Retirement Home investment? RFC.

Hey there,

I'm thinking of investing in a retirement home unit. I think I've thought it through, but I was also thinking it would be good to get some experts opinions on my thoughts - and perhaps share any similar experiences?

As a pro towards the idea:
+ its cheaper - $140k for a livingroom/bedroom/bathroom combo, which makes it easier to get into IPs and have ones money earning growth + some rent
+ tenants likely to pay rent on time and not cause trouble :eek:)
+ large generation of baby boomers about getting older, so I imagine finding tenants not a problem

- it IS a retirement complex, so tenants must come from a specific demographic
- This will tie me up for a few years in repayments, and I've been told by a real estate broker friend-of-the-family that there is a pricing trough coming at the end of this year. Perhaps I should hold on and buy something more to my needs (ie, a townhouse.)

I appreciate any advice from those who've been around the traps a couple of times - I'm keen to avoid the "first homeowner mistakes" I hear are made alot..

What are the arrangements like ? Rent / Body Croproate / common facilities etc ?

What are the capital growth potential / rental income and property expense like and how does that compare with other property ?
Be very careful. Can you resell freely? Many places force you to resell to the manager which results in a loss.

You need to be exceptionally careful about this - not a good call if you are doing it out of a lack of experience.
Many won't lend at all for these kinds of properties, or will only lend up to 60%. So I'd be looking elsewhere; when you're starting out you need to leverage much higher.
Why is lending on this type of properties so limited?
They have a limited market - i.e. limited liquidity
They have "business value" (linked the to business running the village) as opposed to real estate value.

As such, they (along with student accomodation units, serviced apartments, hotel units) are treated more similarly to commercial property. SO if you are considering these, you should also be considering commercial (retail, office, industrial) as a comparison.


The Y-man
Apart from all the other "cons'' these type of properties normally produce very lttle in the way of capital gains. (They are kinda like serviced apartments etc) . Further, quite often the contract says you can ONLY sell them through the company that runs the village and then they get the lions share of the profits. Be very, very careful . Personally I wouldn't go near them AT ALL.