Should you invest in a retirement home?
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19 December 2018 - 10:00, by , in NRI, No comments

Thinking about the future is absolutely important. Here is what you should keep in mind while investing in a retirement home. Retirement homes, earlier looked upon with disdain, are now gaining greater acceptance. Children of aged parents often, live away from their family. They are happier to have their parents living in safe retirement homes, in the company of people of the same age group, and where many of their daily needs are taken care of. The family’s original home can be sold off to generate cash to buy a smaller retirement home, and to fund the parents’ living expenses. However, the decision to buy a retirement home should be taken with due care. Here is what you need to know:

Choose the right developer

Invest with a developer who has prior experience of running such a complex. “Running a senior living complex involves both, hard and soft issues. Developing the real estate and selling it is the easy part. The hard part is providing all the promised activities: a high standard of service and removing the myriad irritants in the residents’ lives. This is where the challenge arises because there is not so much money to be made in the maintenance and service aspects of such a project.

Sometimes, builders rebrand their projects in remote areas that are not selling. Such developers, who are not committed to the concept, may not be able to offer the high level of service and maintenance standards required in such a complex. Therefore, avoid developers who are undertaking one-off retirement projects.

 

Location

Most retirement homes are situated on the outskirts of cities or in remote locations. Land is cheaper there and hence, the developer can buy the vast tracts of land necessary for such a project. Such areas also offer the necessary peace and quiet. However, make sure that the place is connected well to the city by a highway or some form of public transport. This will make it easier for you to travel to the city whenever the need arises, and for your relatives to visit you. A large hospital should be situated within half an hour’s drive to take care of health-related emergencies.

 

Payment modes

The first and most common option, is outright purchase. The advantage of such an option is to be able to pass on the home to your children, though they may only be able to live there after they are 50 or 55. You can also sell the home if you move out and take advantage of the accrued capital appreciation. However, this is an expensive option and a large portion of your retirement savings could get locked up in the purchase of the house. This could lead to a cash crunch in later years.

Under the upfront deposit model, you pay 60-80% of the cost of the house. You live in the house for a certain period after which you move out. When you do so, the deposit is returned after deducting certain charges. Under this model, your upfront costs are lower. So, you have more cash in hand to manage the day-to-day expenses. However, a premature exit before the specified time may be difficult.

The original house

Keeping the original house offers the flexibility to return, if you don’t happen to like living in a retirement home. However, sometimes, the decision to keep two homes means that you become asset rich but do not have enough money to meet your day-to-day expenses.

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