It is estimated that the baby boomer generation in Australia owns around half of all residential investment property. As this age demographic moves into retirement (the BB’s started reaching retirement age in 2011) many will be seeking to sell their investment properties to fund their retirement. This was a subject I covered in a past blog post HERE.

Due to the current softness of the residential property market in many areas around the country, a significant number of BB residential property investors are wanting to sell their investment properties but are worried about the price they will get, the length of time it will take to sell the house, or even if they CAN sell the house.

Now unless you are an experienced property investment professional, and many of the baby boomers who invested in residential investment properties are not, you will be thinking that a sale of your investment property is the only option. However, this is not the case.

One strategy used by sophisticated property investors to transact their investment properties that you should consider is vendor financing. Vendor financing is where you as the seller also act as the bank for the purchaser. This style of buying is popular with those people who would struggle to get a bank loan because they are self-employed or have recently started a new job, they are a contractor, or perhaps they simply haven’t saved the required bank deposit of 10% or more. As you can see, these people are not necessarily bad credit risks, despite what the bank thinks of their situation!

Vendor financing works well for the seller if you don’t require the sale money immediately (vendor financing transactions typically take around 3-5 years to complete) or you need additional cash flow to fund your own loan repayments, property purchase or lifestyle. Furthermore, it locks in the purchase price at today’s value.

The way vendor financing works in practice is that the buyer enters into a standard residential property lease agreement with you as the owner for a period of time such as three years. The buyer rents the property from you for this time period and pays you a weekly amount that covers a component of loan interest and principal (just like a bank loan!), as well as the property costs such as rates, utilities and insurance. The actual weekly amount is whatever you can negotiate with the buyer, but is usually more than what they would be otherwise paying in rent on the property but similar or less than what the bank would be charging in principal and interest repayments.

A further contract called an “Option” is also executed with the buyer. The option can be structured in many ways, but it essentially gives the buyer the option to buy the house at an agreed price at an agreed time in the future. The objective for the buyer is to build up enough equity in the property through capital growth and principal repayments, so that by the end of the lease term they can re-finance the property through a proper bank loan and settle their purchase of the property from the seller.

Vendor financing works for the buyer because they get to buy a property now at today’s prices and are no longer paying rent to a landlord. This is a terrific way for the younger generations to get into the property market without waiting years to save up a 10% deposit.

It works for the seller because the method appeals to a wider range of potential buyers, they can execute a sale of their property in a soft market, their holding costs are covered, they retain ownership of the asset for the period of the agreement (important for tax depreciation and asset security) and they may also get additional cash flow for living expenses.

You can see an example of this kind of deal HERE.

Vendor financing is definitely worth considering if you are planning your retirement and want to off-load your investment property.

 

Guest Post from Dr Ann Villers:

‘Don’t get to your grave with your song unsung’. So said American speaker Cavett Robert. It’s my favourite saying. Why? Because it challenges me to think about the big questions in life. Why am I here? What do I want to achieve while I’m walking this planet?

I’m a baby boomer and I’m keenly aware that there is now more life behind me than potentially ahead. So I find myself pondering what’s important to me, what would I still like to do. And I’m not alone in this. Plenty of people, not just baby boomers, wonder about what their song is and whether they are singing it.

We don’t just have one song in life. We could be singing multiple songs at different stages of life. The songs you sing as an unattached, free-ranging 20 something will differ from young parents juggling jobs and bills. Stacks of songs are possible for baby boomers, depending on whether you’re an empty nester, need to care for elderly relatives, have an interesting job, are in good health, operate a business or have a mortgage. What I find though, is at some point people start thinking: Is this all there is? They have a sense that at some deep, personal level, something is missing. Of all the songs they’ve been singing, ‘their song’ has yet to be sung. Retirement provides an opportunity to sing it.

While you’re busy juggling many demands, you may not have given much, if any, thought to that period of life called ‘retirement’. Why would you? You’re still working and there seems no pressing need to consider the next stage of life into your sixties and early seventies. And certainly there’s no time to think about it, let alone plan. Yet planning doesn’t have to take a lot of time, nor be completed in one sitting. But it does need to be done.

