Don't Buy Your Retirement Home Without Me! by Richard Andrews

Author:Richard Andrews
Language: eng
Format: epub
Publisher: Wiley
Published: 2011-11-15T00:00:00+00:00

The allocation of the deferred fee equally across 10 years is shown in row C, ‘DMF %’, and equates to 2.5 per cent per year, with the total fee of 25 per cent achieved only at the end of year 10. The applicable dollar amounts incurred at the end of each year are shown immediately below in row D, ‘DMF $’.

Remember also that any capital gains achieved on the resale of the unit are split equally with the village operator, so the calculation of the share of the gain paid to the operator is shown in row E, ‘Share of gain’.

The ‘Net return on exit’ shown in row F is the resident’s exit entitlement — that is, the share of the resale proceeds following the removal of the deferred fee and the village operator’s share of the capital gain. In this example, the resident’s exit entitlement at the end of year 10 is $462 000, showing a gain of $12 000 over their original purchase price. Note that the resident does not recoup the original ingoing contribution until year six, although the whole arrangement is pretty much even across the first nine years. This particular contract is not a bad outcome for the resident, who by the end of year 10 has actually paid nothing to live in the village, save for the regular village fee, which would have been similar to the holding costs of a freehold property anyway.

After year 10 the fee is capped in this example, so any capital growth achieved after this time will have a significantly positive impact on the resident’s financial outcome. This is why planning to stay in a retirement village for the long term and finding a community with good capital growth prospects are so important to your financial outcome when you leave.

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