Probably the most talked about, and most misunderstood issue when considering a move to a Retirement Village, is the Deferred Management Fee (DMF). Unfortunately, it is also quite often the reason that many older Australians finish up making the wrong decision in regard to accommodation for their latter years.
There is no denying that a DMF equivalent to 33% of a property’s re-letting or sale price represents significant dollars. In fact on a sale price of say $420,000, that’s an amount of approximately $139,000. However, this needs to be considered in context and with an understanding of what this fee is for.
So what is a DMF for?
The DMF is the payment for the use of your home and the facilities provided to you during the term of your occupation. In other words, instead of paying upfront, or on a weekly or monthly basis, you pay when you vacate. If you like, think of paying your rent in arrears. Using the above example of a DMF of $139,000 it equates to a rent figure of $297 per week over 9 years.
instead of paying upfront, or on a weekly or monthly basis, you pay when you vacate. If you like, think of paying your rent in arrears
You also need to understand that the maximum DMF at Hume Retirement Resort is 33% and only applies after reaching a nine year occupancy period after which it increases no further. For the years leading up to this point there is a sliding scale i.e. 9% for year one and 3% for every year thereafter to the maximum of 33%.
What about Capital gain?
Additionally, at Hume Retirement Resort, you will receive 100% of the difference between your entry payment and the new entry payment received from the incoming resident. This is most often referred to as the Capital Gain and can have the effect of substantially reducing the amount due as the DMF.
The DMF model is used in the majority of Retirement Villages and not only does it provide a return on the owner’s investment, it also enables the owner to continue to invest in the facility which in turn benefits all residents.
If you would like to know more about Deferred Management Fees or require information regarding other aspects of investing in a lifestyle at Hume Retirement Resort, please call Kelvin Gilder on (02) 60258409 or email sales@humeretirementresort.com.au