Retirement is a process

Retirement has traditionally been regarded as an event, marking a distinct phase of life, when full-time work stopped, and people moved into a life of leisure and relaxation. This model of retirement, with its cold turkey exit from the workforce, may still apply to some, but with the line between working full-time and not working blurring, baby boomers need to consider their options.

Retirement is now more a process than an event. Without some planning, the risk is that people retire from what they are doing, without having a clear idea of how they will retire and what they are retiring to.

How do you find your song?

Planning for retirement is just as complex and important a process as deciding what occupation or profession to embark on in the first place. We place much emphasis on asking the young ‘What would you like to do when you grow up?’ This is not a once-only question. It’s also a question that can have different answers each time it is asked. Pre-retirees also need to ask themselves, What do I want to do now? What is my song now and for the next couple of decades?

I suggest baby boomers become ‘career activists’. These are people who take charge of their life, thinking through what retirement means, how they want to live it and creating their own path to find it.

Why become a career activist?

Three reasons come to mind as to why baby boomers should take charge of their careers:

Firstly, each of us needs to work out for ourselves what retirement means. What comes to mind when you ponder retirement? Is it positive or negative? Whose retirements have you observed? What would you like to emulate or do differently than these retirements?

Secondly, retirement is a major life change. Our roles, relationships, daily routines all evolve. Retirement involves a transition between two significantly different stages of our lives. Drifting into retirement with no clear plan, hoping it will evolve on its own, is a poor recipe. Career activists have the skills to handle this change so as to obtain the best possible outcome.

Thirdly, this transition is stressful. Three areas cause stress in retirement. People underestimate the emotional impact. Do you understand what you are leaving behind? Will you miss your job title and all those problems you face at work? Stress also comes from a lack of fulfilling activities. Have you thought about the loss of structure to your day? Will playing golf be enough? Yet another source of stress is the change in family dynamics. How much time do you really want to spend with your spouse or partner? In short, can you imagine rising each day with the same anticipation you experience during your working career?

There’s much to think about for a pre-retiree career activist. The main task is to make sense of retirement in the context of your own life. The popular image of the happy retired couple strolling hand in hand at sunset along a pristine beach may fit and be attainable. Then again, you may wish to join the grey nomads touring the country, topping up the coffers with casual farm labour, such as fruit picking. Or you may wish to indulge some long-neglected hobbies. Any of these are worthy songs so long as you’ve thought them through.

Naturalist Diane Ackerman said: ‘I don’t want to get to the end of my life and find that I just lived the length of it. I want to have lived the width of it as well’. Part of the breadth and depth of life is singing your song.

What will your song be?

 

Dr Ann Villiers, learning guide, professional speaker and author, is Australia’s only Mental Nutritionist® specialising in mind and language practices that help people build flexible thinking, confident speaking and quality connections with people. Visit www.mentalnutrition.com to learn more about Mental Nutrition. Visit www.selectioncriteria.com.au for free resources unlocking the mysteries of public service jobs.

Many people who are considering buying a home in a retirement village want a community that has an aged care facility on-site, so that if they need higher care at a later date they can simply move a few doors down into the nursing wing.

This assumption about care is a common misconception among people considering retirement villages and I’ll tell you why…

Firstly, 95% of the Australian population aged over 65 years choose to age in their own homes and the bulk of the care industry is set up to cater to this market. There are any number of care services that can be brought into your home to help you stay there as long as possible, so unless you need constant care or supervision you can stay in your own home. The same applies to retirement villages – if you need care you can arrange this with an external provider and have the care brought into your home in the retirement village (this typically applies whether the village provides care or not). This means you don’t have to find a retirement village that has an aged care facility on site.

Secondly, many people assume that if they live in a retirement village that provides aged care, once they need the aged care they simply move into the aged care facility. Not so. Retirement village operators that offer aged care typically only do so in a limited way, because they make their money from the sale of independent living units, not running aged care beds. Therefore the ratio of aged care beds to independent living units in a retirement village is low. There is no guarantee that when you need higher care that a bed in the on-site facility will be available for you.

