has sgp telegraphed their intentions on fkp?, page-9

Major...essentially you've got the idea but there are so many alternatives and variables.

It's complex which is why the instos have difficulty getting their head around it...particularly after a few Coronas on a Fri night when they are selling bulldust to their fellow instos!(The scarcasm is deliberate).

When you do though, you see the brilliance of a future stream of guaranteed income.

One important point: The smart operators don't promote a retirement unit as a real estate investment....rather it is a lifestyle choice.


Here's something I've had in my files as a basic primer on it. Can't remember where I got it from but it does contain the nuts and bolts. Here goes:


When you leave a retirement village, you may have to pay an exit fee, departure fee or ‘deferred management fee’. These fees should be set out in your contract. Make sure you understand them before you move into the village — they can be extremely costly.
The exit/departure fees payable are calculated in a variety of ways. For example:
• The operator is entitled to 100% of any capital gain on the sale of the unit. In addition the owner pays a set percentage of the entry price (for example, 2.5%) for each year they’ve lived in the village.
• Fees are based on a percentage of the entry price per year of occupation (as above) but the operator and resident share any capital gain (in proportions as set out in the contract).
• Fees are based on a percentage of the resale price when the unit is sold, leased or licensed to a new resident. The operator is also entitled to a percentage of any capital gain — and this can be as high as 100%.
It’s not unusual for the resident to make a loss on the transaction even if the unit is sold at a higher price than they paid to move in. This can severely limit their future accommodation options.
The percentage rate at which the fee accrues per year of occupation can vary from around 2.5% to 10% of the entry or resale price. Sometimes the rate is higher in the first year or first couple of years of your residence.
The fee may also be subject to a minimum or maximum. If your village charges 2.5% per year for a maximum of 10 years, the maximum fee is 25% of the relevant amount. If your contract doesn’t state a maximum, you’ll end up getting nothing back if you stay at the village long enough.
Beware of contracts that state a minimum fee. Even if the accrued departure fee (based on a stated percentage, say 2.5% for each year you’ve been a resident) is lower, if the minimum fee is 10%, that’s what you’ll pay, even if you only stay a year.
A one-off administration fee may also be charged. It’s generally based on the resale price and can be higher if you leave within a couple of years. Contracts with both an administration fee and a minimum departure fee penalise you twice for the same thing and should be avoided.
On top of all this, the village operator may require you to organise and pay for a building report and pest inspection.
Departure fees can be a trade-off for a lower entry price so it’s important to look at the overall cost of the deal. Is a lower entry price a real advantage if you lose 100% of any capital gain when you leave?