We recently participated in an online webinar through our industry body, where representatives from the Retirement Villages Residents Association of New Zealand were talking about buying into and living in Retirement Villages.
You can find information about them by clicking here https://www.rvranz.org.nz/.
48,000 people live in 450 Retirement Villages around New Zealand and in the next 11 years it is expected that there will be an additional 34,000 residents in 80 new villages. There are 37 new units built or available every week.
People who live in retirement villages have high levels of satisfaction, but it is important to understand the financial side of living in a retirement village, and the RVRANZ helps its members with this.
What are the reasons given by residents for moving to a Retirement Village? (in no particular order).
1. Release equity in your home.
2. Access a continuum of care as your health declines (more particularly for villages that also have Rest Homes and Hospital wings attached).
3. To not be a burden on your children.
4. Change of health situation
5. Stress free, maintenance free
6. Friends moved and their live is hassle free
7. To have a community around you to live in.
Things for you to consider when you are looking at moving into a retirement village:
1. Is this your final move? (You don’t want to be moving between villages or homes after your first move and losing the % fee each time).
2. 80 years old is far too late.
3. Get sales people to put their promises in writing.
4. Ask for a summary of the key terms
5. Look at the different villages, their rules, facilities and financial arrangements and what % you get back at the end of the occupancy.
6. Are you limiting your financial options (eg, if you don’t have enough money to live off for the rest of your life, you can’t get a reverse mortgage on a retirement village property).
7. You will have fees payable while you are living there. How are you going to fund this (we recommend to our clients they set aside an investment and get a regular income to pay these fees). Are the fees linked to inflation or superannuation?
8. How do you get your money out? How long does it take (the villa is usually required to be refurbished)? What is the incentive for the operator to organise the change?
9. What is the impact if you do renovations, do you have to pay to get the villa back to the same situation as before the renovations?
Some important points:
10. Right to live. You are not purchasing a home, you are buying a right to live in that property.
11. Capital Gain is not shared with the residents. When you enter into a contract to occupy a home in a Retirement Village, you are generally forgoing any capital gain, this is retained by the operator (some villages are different).
12. Big 6. There are six large operators and every one has a slightly different approach and contract. There are a number of private operators as well.
13. Disclosure upfront – there is a lot of paper which can feel overwhelming, get someone to help you interpret it.
14. Registered village? If the Retirement Village is registered, there will be a supervisor, the activities are covered by legislation and the operator has a fiduciary responsibility.
15. Your family trust can’t buy the occupancy lease. Only the individuals who are listed can stay. Could be an issue if your partner dies and get a new partner.
16. Maintenance vs Replacement. There are arguments over this in terms of the contractual arrangements, it is important to understand how this works. Replacement is funded by the operator, maintenance by the resident.
So, how do you work through all this?
1. Join RVANZ as a member at https://www.rvranz.org.nz/membership/#howjoin. There is a joining fee of $10 per person (one-off) and an annual fee of $20 per person or $30 for two people living together.
2. Go to the website Aged Advisor at https://www.agedadvisor.nz/,