Finally, the move from your independent living unit into the on-site aged care facility, whether it is within the same retirement village or not, typically requires you as the resident to execute a sale of your independent living unit and the purchase of a bond to move into the aged care facility. The nature of retirement village purchase contracts position the bulk of the fees and charges associated with your retirement village lifestyle into the exit and resale of your unit. The high fees that can sometimes be charged mean that you may not have enough money remaining to fund your entry into the on-site aged care facility.

So unless you need a level of care right now, or have a debilitating illness that destines you to requiring care in the medium term, I think there is no need to restrict your retirement village search to only those facilities that provide aged care.

PS. If you do need aged care, make sure you check out my post on supported living HERE. Also, check out Rachel Lane & Noel Whittaker’s new book Aged Care, Who Cares? to help you navigate the complexities of Australia’s aged care system.

I often get calls from people who are in the very early stages of thinking about a retirement village and they are so overwhelmed they literally do not know where to start.

So here is the process I go through when helping clients…

First things first – work out if a retirement village is actually the right move for you. I covered this in a previous blog post HERE.

Second, decide the location where you want to retire to. Unfortunately I can provide no easy solutions to this question. You need to decide where you want to retire taking into account considerations such as your lifestyle, connections in your community, family and of course making sure you can afford to buy in a particular location. At this time it is also worth identifying how many bedrooms you require as well as your care needs (if any).

Once you have decided on a location the next step is to make a list of all the retirement villages in that area. Record as much detail as you can through researching on the internet and other resources such as the Yellow Pages.

Next, you check out the villages on your list. This could include a simple ‘drive by’ in the first instance to look at the general location and appearance of the village, progressing to a personal inspection on the selected retirement communities that make your cut.

Once you have narrowed your choice down to one or two retirement villages, ask for a copy of their purchase contracts so you can pull out the fees and charges that apply to each and make an assessment as to which one is the better deal.

Before signing anything, make sure you get a solicitor that is experienced with retirement village purchase contracts to do the conveyancing for you and assist you with making changes to any clauses that you don’t like.

And that is pretty much it! Yes I have simplified this process somewhat, but there should be enough information here to get you started on investigating your retirement village lifestyle today!

 

When you start shopping around retirement villages looking for your new home, you will be confronted with a myriad of different products, contracts, prices and fee structures. So how can you tell if a home is reasonably priced, or if you are being ripped off?

The very first cost you will face is the asking price. How can you tell if the asking price is reasonable or inflated, or actually represents a good buy?

The prices of retirement village units typically mirror those in the surrounding residential property sector, so initially the best way to assess the reasonableness of the asking price is to compare it with similar properties (ie, a 2 bedroom unit in a retirement village vs a 2 bedroom unit) in the neighbouring suburbs. The best and easiest way to compare prices is to arrive at a ‘cost per square metre’ for the properties.

You derive a cost per square metre by dividing the asking or sale price of a property by the total square metres of the internal built area. Next you find the average price per square metre of all the units you are comparing by dividing the total of all the asking prices by the total of all the internal areas.

The deviation from the average is the percentage difference between each unit’s price per square metre and the average price.

The total square metres of a unit considers internal floor space only and should not include areas such as balconies, pergolas, garages and decking. This is because these areas typically cost less than the internal built area and can vary greatly in size.

Most retirement village sales brochures feature floor plans with the size of each area clearly identified. For comparable local residential properties, simply scan the existing list of properties for sale in the area in the paper or on the internet, or speak with local real estate agents.

Don’t bother asking your real estate agent friends to check past sales of retirement village units on their RP Data database because they won’t be their. Sales of retirement village units do not show up on these reports, as they are not considered ‘freehold sales’.

The price per square metre calculation does not include land area, so if you are comparing detached or semi-detached retirement houses or villas, then remember to include the size of the land area in your considerations, although not in your calculations. If you examined two directly comparable units, one of which had a larger land plot, the unit with the larger land plot should have a higher purchase price because land generally has a higher value than built structures.

The price per square metre calculation for all your comparison properties should be roughly similar. Variances can usually be attributed to variations in the quality of the finishes, the age of the building, the location or whether the unit has views/perspectives.

Directly comparable properties (those of equivalent age, standard and condition) should be much the same price. This provides you with a good indication of the benchmark price for a particular style of property in a particular area, and a good base from which to start your price negotiations with the vendor.

