Retirement Village Costs to Consider
Retirement Village Costs to Consider
Retirement Village Costs to Consider
Retirement Village Costs to Consider
It may now be time for you to consider retirement living. Or maybe you are considering this living arrangement for a loved one. With the retirement village industries increasing popularity, the first and most important aspect to consider is the costs involved with this arrangement. This post aims to help shed light on what type of costs are involved, including what you can expect to pay.
Before considering the costs you must consider the structure behind them. Retirement Village living differs from normal property management because you are entering into a contract to live in the village. You are not buying the house itself. The contract includes your agreement to live in the village for up to 30 years. Included in the contract are social areas, gardens, community centres, swimming pools ect. So you may ask, what are the costs involved in this new contract?
There are three main costs to consider with retirement villages, including:
Entry Fees
Recurring Charges
Departure Fees
Entry Fees
The entry fee is the initial fee paid upon entering into the contractual agreement. You may first expect this to be a minor cost however it may end up leaving a massive hole in your pocket. Entry fees differ between villages and are usually dependent upon the chosen legal structure of a particular village. For example, it may be the purchase price of a freehold property, security or other asset, or it could be described as a loan, premium or prepayment of rent. No initial entry price is payable in the case of a conventional lease. An example of the purchase price of a freehold property is $150 000.
Recurring Charges
Another cost to consider would be recurring charges. Luckily for the user these costs can be kept as low as possible. These are the charges which occur on a regular basis (eg weekly or fortnightly) and are used to maintain the services provided by the village. As mentioned earlier, villages offer a wide range of services. These services charges can be kept to a minimum as they are spread across all residents and villages are designed carefully to keep maintenance down. Weekly levies may differ between $50 and $200 per week.
Departure Fees
Departure Fees, deferred management fees or exit fees are possibly the most complicated fees. This is the fee you pay when you exit the village, and is usually deducted from the lump sum you paid when you entered the village. To state things in basic terms, departure fees are most commonly worked out by reference to the entry price or reference to the resale price. It must be noted that any capital gains are also part of the departure fee.
To add to the confusion there is no standard formula to work out the Departure fee, however it usually works out at between 2.5 and 3.5 percent for each year that you live in the village and is often capped at around 10 years (i.e. 25 to 35 percent). Therefore if you paid $150 000 upon entry and lived in the village for 10 years with a 2.5% Departure Fee, you would pay 25% of $150 000 ie. $37 500.
Hopefully this post has helped outline the costs involved in retirement living, giving rough examples of cost structures and what you can expect to pay if you entered into a retirement village.
If you require more information feel free to visit www.retirementvillageadvisor.com.au.
http://www.articlesbase.com/elderly-care-articles/retirement-village-costs-to-consider-4554003.html
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