Retirement Villages vs Land Lease Communities – What are the financial differences?
As house prices in Australia’s capital cities boom, many downsizers who are asset-rich but cash-poor, are missing out on an opportunity to unlock their existing home equity and improve their lifestyle.
Freeing up capital by selling your house for more than what you would pay for a new home is a benefit for downsizers, who can then use the additional capital to invest or supplement income to enjoy an independent lifestyle.
Author and finance expert, Rachel Lane said everyone had the option of staying in their own home, but many found it to be too much maintenance or too lonely if they had lost a spouse.
“A lot of people look at downsizing to either a land lease community or retirement village, however they are distinctively different and can be hard to compare.
“My advice is to break it down to the ingoing, the ongoing and the outgoing costs of each. The ingoing amount is normally straight forward – the amount paid for the home or unit.
“The ongoing cost in a retirement village is the general service change, in a land lease community it is the site fees. The unique ownership model in a land lease community allows you to own your own home and lease your land, which means many downsizers are eligible for rent assistance on their site fees.
“The greatest confusion comes from the exit fees, also called deferred management fees. These are standard in retirement villages, and normally a percentage accrued over a period of time, typically anywhere between 25% and 50% after 10 years and there can be sharing in capital gains to factor in as well.
“Land lease communities have no government charges (stamp duty or council rates), and there are no exit fees, and with your ongoing cost of leasing the land being reduced through government assistance – it is a very popular and affordable housing option.
“Being part of a like-minded community significantly enhances quality of life too,” Rachel said.
Living in an Ingenia Lifestyle-oriented community delivers a number of financial gains;
- no stamp duty fees
- no council rates
- no exit fees or DMF on exit
- you own your own home keeping 100% of any capital gains
- as you lease the land there is a more affordable upfront price point
- your new home is part of your estate as a willable asset
- where eligible, the site fees may be covered by government rent assistance.