Some retirement village operators claim that village units cost around 80 to 85 per cent of comparable residential properties. In my experience, however, retirement village units are typically equivalent in price or even higher than comparable properties in the same area.

 

The material in this blogpost has been taken from our new book “Don’t buy your Retirement Home without ME!”, published through Wiley Press and available in all good bookstores from Feb 2012.

 

Supported Living is a relatively new concept out of the US that is making significant inroads into the Australian retirement village market.

In essence, Supported Living is where residents live in their own studio, one, two or three bedroom apartment, and any care services that are required – from simple cleaning & laundry through to palliative care – are brought to the resident in the home. This is different to most retirement villages that offer aged care, in that residents are not forced to move out of their independent living unit into an hostel or hospital environment, which in some occupancy contracts can be forced on the resident at the discretion of the retirement village operator. Residents can therefore stay in the comfort of their own home and couples do not have to separated in the event that one spouse needs a higher level of care than the other.

The Supported Living concept is becoming the preferred option for people who want  to avoid the horrors of Australia’s aged care system. Ironically, the reason why the Supported Living concept is so successful (for both operators and residents) is that it operates under state retirement village legislation and not the Commonwealth Aged Care Act.

Residents buy a right to occupy a Supported Living unit through a lease or licence under what is known as a Deferred Management Fee scheme, meaning that there is an Ingoing Contribution (the purchase price), a village fee (charged weekly, fortnightly, monthly or quarterly, generally around $100-120 per week), a deferred or departure fee upon exit (calculated as a % of the purchase price or re-sale value of the unit) and any capital gains upon sale of the unit are typically split with the owner. For more information on Deferred Fee schemes check out our video tutorial HERE. Any services that are required such as cleaning, meals, laundry or personal care or paid for separately and in some instances may be subsidised by a government benefit.

I am a huge fan of Supported Living for the following reasons:

• The physical product is significantly better than what you find in Aged Care hostels (I would put my Mum into one of these, whereas I probably wouldn’t put her into a typical nursing home);
• The business model is sustainable for the village operator;
• Couples are not separated if one spouse requires a higher level of care;
• Retirees who lack mobility experience better social exposure;
• Most, if not all, of the care services are provided on site by the village operator;
• Care can be brought in quicker, and for shorter periods of time than when you use an external provider; and
• The purchase arrangements, while a little more confusing than what most people are used, are market-driven and transparent, unlike the aged care bonding system.

Is Supported Living appropriate for you?

I would encourage you to investigate a Supported Living option if you:

• Are aged in your late 70′s or beyond;
• Experience on-going health issues;
• Expect to start needing care or assistance with some daily living tasks in the next 12-18 months; and
• Couldn’t bear the thought of living in an aged care hostel.

Just make sure you talk to us at Find My Retirement Home first to make sure you get independent advice!

If you are interested, here are a couple of Supported Living operators:

Ocean View Banora Point (QLD/NSW border)

Tall Trees (2 x properties in south Brisbane suburbs)

Seasons Supported Living (2 x properties in north Brisbane suburbs, 1 under construction on the southside, 2 x Sunshine Coast)

Sunrise Supported Living (VIC and northern NSW)

If you know of any others, please let us know!

What is an over 55′s retirement village ? Is it actually a retirement village?

OK, well lets get the technical legal terms out of the way first: A retirement village is technically whatever is described as a retirement village in your particular state or territory retirement villages act. Typically, it describes a retirement village as a community of older people (usually with a prescribed minimum age limit of 60 or 65) that occupy homes under a retirement village ‘scheme’, whereby they pay an in-going contribution and an exit or departure fee.

To call itself a ‘retirement village’, a retirement community has to be registered under the state or territory retirement villages act, and comply with that act.

Over 50′s or over 55′s villages are completely different.

These communities come under your state or territory’s demountable homes or caravan parks act. This is because the nature of your occupancy is more in line with caravan parks than retirement villages, in that you own the house and lease the plot of land that the building sits on. So you only pay for the house and you lease the plot of land from the community operator. Age restrictions are not part of the legislation, but may be enforced under the local council’s development approval from the village or the retirement community’s by-laws.

