If you are thinking about downsizing out of your current home and believe that a retirement village could be the right move for you, your next step is to consider the pro’s and con’s of living in a retirement village versus simply downsizing into a smaller residential property.

People make the decision to move into a retirement village for a number of reasons. Listed here are some of the more common explanations that you may be able to identify with:

Neighbourhood. One of the main reasons people want to move out of their home is because of neighbourhood problems: barking dogs, loud music, hotted-up cars, general noise or changing suburban demographics, such as an influx of immigrants from a particular ethnic group. Retirement communities have rules and restrictions that protect residents from stressful situations, and this is very attractive to seniors. It is not unreasonable to want to live somewhere designed to protect your peace of mind, wellbeing and happiness. It could also be argued that seniors need more quiet and relief from everyday stress, and this is especially true for those with health problems.

Home maintenance. Maintaining a large family home can be hard work, particularly for older homes. Mowing big yards, especially in the summer, weeding, pruning, painting and watering can take up most of your spare time and prevent you from enjoying those things you had planned to do in retirement. You may also want to travel, and you should be able to do this without worrying about your home — is it secure, who is clearing the mailbox or mowing the lawn while you are away?

Downsizing. People often find that their existing home is too large for them or presents access problems with stairs, narrow access ways or multiple levels, whereas retirement homes are specifically built for easy access and maintenance.

Security. Elderly people are particularly vulnerable to home invasion and if they do not feel safe in their home or neighbourhood, it can cause a great deal of stress.

Social life. Retirement communities are full of like-minded people who generally want the same things out of life that you do. This can make for a busy social life, if that’s what you want!

All of these reasons are compelling arguments to move into a retirement community! So if you think that a retirement village could be the right move for you, here are some of the pro’s and con’s of retirement villages:

Pro’s:

• You get to live in a community of similarly aged and like-minded residents.
• Retirement village homes are specifically built for low maintenance.
• Many retirement villages feature on-site management and facilities such as a gym, pool, clubhouse or village bus.
• Some villages also offer meals and medical care.
• Resident restrictions such as a minimum age and no pets.
• You will typically find very little cultural or age variation.
• Instant social life, friends and activity programs.
• On site security and support.

Con’s

• Retirement villages are typically a more expensive living option with higher transaction and living costs.
• They feature smaller properties, with little or no backyard (some people may see this as an advantage!).
• Limited choice of locations as well as accommodation products.
• Generally a poor financial outcome for residents upon exit.
• Higher density living — cramped.
• Retirement villages may have a no-pets policy.

Retirement villages are not for everyone and they are an expensive lifestyle option, which is probably why 95% of Australia’s population aged over 65 choose to stay in their existing home. Take your time to choose the best option for your circumstances and do your research thoroughly. My new book Don’t buy your retirement home without ME! is a great aid for anyone going through the downsizing decision and perhaps thinking about buying a home in a retirement village. Buy a copy today!

Regular readers of this blog, or perhaps those who have bought my book, would know that you typically occupy a unit in a retirement village in Australia through a ‘right to occupy’ contract, usually in the form of a loan/lease or loan/licence agreement. Sure, there are other types of occupancy agreements, such as Leasehold and Freehold, but the majority of occupancy contracts are loan/lease or loan/licence agreements.

So which contract is better – loan/lease or loan/licence?

Well to be completely honest, there isn’t a heck of a lot of difference between them.

Under both contracts, you make a ‘loan’ to the retirement village operator which is repaid back to you when you leave, minus, of course, all of the fees and charges that are applied when you exit. The loan is essentially the purchase price and is otherwise identified in your contract as the ‘ingoing contribution’. The loan or ingoing contribution amount is similar to what you would pay if you were buying a standard freehold-titled residential property of similar size and standard. It is structured as a loan basically so the village operator can pay less tax!

The lease or licence is the agreement under which you occupy your unit. You should enjoy the same quality of tenure under both types of contracts but remember, the purchase contract forms the basis of your occupancy in the village and you need to read and understand this document to know what you can and cannot do in your unit. You only have one chance to get this document right and that is BEFORE you sign it and move into the village. It is no use querying the fees and charges ten years later when you go to leave.

