Are you curious about what you are really buying when you move into a retirement village unit?
It is a common question, and an important one. A retirement village unit is not always a straightforward property purchase, so it pays to understand how the arrangement works before you make any decisions.
The good news is that once you understand the basics, the choice becomes far clearer.
What a retirement village unit actually is
When you move into a retirement village, you are buying into a lifestyle rather than simply buying a house. In most cases you are not purchasing the land and building outright the way you would with a standard home.
Instead, retirement villages usually offer one of a few common arrangements. These can include a loan and licence agreement, a long-term lease, or in some cases a form of strata or company title. Each one gives you the right to live in your unit and to enjoy the village facilities, but the details and the costs can vary quite a bit.
Because these arrangements differ from a normal home purchase, it is essential to read the contract carefully and have a professional explain anything you are unsure about.
The three types of costs to understand
Most retirement village contracts involve three separate stages of payment. Knowing each one helps you avoid surprises later.
- The ingoing contribution. This is the upfront amount you pay to secure your unit. It is often similar to the purchase price of a home, though the way you hold the unit may be different.
- The ongoing fees. These are regular service or maintenance fees that cover the running of the village, including things like gardening, communal facilities and management.
- The exit or deferred management fee. This is a charge that applies when you leave the village. It is usually calculated as a percentage of your ingoing contribution and increases the longer you stay.
What your ongoing fees cover
Your regular fees are there to keep the village running smoothly so you do not have to worry about it.
Depending on the village, these fees may cover building and grounds maintenance, use of shared facilities, security, insurance for common areas and the day to day management of the community. At Warrina, our residents also enjoy access to recreation centres, an in-house cafe, a hair salon, a gym and 24 hour emergency support.
It is worth asking exactly what is and is not included, so you can plan your budget with confidence.
What happens when you leave
One of the most misunderstood parts of village living is what happens when you or your family decide it is time to move on.
When you leave, the unit is usually sold or relicensed to a new resident. The deferred management fee is then deducted from the amount you or your estate receives, along with any other agreed costs. Some contracts also share any capital gain or loss between you and the operator.
Because these terms can have a real impact on your finances, you should always ask how the exit process works and what you can expect to receive at the end.
Getting the right advice
A retirement village unit can offer a wonderful lifestyle full of comfort, security and community. The key is to go in with your eyes open.
Before you sign anything, take the contract to a lawyer or financial advisor who understands retirement village arrangements. Involve your family in the conversation and never feel pressured to rush.
If you would like to see how it all works in person, we warmly invite you to visit us in New Gisborne and tour the Warrina community for yourself.