In theory, if you wanted to leave the village you are quite within your rights to lift up the home (as you would a caravan) and take it to another site. However in practice, the homes are there to stay and cannot really be moved. Many of the original over 55′s villages were demountable-type homes which could be relatively easily moved, although the new over 55′s villages today are proper brick and tile on slab buildings no different to a standard suburban home.

Other features of over 55′s villages include:

• They are targeted to a younger demographic than your standard retirement village, which may have a qualifying age limit of 60 or 65.
• You own the house outright and lease the plot of land – in retirement villages you occupy your residence under a lease or licence, or occasionally under a freehold arrangement.
• You pay a regular fee (ie, weekly or monthly) that is similar to a body corporate or owners corporation fee and covers off the maintenance of the grounds and common areas, security, insurance, etc, as well as a component of rent for the land.
• The rental or lease component for the plot of land your house sits on may attract the government rental allowance, if you qualify.
• Most over 55′s villages don’t apply departure fees or take a share of any capital gain when you leave.
• Because the facility is aimed at a younger demographic there are usually no care services provided on site. However there is nothing to stop you from bringing in any care or other services you need from an external provider, the same as you would if you were living in your own home.
• They should be a cheaper accommodation option because there is no land component in the purchase price.

 

Some things you need to be aware of  however:

• Make sure that your lease term on the land extends for a decent length of time – at least as long as you will be living there. 40+ years should be adequate.
• Make sure your lease agreement does not allow the operator to terminate your lease agreement for any reason that you think is unreasonable, such as if the village operator goes broke or sells the village.
• Make sure that your lease agreement does not allow the operator to arbitrarily raise the lease fee amount.
• Find out who pays the rates – is this included in your weekly fee or not?

 

I am a big fan of the over 55′s villages if they don’t apply exit fees, as they will provide the retiree with a good financial outcome when they exit, unlike retirement villages, which can decimate your savings

It is always important to good advice on any purchase of significance and retirement villages are no different. Give us a call if you have any questions on 1300 425 442.

Many people are attracted to the idea of living in a retirement community operated by a not-for-profit (NFP) organisation because the purchase contracts will be more reasonable. But is this necessarily the case?

The retirement home sector has traditionally been dominated by the NFP sector, such as church groups and charitable associations. Over the last decade the sector has attracted significant interest from “for-profits” such as investment banks and property companies, to the extent that more than half of the retirement villages in the country are now owned by the for-profits.

I think you could safely say that that the NFP’s were originally motivated by a strong sense of “mission” in building their portfolios of retirement village assets. In fact, the much-maligned Deferred Management Fee scheme was created by the NFP sector, who discounted a property by 20-30% off the market value to allow the struggling retirees to purchase a unit, and then made the discount back via the deferred management fee when the resident departed the complex.

Today however, there is little difference between the purchase contracts offered by NFP’s and for-profits. Both use deferred management fee schemes with great effect to their bottom lines. Some NFP’s do allocate a portion of their community to subsidised housing, although this is not common.

It is hard to make a generalisation about the best owners/operators of retirement villages, as they are all very different. On one hand it would seem that NFP’s would have your best interests at heart because they are, well, not-for-profit. However NFP’s do try and make money from their operation to (I assume) fund other social ministries supporting the community that don’t make money.

It could also be argued that NFP’s are not as efficiently run as for-profit organisations and they certainly wouldn’t attract the same quality of executives as a Lend Lease, AMP or Stockland. The larger listed companies are also very sensitive to adverse publicity and are likely to be more responsive to resident concerns.

As a very general rule, we would recommend finding answers to the following questions when selecting your village owner/operator:

• Does your owner/operator have a strong balance sheet (ie, no more than 30% debt as a proportion of their assets)?
• Is retirement living their core business?
• Are they in the retirement living business for the long term?
• Is there a corporate/head office structure dedicated to retirement living sitting behind the village management?
• Are they too focused on expanding their portfolio by developing new communities?

 

Brits and Americans are increasingly retiring to locations overseas for a whole range of reasons – so why hasn’t this concept taken off in Australia?

