Looking for a good investment can be tricky. After all, the economy is subject to constant changes. You can end up investing a lot of money into something only to discover that it is not as profitable or useful as you originally thought.
If you are thinking ahead, you may even be contemplating investing in a retirement flat at some point in your life. If so, you will likely be wondering “are retirement flats a good investment?” To find out the answer, continue reading.
What Are Retirement Flats?
As the name suggests, these are flats that you use once you have retired. Traditionally, these properties are used by people over the age of 60. To take the hassle out of retirement, some people begin saving up for their retirement flats well in advance.
Retirement flats tend to be built in a complex or retirement village. This means that you can be surrounded by other retired people, allowing you to make friends with people who are in a similar situation and of a similar age. These complexes are catered to the needs of retired people. You may even be given access to communal facilities, potentially including a gym.
These flats are ideal for older people who can still look after themselves, but simply want to have a home that is better designed for their needs.
How Can You Invest in a Retirement Flat?
While some people make investments in order to make money, other people do it for other reasons. If you are looking to invest in a retirement flat, this will likely be because you want a place to live when you are retired. These properties are not going to make you a boatload of money.
Investing in a retirement property is pretty straightforward. However, you will need to take a few things into account. One of the things you will need to think about is what sort of retirement property you want. Retirement flats are pretty common, though there are various models of retirement flats.
Can I Invest in a Retirement Flat?
Technically, you do not need to be retired to get a retirement flat. The criteria that you will need to fulfill will vary between properties. Most will require you to be a certain age, though this can vary. Typically, you will need to be at least 50 to own a retirement flat. However, these properties are usually reserved for those who are over the age of 60. If you are still working at this age, you will normally be allowed to live in a retirement flat.
Though you may meet this yardstick, you will also need to consider whether you are the right sort of person to be living in a retirement home. Though they can be quite sociable, most retirement complexes are not very lively. If this is something you are interested in, a retirement flat may not be the right place for you.
Though you are often permitted to have friends and family members stay with you, some complexes may be more strict on the rules surrounding this. As a result, you will need to take this into consideration.
You will also have to think about your mobility. If you are quite limited as to what you can do, you may want to think about going into a care home. These establishments will be able to provide round-the-clock support. They are also designed for those who are less mobile or need more care.
Are Retirement Flats a Good Investment?
As you may have expected, there are both advantages and disadvantages to investing in a retirement flat.
Disadvantages
For most retirement flats, there will be additional costs. These can include security, cleaning. You will likely also need to pay ground rent. If you are unsure what this means, ground rent is paid by a holder of a property to a landlord or freeholder. The amount of ground rent you will need to pay will be outlined in the lease.
If you invest in a retirement flat, you should expect a long contract. While older properties have a 99 or 125-year lease, more modern-built ones are much longer. These newer properties will frequently have 999-year leases. Though this can be considered an advantage in some ways, it is quite a costly commitment.
They are becoming less sought-after. While many retired people are still interested in getting a retirement flat, the number of people actually going through with the process has declined. This may be due to the high costs. As a result, there may be fewer people for you to socialize with.
When an elderly person dies, the retirement flat can become a burden for their family. They may have to continue with payments until they have sold the property. Given that these properties can sometimes be difficult to sell, this could become a real problem for your family.
Over the last few years, retirement flats have declined in value. As a result, they may not be a worthwhile investment.
Another disadvantage of retirement flats is that you may have to pay event fees. These fees will mean that you have to pay for various “events”, such as the property switching ownership. Typically, these fees are calculated in percentages. You can end up paying a lot of money for these event fees.
Advantages
There are also advantages to having a 999-year lease. Though you are not in the exact same position, you will be in a similar level of power as a freeholder.
Another advantage of investing in a retirement flat is the social opportunities. You will be able to live alongside other people who are within the same age range. Some people find retirement to be quite boring and lonely. If you live in a retirement flat, you may find this to not be the case.
You may also observe a higher quality of life in a retirement flat. As previously mentioned, you may be able to access special facilities in a retirement complex. These complexes are normally located in peaceful areas that are still close enough to cafes and restaurants for you to frequently visit them.
Compared to other forms of retirement accommodation, such as retirement homes, these flats will grant you a high degree of independence and freedom.
In most retirement complexes or villages, you will not have to be concerned about repairs. Instead, this will likely be covered by your fees. This will make your living experience more hassle-free.
These spaces tend to be very secure. Retirement complexes often have security personnel. As a result, you can rest assured that you are safe when living in a retirement flat. Aside from this, your service charge will also guarantee that your complex is clean. Not having to worry about the state of your complex can result in your retirement being much more relaxing.
Frequently Asked Questions
Retirement flats can be a confusing conversation. To help provide some clarity, we have selected and answered some of the most commonly asked questions.
Are retirement flats difficult to sell?
In today’s market, it is becoming increasingly difficult to sell retirement flats. In fact, a lot of people interested in purchasing a retirement flat would rather get a brand-new property. Because of this, it can be hard to sell second-hand retirement flats.
Can you rent a retirement flat?
Yes, you can rent a retirement flat. Doing so is much less of a commitment to a complex than buying one. It will give you more flexibility, though it will not grant you as much stability. Additionally, you may end up paying more in the long run.
How do retirement complexes/ villages make a profit?
There are a few ways that these establishments can profit. Retirement complexes make money when you buy or rent a flat. However, you will probably have to make other payments that will contribute to the complex making a profit.
As discussed previously, you may have to pay ground rent and service charges. Though a lot of these service charges are spent on preserving the facilities, the complex may also make a profit via this money. In some cases, retirement complexes can also receive funds from the government. Namely, they can get care fees.
How much does it cost to live in a retirement community?
There is no definitive answer to this question. The reason for this is that the cost of a retirement facility will vary depending on the complex. As a rough guide, you are looking to spend approximately $1,500 to $4,000 per month. For many people, this can be quite an expensive form of accommodation.
Conclusion
Deciding whether a retirement flat is a good investment is an entirely personal decision. While some people will believe these properties to be worth investing in, others will not. The reason for this is that there are advantages and disadvantages to this. To accurately determine whether a retirement flat is worth investing in, you will need to weigh up these pros and cons for yourself.
Hi, my name is Matt Roberts, and I have been a financial analyst and advisor for the past 7 years.
While my job is based within the money industry, in my spare time I enjoy looking into potential new investment opportunities. From cryptocurrencies, to purchasing vintage cars, everything has the potential to gain you money if you are wise and make the correct investment decisions.
Through this site, I hope to educate others on investing in general, and hope to provide others with useful information that can benefit them and the opportunities they have. If you are not confident with finances, investing money can be a daunting step, however, it is a lot easier than many people are led to believe.
