Investment Issues with Retirement Community Homes

While 55+ communities are a popular option for retiring adults, retirement community homes may not be wise investments. Laura Vecsey of Kiplinger’s Personal Finance suggests essential considerations in making a decision.

A tour of 55+ active lifestyle communities can be a whirlwind of swimming pools, golf courses and nightly cocktail parties. There’s a Shangri-La effect that can sweep people up into the feel-good frenzy, and it’s easy – sometimes too easy – to make a decision without weighing all of the angles of a pricey financial commitment.

What are the real costs? Homeowner association fees? Taxes? Utilities? And what happens to the value of a place in a retirement-focused community?

Regency at Caramella Ranch, for example, is a new 55+ active lifestyle community outside of Reno, Nevada. Real estate agent Katrina Karasawa says buyers there have to weigh the lure of new construction against the general real estate market in this booming region near Lake Tahoe. Caramella Ranch homes range from the low $600,000s to $1.2 million. The monthly dues are $284.

“At this price point, buyers have many choices, so they have to want to be at Caramella Ranch,” says Karasawa. “It’s a lifestyle choice. As a retiree, you have to be set up financially. The dues are always going to go up and so you want to take advantage of what the community has to offer.’’

Buyers also must be aware of how 55+ active community developers may maximize their profits by increasing density.

Carol Evans, 68, had a house built at Latitude Margaritaville Daytona Beach, Florida. She was pleased with the construction when she moved from New York to this popular Jimmy Buffet-inspired development, but she quickly decided to sell.

“They decided to build cottages, which increased the number of homes there, but they didn’t add the amenities to support them,’’ she says, adding that the development’s land often flooded and was located too far from shopping, the beach and other amenities.

There are similar stories from other communities.

More than 2,000 active adult communities have sprung up from Florida to California, and all along the Sunbelt in between. Visiting websites listing these homes can be overwhelming. Florida alone has 673 to choose from.

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“Over the past decade, the housing market has been driven, in part, by the 73 million Baby Boomers who have been buying homes as they retire and adopt new lifestyles,’’ says Rob Parahus, president and chief operating officer for home builder Toll Brothers.

Prices of retirement community homes

Prices are all over the map. In The Villages, a well-known Florida community, there recently were 422 sale listings on Zillow – ranging from a three-bedroom, two-bath mobile home for $155,000 clear up to a $2.1 million fairway-fronting lake house with four bedrooms and three baths. At Sun City Grand in Surprise, Arizona, prices range from $145,000 for a one-bedroom, one-bath mobile home to $1.09 million for a two-bedroom, three-bath house.

But the long-term market value of homes in 55+ active communities has demographics and Father Time working against it. Zillow says 55% of owner-occupied U.S. homes are owned by residents age 50 or older.

As this Silver Tsunami of homeowners passes on, however, upward of 20 million homes are expected to hit the market through the mid-2030s. That will bring a sea change that housing officials and developers say needs to be factored into long-term use and valuation.

Explore a range of retirement living options at Seniors Guide

Laura Vecsey is a contributing writer at Kiplinger’s Retirement Report. For more on this and similar money topics, visit Kiplinger.com.

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