So you are approaching retirement and are looking for somewhere to lay down new roots? Or perhaps you’ve already given up work and would like to swap your large family home for new surroundings, where you can make the most of your newfound freedom and no longer have to spend hours on end cleaning and tidying room after room.
This phase of life sees many older Australians considering downsizing, with lifestyle communities one of the most desirable options for those approaching retirement age and looking for a home that is cheaper and easier to maintain.
But, before you sign on the dotted line, you need to be aware of the financial ins and outs of such a move, so you can avoid getting stung by unexpected fees or bills further down the track. Here’s a rundown of the financial pros and cons of moving to a lifestyle community.
One of the biggest benefits of choosing a lifestyle – or land-lease – community is that the purchase of your home is far simpler. The amount you pay upfront is simply the purchase cost, plus the cost for leasing the land it sits on.
Lifestyle community residents also tend to face a lower or no deferred management fee (DMF) when the time to comes to leave their residence, compared to those living in retirement villages who are hit with an exit fee upon moving out.
It is also worthwhile noting that, if you’re currently in receipt of an eligible welfare payment from Centrelink, including the Age Pension, you can also receive fortnightly Rent Assistance payments of up to $138 from the government. And, because you’re effectively renting your land within the community, the rental subsidy can be used to offset your weekly fee.
“There’s no stamp duty on purchase, no sinking fund, no body corporate and no strata or community title fees,” Bevan Geissmann, from Halcyon, previously told Starts at 60. “The weekly fee covers all management and maintenance costs as well as rates, water and government charges.
“And, unlike the retirement village model, you own your home, so when you sell it, you pocket all the capital gains.”
In terms of money, one downside to a lifestyle community is that residents must pay ongoing site fees and these can often be higher than the ‘general service charges’ paid by those living in retirement villages. This is because the companies that own land-lease communities are legally permitted to profit from their general running fees, and retirement village providers are not.
As with any major life change, it is crucial that you do your research ahead of time and make sure you know what you’ll pay upfront, how much you will pay as an ongoing contribution and what the costs will be if and when you decided to sell up.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.