Pensioner Units

[Fester]

I have existing IP's. I have been looking at pensioner units, and working out the sums, seem to be an excellent proposition. Very cash flow positive. Finance is available at 80% LVR (90% with mortgage insurance). Has anyone had any experience with this type of property investment, and if so are there any pitfalls?

Cheers ... Fester

 

[Bobq]

Fester

What are pensioner units?

Bob

 

[Donna L]

These are usually managed complexes aimed at pensioner retirees. They usually have a common hall area for recreation and many provide meals and basic laundry. They are furnished and give good income and good depreciation. However, this is offset by more difficulty in obtaining finance because of their specialised nature and watch the fine print for the management costs - can be very high and may almost wipe out the advantage of the higher rental returns (often about 9-10%). May find them difficult to sell if you need to. Also not sure how capital growth would be affected by specialisation. However, vacancies are apparently low and the rent comes straight out of the pension.

 

[Ross Sneddon]

Hi Fester

Pensioner units are becoming increasingly popular in warmer areas, coastal or holiday type areas where it is believed that older people may want to retire but it doesn't always follow.

The pensioner units are designed to assist low income people (pensioners) with little in assets to move into a semi care facility at minimal or no cost. The income to the investor is guaranteed by the operator and Government legislation which permits up to 85% of their Government pension to be taken and used for the pensioners maintenance. Yields are usually good.

There is always a down side and you need to evaluate it.

Small specialised units means lenders are cautious about lending. Most units are 25 to 40 sq m in size and banks prefer greater than 50 sq m. If the vendor is providing the finance, you can bet that they will not refinance on a resale and you can be stuck high and dry. Capital Gain is almost non existent as they generally increase at maybe inflation rate only.

I know of several people who have purchased them and this was a way to assist Mum and Dad into retirement and claim the IP advantages. Mum and Dad "pass" on any available funds, the kids do the investment plus some extra for assistance, the deal is done and the oldies move in.

I don't know anyone who has invested for the investment returns alone except charities, churches etc., and marketers who promote the concept to potential investors.

There are some more expensive retirement homes but these are not usually referred to as pensioner units which generally refers to people totally reliant on the Government pension. It is one way for the Government to assist pensioners to retire without the Government having to pay all the cost. Fair enough, good move on the Governments part.

Regards

Ross