The UK has one of the world’s strongest currencies and ironically one of the worst climates! Retired Brits are heading to continental Europe in ever-increasing numbers where they increase their savings by converting their nest-eggs from pounds to euros. Naturally, they head to areas with warmer climates, typically around the Mediterranean – Italy, France, Spain and Greece, as well as Portugal and Croatia. All of these areas are now home to little enclaves of English retirees who have traded long, damp, nine-month winters for better food and more sunshine, as well as a much cheaper cost of living.

American retirees are also fleeing their homeland for south American ports such as Panama, Costa Rica and the new retiree hotspot of Mexico. Weather is certainly an attraction, but the main reason appears to be financial – lower taxes, a cheaper cost of living and of course a great exchange rate on their US dollars.

So why don’t we see hawaiian-shirted conga-lines of Aussie retirees heading overseas to live?

Well for starters, Australia appears to have everything you could ever want in a retirement destination – a developed, English-speaking nation with clean air and water, mostly crime-free cities and towns, and of course a great climate.

How could you possibly improve on that?

Apparently you can.

Rob is a 66-year old who fled Brisbane two years ago after a messy divorce. He has now settled in Hanoi and is loving his new expatriate life.  “The cost of living here is about 60% cheaper here than in Australia. The people are friendly and I have made some terrific friends from both the local and expatriate communities” he says.

Rob travels regularly, taking advantage of the cheap flights on offer from the many discount airlines that service Asia. “Since I have been living in Vietnam I have visited Korea, Japan, China, Malaysia, Cambodia and Laos. I also go to Thailand with friends at least once a month” said Rob.

Other Aussies retire overseas for a variety of reasons:

Currency

The Aussie dollar is quite strong compared with our local neighbours. This positive exchange rate can instantly double or triple your retirement nest-egg when converted to a foreign currency. If you are on a pension this fact alone could significantly enhance your quality of life.

Tax

Australia is one of the highest-taxing nations on earth. There is nothing worse than seeing your hard-earned retirement nest-egg decimated by tax-hungry state and federal governments. In contrast, many of our Asian neighbours enjoy low levels of personal taxation.

Cost of living

The cost of living in many of our cities is probably about average in comparison with other developed, western nations, but much higher in relation to our Asian neighbours. The recently published Mercer’s Cost of Living 2010 report listed Sydney at number 24 and Melbourne at 33. Although below established Asian cities like Beijing, Tokyo and Seoul, in places like Thailand, Malaysia or Vietnam your cost of living could be less than half that in Sydney or Melbourne.

Climate

Many people migrate north from the southern states of Australia to enjoy the warmer climes of Queensland in their retirement. Did you know that similar climates to Queensland can be found throughout southeast Asia?

Health Care

There is a popular misconception that we have great health care in Australia and that Asia is “third world”.

Nothing could be further from the truth!

Doctors and hospitals in Asia are now so good, and so cheap, that it has spawned a completely new industry called medical tourism. Medical tourism is where people from expensive, developed countries like Australia fly to Asia for medical treatment – plastic surgery or dental work – and spend a few weeks recuperating by the pool in their luxury hotel. The treatment and two week holiday, including flights and accommodation, is typically much less than the price of simply getting the treatment performed in Australia (usually by a foreign-trained doctor anyway – almost 40 per cent of Australia’s 75,000 doctors trained overseas, with around 68 per cent of them working in major cities).

Cheap Travel

If you ever needed convincing about how over-charged Aussies are on air travel, research the prices on some of the budget airlines hubbing out of the major regional ports of Singapore, Hanoi and Kuala Lumpur!

So where are Aussie retirees going?

Malaysia, Thailand, Bali, Vanuatu and New Zealand.

And how do our neighbours feel about Aussie retirees moving to their country? Great!

Malaysia even has a government-sponsored program to encourage foreigners to retire in their country – contrast this with our own attitude on immigrants!

There are some downsides however.

Leaving your family to live overseas can be daunting and forsaking established networks of friends that have taken years to build is a huge decision. It takes time to settle in a new place – even longer when the language and culture is different.

However, if you are thinking about retirement and yearn for a lifestyle worlds away from Aussie suburbia, then trade your local Westfield shopping mall for a village fresh produce market in Asia and consider a move overseas.

Do you know anyone who has retired overseas? How have they found it?

Where would you go if you retired overseas?

 

Postscript: I found this article recently which gives another angle on the decision to retire overseas.

