Balancing up the Levy
As every home owner knows, the cost of owning and maintaining a property never goes away. The longer you have your property the higher the maintenance costs can become. Moving into a retirement village means that the manual labour and time commitment is no longer on your shoulders.
How much does it cost to maintain your property?
Do you know how much money and time you are spending each year on keeping your family home and property maintained?
Maintenance can include painting, pest control, gardening, re-stumping, guttering, plumbing, grouting of tiles, sealing wet areas, drainage, driveway access, replacement or repair of woodwork, rising damp or water damage, electrical faults and repair, rewiring, roofing repairs, fixing door hardware, repair of doors and windows.
If you are fortunate enough to have the responsibility of the upkeep of a swimming pool, spa or tennis court this can add to the regular labour and repair bill.
Depending on the age of your home, it may be time to be thinking about upgrading your bathroom or kitchen. Ouch!
So how much investment is required to maintain your home?
Commonly cited is the 1 per cent rule, meaning you should save that portion of your property value each year for repairs and maintenance. This means that if your home is currently worth $500,000, you should be saving between $5,000 every year to cover ongoing maintenance costs.
The costs associated with ongoing maintenance will not disappear once you move into a retirement village. However, maintenance of your property and your surrounds will become easier to coordinate.
A clear benefit of choosing retirement village living is that the number of services available to you increase, such as well-lit outdoor areas for safety, an emergency call service, access to a pool, bowling green, library and other clubhouse facilities.
Service and maintenance fees are sometimes referred to as the levy. The levy covers the following:
- External maintenance and repair of your villa or unit
- Staff salaries including manager receptionist, maintenance and nurse
- Building and public liability insurances
- Water rates and usage
- Cleaning of communal areas
- Lighting of common facilities
- Repairs and maintenance of common grounds and facilities including Clubhouse & bowling green
- Road maintenance
- 24-hour, seven day a week emergency call system
- Village bus costs
- Active health program
Can the levy increase?
Service and maintenance fees must be charged on a cost recovery basis only. Legislation contains protections and controls to ensure residents are kept informed about the service and maintenance costs and any changes to these. In Victoria, as with other states, fees can only increase annually by the Consumer Price Index (CPI). The levy can only move above CPI if a majority of residents vote in favour.
What about the costs of long term maintenance?
Long term maintenance refers to items of repair and maintenance that are of a substantial but infrequent nature. Some retirement village operators apply a special levy or sinking fund payable by residents for this purpose.
RCA Villages cover long term maintenance as part of the levy so you do not need to set aside additional funds for long term maintenance.
What other ongoing costs will you need to budget for?
Costs unique to your level of personal consumption will usually be billed directly to you. Bills metered individually for each villa or unit including Council rates, gas, telephone and electricity bills are examples of this.
RCA Villages negotiates purchase of some of the services mentioned above in bulk. This means there can be some cost savings passed on to residents.
Residents are responsible for the cost of maintenance of external fixtures to the villa such as a hot water service or air-conditioning unit and any internal maintenance.
Remember, you are buying into a new or newly refurbished villa so you should expect that everything will be in excellent working condition when you move in.
So, take a good look around your current property. Over the next 10 years what maintenance work is required to keep the property in reasonable condition? Start from the outside, from the roof down, then the drains, driveway, pathways, garden, woodwork, exterior cladding etc. Make a list of regular maintenance tasks and the one-off repairs or upgrades over the next decade. Calculate the costs and then consider upgrading to an RCA Village lifestyle.
HOT TIP: Use Australia’s Archicentre 2017 cost guide (available online) to calculate approximate repair and maintenance costs.
Article from RCA's printed magazine, Evolve - Summer 17-18