporate and all kind of management fee etc.

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  tonka on 21/08/2016 - 18:35

  +1

  Make sure you check strata and management costs. Have been curious myself, don't know about retirement but I've seen holiday type complexes that have onsite management, rent commissions are much higher than the 5-8% you would pay a real estate agent.
  It's possible you may have other complex charges for assisted living type stuff that you pay and but are already included in the high rent return you have been quoted.

  • 

    peuwayaqdq on 21/08/2016 - 19:22

    Thanks. That's a good point (strata). At the moment I have not considered holiday type complexes as the income stream is not that steady.

  • 

    DarkOz on 22/08/2016 - 07:19

    +1

    Yup. Check out the strata and management costs. Especially if there is any major defects to be repaired or upgrades.

    I heard of a true story that someone bought a cheap unit only to be faced with a $30k bill immediately because the roof needs replacing.

• 

  chumlee on 21/08/2016 - 19:44

  +1

  If capital growth is low why waste your time and money.

  Seriously, they are putting lipstick on a pig, so it's still a pig at the end of the day.

  • 

    peuwayaqdq on 21/08/2016 - 20:50

    hi @chumlee i was just guessing. Do you know that for a fact?

    Postive stream of income is still something though.

    • 

      chumlee on 21/08/2016 - 20:56

      Put a link to the property. Will help with the discussions

      • 

        peuwayaqdq on 22/08/2016 - 08:41

        I put one link in the post.

• 

  niyiaw on 22/08/2016 - 11:17

  34 sq m? Good luck getting a mortgage for that…

• 

  Dumax on 22/08/2016 - 11:30

  Body Corp/Sinking/Rates = $90.72 per week
  108K Loan @ 4% (20% deposit) = $131 per week
  Rental Price Guide = $220 per week
  + very little capital gains

  The numbers simply don't add up.

• 

  peuwayaqdq on 22/08/2016 - 12:50

  Thanks for your responses.

  I am actually after feedback more on investing in retirement home in general. What's the pros and cons. For example, is it true that in general we should expect lower capital gain compared to normal houses?

• 

  chumlee on 22/08/2016 - 17:37

  +1

  These are similar to the serviced apartment model. Capital growth will be low as you are at the mercy of property managers.

  Put your money into a standard property purchase

• 

  tonka on 22/08/2016 - 23:39

  +1

  Looking at the numbers,
  Don't think it will positively gear for a little while.
  Rental commission is not taken into account.
  There will be some expenses for repairs and maint.
  You have to pay for smoke alarm inspections, blinds safety compliance etc in QLD.
  You will probably want landlord and building insurance.
  You should check mortgage conditions, interest rate and deposit may be higher for this type property if you rent out.
  If the sinking fund is low you may get some special levies.
  Not sure in Wynumm but some areas council rates are considerably higher if you are renting out your property.
  Your expenses will go up each year.
  Rent increases will probably be very slow while interest rates are low. When rent does go up your costs will increase as well with interest rate increases.
  You will likely have some annual fees associated with the mortgage.
  Your tax return will cost more
  You will have additional expenses to make the purchase, stamp duty, conveyancing, (maybe mortgage insurance)
  There is the cost of your 20% deposit

  If there are no exit fees I don't see any reason you wouldn't get capital growth, it will probably be out of step with normal market though.
  Prices are all about supply, demand and alternative cost. When it gets to the point where a 55 yo can pay $500K for a unit at Wynumm or $120K for a retirement unit demand will up and so does your capital growth. It is likely to be more a rubber band effect though so the price resists growth for a long time then slingshots up to adjust to market.

  My questions would be, can you select your own rental agent, tradespeople and tenants.
  What happens if the complex is redeveloped are you an equal landholder. (maybe this is the catch??)
  Will the bank accept this as equity for further loans and at what percentage.

  If you get good answers to these questions I would buy this (I've seen them before and been tempted), it's not a huge commitment and old people are popping up everywhere :-) Wynumm is a nice area and I find QLD tends to undervalue these type of properties (non mainstream type properties).

  Check the growth cycles, the key to good property investment is buying at the right time. You may find a pattern linked to housing prices that will help you predict capital growth. I'll give you an example of the sort of things to look for here.

  CBD Unit prices increase = Increase inner city houses = increase suburban units = increase suburban houses = (repeat) = increase industrial commercial (repeat) = catch up retirement villages (repeat) = catch up rural housing

  Something I've notice is a good time is dips and recovery in market. If you can find the increase pattern you can do things like anticipate a suburban housing recovery because CBD housing has already recovered.

  A rural retirement home would be a different proposition.

  • 

    peuwayaqdq on 23/08/2016 - 12:08

    Hi tonka, thank you for your very informative response. You gave me a better picture with facts around this.

    I guess I also need to pay a visit to the property and talk to the site manager and the real estate agent.

    • 

      tonka on 23/08/2016 - 15:52

      Here is an idea to gauge potential capital gain.

      Find units with similar titles in Sydney, and their recent sale prices. Find the ratio of those sale prices to houses.
      might look something like 1:4 or 1:5 for a 1 bedder against an older house. I think the ratio in Wynumm would be around the same.

      So this sort of says to me these unit don't need to adjust to the housing prices. I do think though that QLD prices will need to adjust to the Sydney market. You would pay $350-400K for the same thing in Sydney in a similar suburb.

      I know where I would be retiring to if I was a baby boomer.