Factors to consider before choosing a retirement village (part 3)


In preparation for your retirement, you should do the necessary research on the various housing options before you finally decide to purchase a place in a retirement village. Here are some of the factors you should consider before moving to a retirement village or buying a home.

As you would expect from buying a property as an investment, there will always be an element of risk involved. Even if the law gives you enough protection, you will always find savvy operators trying to find the fastest way to part with your hard-earned money. Not only are there many fraudulent operators, but a development or property project can also present risks of failure, such as under-capitalization or bankruptcy during operation.

While the law protects your capital, other issues can arise including incomplete developments or promised facilities that are not provided. Since projects are often developed in phases, the income generated from a previous phase is typically used to fund the next phase, stretching the financial risk beyond the point where your unit is completed and occupied until the sale of the unit. last phase.

Be careful, just because a large, well-known financial institution is financing the project, this is not necessarily a guarantee for the buyers. Chances are the bank has a preferential right to all available assets, and taking the seller or developer at their word is often a mistake. Be sure to check the details, for example if you have purchased property rights rather than just renting out your place to avoid future disappointment.

If reselling your home is a consideration, buying in the right place at the right price is the key to potentially reselling your property for a profit in the future. Be aware that there are different termination and resale conditions attached to your property where you may only be able to resell it to the project or only be entitled to a percentage of the profit made on the sale. A portion of the resale profits retained by a plan is often used for the benefit of all residents, for example to reduce withdrawals or build up a stabilization fund.

Right off the bat, make sure you know how a diagram defines the “profits” of the sale. These can be before or after deducting taxes, commissions and other costs, such as those for improvements you may have made. These factors could have a significant impact on the amount you receive on the sale.

One expense that can often trip a solid investment is the monthly drawdowns. Avoid being worse off when you compare the cost of buying from one village to another by always including the levies charged. When factoring in direct debits, also consider comparing what you get for your direct debit, namely facilities and services. A developer could use small upfront levies to attract potential buyers, but then they might be forced to significantly increase the levies in the future. However, the law leaves room for annual increases in the levy by a certain percentage.

If you are planning to buy from a village or established program, be sure to research the history of the village withdrawals. There could be a tendency towards fixed withdrawals through a withdrawal stabilization fund where withdrawals are often subsidized by the fund because of the profits made on the resale of the units as mentioned above. If the village you are considering has a large stabilization fund, consider it a major advantage.

Acting as a checklist, remember that levies can cover a multitude of services, including municipal tariffs, electricity, water and sewerage, security, gardening services, maintenance, housekeeping and laundry, satellite TV and garbage removal. Check the quality of service, for example, security can mean a security guard walking around the property once a day in one village or 24 hour camera surveillance and door control in another.

Special direct debits can also be introduced, even if you are already paying a fixed lifetime direct debit. The levy you pay cannot exclude the introduction of a special one-time levy to finance a particular project, such as a new landscaping for the benefit of residents. Be sure to keep abreast of these changes once you are a resident, usually through the legal person or similar legal person where residents can participate in the decisions of the retirement village.

There are other factors to consider when considering a retirement village, including management, lifestyle, accommodation, and healthcare facilities, to name a few. Make sure you do the necessary research and before signing anything, talk to your legal and financial advisors. It can save you heartache and cost in the long run.

As always, it is imperative to seek advice from your trusted financial advisor and real estate expert. A certified financial planner and a qualified tax advisor will be your best support during this last step. To get a general idea of ​​everything you need to consider before retirement, take a look at our bestseller, The Ultimate Guide to Retirement in South Africa, and visit www.retirementplanning.co.za.

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