Hi
I'm enquiring on behalf of my father who only has small budget of $150,000 max to purchase one investment property. On alot of searches the over 55's retirement style properties come up and some return good yields of even 12%. We would appreciate some advice about the advantages and disadvantages of this type of property investment.
Thanks
Pru
Hi Prudence,
Retirement units are generally harder to finance and a larger deposit may be required.
You will also need to check to see what sort of net returns they give. On the surface 12% sounds terrific but there are often large and ongoing costs incurred which erode your profit margin – this making the ROI less attractive.
On a side note properties in niche markets (like retirement villas) tend to not enjoy the same growth rates as more 'normal' property.
Cheers
Hi Prudence,
Generally speaking although there are worse investments – I am not a huge fan of Over 55's properties. When you are calculating the yield you need to ensure that you are calculating all the outgoings especially one that it strata'ed rather than torrens titled.
Finance is also quite restrictive/limited/difficult with Over 55's. From the top of my head only ING and Homeloans Ltd touch Over 55's. Due to this reason resale is also quite difficult.
Hope that helps.
Regards
Shahin
TheFinanceShop | Elite Property Finance
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Harder to finance and again no growth. Investing is about creating wealth and for that to happen it requires capital growth. The problem with assets like this is that it will not create growth.
Nigel Kibel | Property Know How
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Hi Pru,
There was a lot of hype around retirement homes as investments in years gone by.
They were spruiked as the next big thing because of Australia's aging population but, it failed to materialise.
Sales agents will talk up the gross yield but generally the management fees for these type of properties are the biggest killer.
I lump retirement homes with motel rooms and student accommodation, as they are all investor driven there is less demand for these property types over main stream properties (houses / apartments etc) therefore less growth.
Not all over 55's development have management fees and also it depends on the area. There are many that are torrens titled.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
I would not advise you to invest in retirement homes. They are not in big of demands and usually do not have a good cash flow. I think investing in a 2-3 bedroom single family house would be better and more cost effective.
Personally I would run a mile.
Will depend on what your fathers investment objectives are as to what and where he purchases.
I am not sure why can only spend $150K but assume there is a reason.
Depending on his age he may even want to think about setting up a Self Managed Super Fund.
Make a deductible contribution to Super (within maximum limits) and look to purchase inside the Fund.
Hard to comment without further details.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I read through the purchase agreement for one of those retirement village dwellings once. Gobsmacked is an understatement. A very distressed friend of mine wanted a few savvy friends to read it over as his mum was wanting to sell her home and buy one "for an easier lifestyle" and he was very concerned by the contents of the contract.
Have a read of one and you'll quickly change your mind. Ridiculous rules such as:
– No more than two visitors at any time without first notifying the land owner. So basically her son and his wife and kids could never spontaneously pop in for a visit. Permission would have to be sought and may or may not be granted.
– If the owner of the property dies, whoever is the poor sod named as executor of the will is required to carry on making payments on their behalf. Um, what the? Whatever happened to sorry the estate will get liquidated and you'll get your money when the property is sold.
– If you ever decide to sell the property you are only allowed to put a tiny sign on the fence. Either way you have to first offer the property for sale to the land owner and the land owner will decide the sale price.
Need I go on. Run away from such properties.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Wow thanks so much for your replies, I'll pas the info onto dad. Very useful information.
Regards
Pru
Thanks for the thread, Pru…
My parents and I have had the same discussion.
They too have thought about investing in a unit at a retirement village (somewhere like here).
These answers have been very helpful!
By the way the price of these things which appear to essentially be mobile homes, is pricier than a solid brick home in the same suburb, and in additional to this you have to also pay rent to the land owner. Massive scam.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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