Are Retirement Apartments an Investment Option?

Should you invest in Retirement Apartments? Based on my personal research and experience, I would like to express some views. It might help you in making your decision.

Retirement Villages usually offer a package that's hard to resist. Security, housekeeping services, meals, transportation services, daily activities, and medical and frail care services. The list goes on.

Four years into retirement we seriously considered buying into such a retirement village. We still travel a lot and we thought that such an apartment with all the support services could be the ideal home base.

But frankly, we were not ready to live in a retirement village. Even for less than six months in a year.

Investment or Liability

I never believed that your primary home could be an investment. In fact, based on my experience, it is a liability. Unless you make it a business to buy, renovate and upgrade, and then sell the house at a profit and do it over and over again, your home will be a liability.

When I investigated retirement villages, as an investment, I came to the conclusion that it would be a worse investment than a regular home or apartment!

Rent?

If you thought of buying into the retirement village concept and rent it out until you want to occupy the apartment yourself.... Well, think again!

Retirement villages have usually the restriction that occupiers must be at least 55 years of age. If you look at the statistics of the demand for apartments to rent you'll find that people of that age rarely rent! They usually own their own apartment or home. Low demand means low rental income.

In fact, a friend capitalized on this fact while he is busy building a new house. He qualified to live in some local up-market retirement village and he pays a rent that is significantly lower than the rent paid elsewhere in town.

Retirement apartments have normally some stipulations in the contract for when you want to sell your apartment. Sometimes the selling price is regulated but mostly there is some kind of a levy on the price that you get for your apartment.

The net result is that the market price of retirement apartments do not match the market price increase of comparable apartments elsewhere in town.

Probably an Investment

My wife and I are still active. We bought a small house in a secure neighborhood. Our neighbors range from couples with toddlers to families with grown children. We've got to manage maintenance and housekeeping services ourselves, but it forces us to be part of the community.

I don't consider the house to be an investment. However, I am quite confident that – should we need frail care and need to move into some retirement village - we would sell the house at a good price and we'll be able to afford buying into some up-market retirement village.

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