H
ow well do you understand the costs of retirement villages? You’re probably familiar with the initial entry fee but you might not be aware of the other costs. Additionally, you might not know what these costs actually cover.
In this blog, we’ll run you through the various costs of retirement villages. We’ll explain what exactly the various fees cover and roughly how much you can expect to pay.
Upfront costs of retirement villages
The first cost you can expect to pay when moving into a retirement village is
the entry fee. This could range anywhere from $100,000 to several million; it really depends on the village.
Across Australia, the average entry fee for a retirement village is just over
$450,000.
— What am I paying for?
Paying the entry fee is commonly referred to as
‘buying-in’ to a village. However, this phrase isn’t entirely accurate.
When you ‘buy-in’ you are
entering into a contract to live in that village. You are not actually buying the dwelling itself. Unlike normal property development, you are also
contracting with the village owner to stay on and operate the village. In effect, you’re paying the operator to look after you and your home as you age.
Ongoing costs of retirement villages
Almost all villages charge a
weekly or monthly fee. This levy covers the day-to-day operational costs of running the village. Think things like electricity for the common areas, maintenance of gardens and the village manager’s wage.
Fortunately, these fees tend to be
very low. This is because it is spread across
all residents and most villages are designed carefully to keep maintenance down.
— Deferred Management Fee (DMF)
The second cost of living in a village community is the
Departure Management Fee (DMF). This is
only paid when you leave the village.
The DMF is
essentially a form of rent that’s deducted from the lump sum you paid when you entered the village. There’s a standard formula for the DMF, but it generally works out at between 2.5 and 3.5 percent for each year that you live in the village. It is generally (although not always) capped at around 10 years (i.e. 25 to 35 percent).