When you’re ready to enjoy more ‘you’ time – away from the demands of maintaining a larger home and garden – the first thing that might spring to mind is retirement village living.
So, how do retirement villages work? Those considering downsizing in retirement must understand this before signing on the dotted line.
As retirement villages are often associated with complex contracts, ongoing charges, and unexpected costs, we’ll go into how a retirement village works, disclose some well-known traps to avoid, and share how an over 50s lifestyle resort can make the decision to downsize stress-free.
How Do Retirement Villages Work?
Retirement villages are either run by companies or not-for-profit charities. Both offer residential accommodation for the over 55s. This helps create a sense of community as the residents share similar ages and life experiences. In Australia, the average age of a retirement village resident is 81.
Retirement villages often have different options depending on the health and mobility of the residents. This can range from homes that allow you to live fully independently through to serviced units and full nursing care. In some cases, all three residential types are in the one property.
Retirement villages either offer homes for sale or, less commonly, have places to rent.
Another option you may come across are lifestyle resorts for over 50s. These properties usually operate on a land lease community model. These resorts attract younger people who are fit, active and fully independent.
You can learn more about the different types of retirement living options here.
How Do Payments Work for Retirement Villages?
Buying into a retirement village is not as straight forward as purchasing a home. In fact, depending on the resort operator you may not even own your home, rather you will have a lease arrangement with a right to occupy.
The types of fees you’re likely to encounter are:
Entry Fees
Entry fees are the cost to buy into the retirement village. Depending on the location and facilities offered, this can range from a $200,000 to over $1 million.
Learn more about entry fees and retirement village costs here.
Exit Fees
Exit fees are charged when you leave the retirement village. The fee is determined by how long you’ve lived there and can range between ten to 30 percent. Non-profit retirement village operators use this money to maintain and improve facilities while commercial operators may take the fee as profit.
Learn more about exit fees in retirement villages here.
Deferred Management Fees
Deferred management fees, as the name suggests, are fees that cover the cost of managing and maintaining a retirement village.
Learn more about deferred management fees here.
Refurbishment Fees
Capital gains fees means you may be obliged to pay up to 30 percent of the capital gains on your home to the retirement village operator.
Maintenance Fees
Even after you vacate the property you may also be obliged to continue paying maintenance fees for another 30 to 90 days.
All these fees can take a substantial bite out of the nest egg you’ve built to fund your retirement and the legacy you plan to leave your family. In some cases, you or your family are left with far less than the original purchase price of the retirement village unit.
Case Study Example
You purchase a retirement village unit for $500,000 and it appreciates at 3 percent per year for 10 years and you elect to sell at $671,958. When you sell, 30 percent – or $201,587 – goes to the retirement village operator in exit fees.
Over those 10 years, your capital gain is $171,958 but you will have to pay 50 percent of that – or $85,979 – to the retirement village. By the time you factor in another 2.5 percent selling cost of $16,798, you are left with only $367,594 from your initial $500,000 investment that sold for $671,958.
And that’s not including the $67,600 you will have paid in $130 per week general service charges during the decade.
Can You Rent in a Retirement Village?
Retirement rentals are available but are less common than retirement accommodation that requires a financial buy in. These can take the form of assisted living environments for vulnerable older people who have their own ensuite room and share common areas to one–bedroom units with basic outdoor facilities.
What are Loan and Lease Retirement Villages?
Some retirement villages offer a ‘loan and lease’ model (also known as a loan and licence model). This means you ‘buy’ into the retirement village but only for the right to occupy the unit under a leasehold arrangement.
This fee will vary between resort operators but can amount into the hundreds of thousands of dollars – and that doesn’t include any ongoing maintenance or service charges.
As the name ‘loan and lease’ suggests, you are providing the operator with an interest-free loan for the right to lease a property and you may still be obliged to pay exit fees when you leave.
Can You Still Live and Work in a Retirement Village?
Choosing to downsize in retirement to a retirement village can come with a whole set of complications – particularly when it comes to working status.
While the average age of those who enter a retirement village is 75, you can safely assume that the vast majority of residents will no longer be working. That said, they may be restrictions for those who still are active in the workforce. Also, depending on where you choose, there may be other rules and regulations that govern what you do.
Some retirement villages may place limits on the size of pets you can bring with you. Others may not allow pets at all.
There may also be restrictions on you have overnight guests – particularly children – stay with you and the number of guests you can welcome and even how you can decorate your home. Other retirement living options like lifestyle villages provide residents with more freedom regarding working status, pets, and guests.
Learn more about retirement villages vs. lifestyle villages here.
How Do Lifestyle Resorts Work?
If you are over 50, active and looking for an improved lifestyle in a rightsized home with resort facilities, then a lifestyle resort might be a better option than a retirement village.
Land lease community resorts have two contracts. One is for the purchase of your home, which you own outright, the second is for the site rental which also covers the cost of onsite management and maintaining the resort.
No Exit Fees
Land lease communities charge no entry, exit or deferred management fees. There are no capital gains fees either which means you retain all the proceeds of the sale of your home.
GemLife Operate Under Land Lease Model
Land lease communities or over-50s lifestyle resorts like GemLife are a refreshing alternative to the traditional retirement village model.
They have distinct financial advantages too:
- There are no entry and exit fees.
- There are no complicated contracts – you own your home and simply pay a modest weekly site rental fee.
- There are no capital gains fees.
GemLife offers an outstanding lifestyle for active people with exceptional quality facilities including a premium Country Club with tennis and pickleball courts, bowls greens, ten-pin bowling, golf simulator, theatre stage, cafe and bar, arts studio, residents’ workshop and more.
And, exclusive to GemLife, is the Explore program, which is a fleet of modern, top-of-the-line Jayco Conquest motorhomes for residents to hire so they can hit the open road without the costs of owning and maintaining a motorhome or caravan of their own.
We Encourage an Active Lifestyle
There is more than life inside the retirement village – there is a whole world outside of it. And that means lifestyle is the biggest factor to consider when deciding on the place you’d like to make your downsizing move.
GemLife homes also come with access to an outstanding Country Club and resort facilities including tennis and pickleball, ten-pin bowling, lawn bowls, fully equipped gyms, heated lap pools and more.
Homeowners organise regular fitness classes and compete in sporting competitions within the resort and between local GemLife resorts.
In addition to fitness, homeowners have access to an art studio, commercial kitchen and workshop to further unleash their creativity.
Begin Your Next Chapter with GemLife
Experience the best that GemLife has to offer in some of Australia’s most desirable locations. Nestled throughout Australia’s most sought-after seachange and treechange locations, GemLife creates premium resort-style living for over 50s looking to start their next chapter.
With state-of-the art facilities and luxurious modern homes, GemLife gives you the perfect lifestyle if you’re looking to ‘rightsize’ without any of the traps you might find in traditional retirement villages.
For more information, reach out to our specialist team or request an info pack.
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