The big financial gains to be had from moving into a lifestyle community

An important part of retirement planning is budgeting and getting your finances in order to ensure you can enjoy the quality of life you deserve. Not only is downsizing from your family home one way to increase your retirement fund by freeing up equity, it also gives you the opportunity to unlock a whole new lifestyle. This is where lifestyle communities come in.

Also known as land lease communities, lifestyle communities are one way you can achieve financial freedom while owning your home and enjoying a lifestyle filled with more of the things you love.

How? It’s all in the unique way that lifestyle communities operate.

Lifestyle communities, such as those operated by Ingenia Lifestyle, are an increasingly popular choice for downsizers, over 55s and retirees as an alternative to the traditional retirement village model.

Ingenia Communities is the biggest and most established Aussie land lease community provider, with communities in Queensland, New South Wales and Victoria. Currently, around 6,000 residents call an Ingenia Lifestyle community home having discovered the lifestyle and financial benefits of living in a thriving community.

Free up your home equity

For many people, downsizing’s biggest drawcard is the freeing up of what is often a large amount of equity locked in a large, family home – equity that can be used to increase retirement income, make a longed-for purchase such as a caravan or boat, or even fund your next big holiday.

However, equity only becomes available if your downsized home is cheaper than your family home and this is where lifestyle communities are winners.

Rachel Lane, retirement living expert and author explains that downsizing to a lifestyle community often means downsizing financially. Because you don’t own the land in a land lease model, buying a house in a lifestyle community is often more affordable than traditional homes.

As a result, the overall house price is usually significantly less than a regular home in the same area, providing the opportunity to maximise equity released from selling a home, or in some cases, to enter the property market if you don’t currently own a home.

In addition to unlocking equity, there’s also the potential for a quality upgrade when you buy a brand new, modern home expertly designed to meet your needs now and into the future.

Avoid thousands of dollars in stamp duty

The prospect of paying thousands of dollars in stamp duty on a new home is one of the big factors that put some older Aussies off downsizing but buying into a lifestyle community allows you to avoid stamp duty.

Under the land lease model, you purchase a house and secure a long-term lease on the land underneath it. Because you own the house but not the land, there’s no site-specific stamp duty payable, which can leave you with significant savings compared to buying a traditional ‘house and land’ package or an existing home in the residential market.

You also don’t need a large deposit to secure your home or pay a rental bond before you move in. The only upfront cost is the purchase price of your home, which you then own outright.

No council rates payable

Council rates are rising at an astronomical pace in Australia. Yet, the home ownership structure in lifestyle communities means you no longer have to pay council rates.

Lifestyle communities charge a weekly fee to cover the cost of running and maintaining community grounds and amenities such as pools and gyms.

Rachel explains that making the move to a lifestyle community can also be a smart decision for those eligible for government rent assistance.

“Rent assistance is a very generous payment, with rent above the threshold receiving a payment at 75 cents per dollar up to a maximum of $145 per fortnight for singles and $210 per fortnight for couples.

“To put that in perspective, let’s say you are a single person paying site fees of $324.60 per fortnight, the rent assistance would be $145.80 so the out-of-pocket cost would be $178.80 per fortnight, less than $100 per week”.

Cut your utilities and maintenance costs

Maintaining a four-bedroom house with a big backyard (or even a pool!) isn’t cheap – not to mention it can be hard work and time consuming. You can wave some of those costs goodbye when you move into a lifestyle community.

“If you’re an empty-nester, chances are you’re no longer utilising all the space in your home – but you’re still paying for that space through insurance premiums, utilities and council rates,” says Rachel.

Rachel mentions that the most common misconception when it comes to downsizing into a lifestyle community is that staying in your current home is free.

“When you look at the big-ticket items like the cost of renovations and replacing appliances as well as the day-to-day expenses like rates, insurances, maintenance and even utilities, the financial benefits of downsizing to a brand new home can really stack up”.

No exit fee, no worries

Unlike retirement villages, most lifestyle communities do not charge an exit fee, also called a deferred management fee, or DMF.

Rachel explains that these are standard cost in retirement villages and are normally a percentage of the price you paid for the home, accrued over a period of time.

“These will typically cap out at anywhere between 25 and 50 per cent after 10 years and there can be sharing in capital gains to factor in as well”.

Under the land lease model you’ll keep 100 per cent of any capital gain you may make because you own your own home.

Considering a lifestyle community?

If you’re interested in learning more about how lifestyle communities can help you unlock the retirement of your dreams, download the free e-guide put together by Starts at 60 in partnership with Ingenia: ‘The ultimate guide to lifestyle communities’.

This free e-guide is packed with critical information and easy-to-complete exercises to help you better understand and consider living in a lifestyle community.