Common occupancy issues that you will want to check in your contract include:

• Can you have visitors stay with you and for how long?
• Can you have pets?
• Can you make changes to the inside or outside of your unit?
• Do you have a garden and can you plant whatever you want?
• Who repairs things like dishwashers and air conditioners?
• Who insurers what?
• What happens if you want to travel for an extended period?

I think it is also important to understand what happens when you leave – do you have to use the village sales agent or can you sell the unit yourself? Is there a commission or charges on sale?

It is likely that you will spend several hundreds of thousands of dollars on this purchase so it is definitely worth getting good, independent advice before you sign anything.

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.

It's aged care Jim, but not as we know it!

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!

Not-for-profit ain't necessarily so...

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?

Trade your suburb for an exotic location

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.

Queensland has around 190 registered retirement villages, with many of these located around Brisbane and the southeast corner of Queensland, including the Gold and Sunshine Coasts. The region is popular with retirees due to its pleasant climate, beaches and easy access to quality hospitals and health care. Many of the villages located near the Brisbane CBD are older villages, built around 30 years ago. The newer villages are located in suburban fringe locations where retirement village developers have been able to access large plots of land.

When considering where to live in Brisbane, the first decision you need to make is “which side” of Brisbane to live in. This could be the north side, as far up as Bribie Island or Caboolture, east in the Redlands region, south, as far as Logan, or west, out as far as Ipswich.

Understandably, the closer to the Brisbane CBD you want to live, the more expensive it is. For example, a two bedroom apartment close to the CBD may be $400-$500k, whereas a similar standard of apartment may be accessed for around $250k in the more regional locations.

Living in a retirement community can be a great lifestyle choice for retirees. Unfortunately, the process of buying a home in a retirement village is complex and confusing, with many hidden traps and charges awaiting the unwary buyer. It is important that you get good, independent advice and don’t just rely on what the village sales agents are telling you. Find My Retirement Home is a Brisbane-based independent advisor and buyer’s agent specialising in retirement homes. You can give us a call on 1300 425 442.

Retirement villages in Queensland are administered by the Department of Fair Trading.

There are five ways that retirees are able to own or occupy a retirement home in Brisbane. You can learn about the five different ways HERE.

One of the most difficult issues for the buyers of retirement homes to understand is that of Exit Fees, also known as departure fees or deferred management fees. You can learn more about Exit Fees on my video tutorial HERE.

If you would like to conduct an online search for the retirement villages available in and around Brisbane, please go HERE.

In Victoria, a retirement village is defined under the legislation as a community where most of the residents are aged 55 or over, have retired from full-time work and upon entering the village, paid a lump sum (called an ingoing contribution) that was not rent. There are around 400 retirement communities in Victoria.

Living in a retirement community can be a great lifestyle choice for retirees. Unfortunately, the process of buying a home in a retirement village is complex and confusing, with many hidden traps and charges awaiting the unwary buyer. It is important that you get good, independent advice and don’t just rely on what the village sales agents are telling you.

Retirement villages in Victoria are administered by Consumer Affairs Victoria.

There are five ways that retirees are able to own or occupy a retirement home in VIC. You can learn about the five different ways HERE.

One of the most difficult issues for the buyers of retirement homes to understand is that of Exit Fees, also known as departure fees or deferred management fees. You can learn more about Exit Fees on my video tutorial HERE.

If you would like to conduct an online search for the retirement villages available in Victoria, please go HERE.

In NSW, a retirement village is defined as any residential complex predominantly occupied by retired persons aged over 55 years. These residents have entered into some form of contractual arrangement with the owner or operator of the village, usually in the form of a loan/lease or loan/licence agreement.

According to the NSW Dept. of Fair Trading, there are approximately 591 retirement villages across NSW, accommodating more than 36,000 residents.

Living in a retirement community is a great lifestyle choice for retirees. Unfortunately, the process of buying a home in a retirement village is complex and confusing, with many hidden traps and charges awaiting the unwary buyer. It is important that you get good, independent advice and don’t just rely on what the village sales agents are telling you.

There are five ways that retirees are able to own or occupy a retirement home in NSW. You can learn about the five different ways HERE.

One of the most difficult issues for the buyers of retirement homes to understand is that of Departure Fees, also known as exit fees or deferred management fees. You can learn more about Departure Fees on my video tutorial HERE.

If you would like to conduct an online search for the retirement villages available in NSW, please go HERE.