Many people are confused about the difference between a retirement community and an aged care facility, and I would certainly agree that the lines appear to be blurring between the two.

So what is a retirement village?

A retirement village is basically whatever is defined as a retirement village in your state or territory’s retirement village legislation. Typically, the legislative definition describes it as a property where retired or older people reside, and they purchase a right to occupy (usually via a lease or licence to occupy) and may purchase additional services for a fee. A village needs to be registered under the state retirement villages act in order for it to charge all of those weird and wonderful fees like deferred management or exit fees.

However, you may have heard of other retirement living facilities such as an Over 50′s or Over 55′s village, or a lifestyle resort. These complexes typically sell you the freehold title to the built structure (the house) and then lease you the portion of land it sits on. These developments come under the state or territory’s manufactured homes legislation, usually the same legislation that covers caravan parks and the like.

Other retirement-style facilities include freehold complexes, where you own the freehold title to the unit. These facilities may or may not be registered retirement villages and may or may not charge all of the same fees (such as deferred management or exit fees) that you will find in a village operated under the retirement villages legislation.

There are around five different types of purchase and occupancy arrangements for retirement villages and each one has its own framework of fees, charges and complexity. Generally speaking, the occupant pays an upfront fee similar to the freehold value of the property, then a small regular fee during their occupancy, and a larger deferred fee upon exit.

Retirement villages are typically targeted to retirees who can live independently, although many villages now offer some care services as well.

Aged Care on the other hand, comes under the one Commonwealth Aged Care Act 1997, which dictates how the charges and occupancy is arranged. There is still a fair bit of discretion on the operators behalf as to the quantum of charges, and you should be sure to get good advice from a financial planner skilled in the aged care area before you sign anything. As with retirement communities, certain aspects can be negotiated and you should never rely on the company sales agent to give you the right advice.

Under the aged care model a resident may be charged for the care and services provided, as follows:

• Basic daily fee – as a contribution toward accommodation and costs of daily living.
• Income tested fee – as a contribution towards the costs of care.
• Accommodation payment – as a contribution towards capital accommodation costs.
• Extra services charge – applies to residents occupying extra service places (both permanent and respite) for the provision of a significantly higher standard of accommodation services and food.
• Additional service fee – where the resident requests or agrees to additional services (such as newspapers and hairdressing).

Aged Care facilities are targeted to seniors who need an element of nursing support in their day-to-day lives. This can range from a little assistance through to full palliative care. You can find out more on the Australian Government’s aged care website.

I think the confusion arises where you have retirement villages which offer an aged care facility within the same complex as the independent living units. These villages are called “integrated villages” and seek to offer a complete spectrum of care to alleviate the need for its resident’s to ever move again. Well-planned complexes will have the aged care area well separated from the independent living area so that able-bodied residents don’t mix with those who are requiring care.

Integrated facilities typically offer aged care as an incentive to potential purchasers interested in the independent living units, because this is where operators make their money. It is worth noting however that there is usually no guarantee to an existing resident of the village that there will be a place for them in the aged care facility, and they may still have to go onto a waiting list for a place. You may also have to sell your existing unit to fund your aged care place, and the fees associated with a sale of your residence can seriously deplete your capital base.

The aged care facilities within a retirement village may operate under the Aged Care Act 1997 and charge the purchase and occupation fees accordingly, or they may simply charge a weekly/monthly rental, or they may operate under the same deferred management fee schemes as the independent living units within the retirement village.

The whole area of aged care and retirement communities can be a real minefield. I strongly suggest that you find a good financial advisor who can guide you through the process and make sure you get the best deal you can.

If you would like to know more about Aged Care, Noel Whittaker and Rachel Lane recently published a book called “Aged Care – Who Cares?”. To promote the book they are running a series of aged care seminars in Brisbane, Sunshine Coast and the Gold Coast. The seminars are free and I would strongly encourage you to attend if you are interested in learning more about aged care.

The details for the general public seminar are attached here: WM Invitation – Aged Care Public Sessions 2011. Make sure you call to book your seat – previous seminars have booked out.

The details of the seminar aimed at aged care operators and industry is attached here: WM Invitation – Aged Care Industry Conferences 2011.