What’s The Difference Between an Investment Retirement Community and a Monthly Rental Community?
- November 7, 2019
There are a variety of Assisted Living and Memory Care housing options available to Seniors in the Kansas City area.
There are differences in the monthly charges and how additional fees are managed. Two of these stand out as the most common types.
The first is a community where residents invest a large fee upfront that secures certain commitments on the part of the community.
The second type is a simple month to month rental program.
There are advantages and disadvantages to both.
Different situations will fit different people, so it is good to have a general understanding. In addition it is critical to fully understand what type of financial plan each community has before moving or making a commitment.
The most simple and straight forward type is the monthly rental community.
A monthly rental community is the most popular option in the United States and is usually the least expensive of the two models.
These communities require residents to sign a lease and pay some type of security deposit or community fee. This community fee may or may not be refundable. Typical fees might be between $1000 and $5000.
It is also a standard expectation that rental fees may increase annually as do most market-rate apartments.
The real advantage of rental property is that there is no long term commitment to stay in a community if the resident or family become dissatisfied.
Although it is always the goal of the resident and family to stay in one location there are times when this becomes impossible. Perhaps a move is made to be closer to family members. With this type of rental, there is usually just a 30-day notice to cancel the lease.
One additional benefit is if a resident is applying for any kind of a Veteran’s benefit, it may be important that they do not have a large investment fee committed to a community that is considered an asset.
What do rental communities provide in the way of services?
Again, each community may differ and it is important to ask questions and investigate each separately.
Typically a rental property may have Independent Living, Assisted Living, Memory Care, and Long Term Care or a combination of all four. If services are not provided it may be necessary to move.
There is no specific contractual agreement that the resident has to stay.
Again, there is more flexibility to find the level of care in the best environment if it is a simple rental.
Just as the investment properties, rentals include amenities such as meals, housekeeping, medication management, bathing, transportation, activities, and much more.
A Continuing Care Retirement Community or CCRC may charge a hefty up-front entrance fee as well as an ongoing monthly charge.
These communities will normally have all levels of care available, although a few do not have Memory Care. A common upfront investment might be $200,000 to $300,000.
This fee will automatically disqualify many seniors, but there are commitments that come with this fee that may seem attractive.
In most states, CCRC’s are strictly regulated by the Office of Insurance Regulation.
Unlike some other senior living options, there are both financial and medical criteria that seniors must meet to qualify for move-in. This is because once a senior is accepted in a community they are contractually obligated to care for them no matter how their medical condition or financial situation changes.
There are many variables that may exist community to community.
- How much of the fee is refundable, if any, at death?
- What is done with the investment money and does the CCRC have liquid assets?
- What are the additional monthly maintenance fees and will they increase over time?
- Is there any equity built up from the original fee?
- Who is in charge of remodeling the apartment after a certain time period?
- If care level increases will monthly fees increase?
Choosing a senior Housing Community in Kansas City
There are many pros and cons to both options, therefore, it is important to carefully assess a senior’s medical and financial situation before deciding.
The CCRC investment commitment allows for less flexibility but perhaps additional longterm security.
A monthly rental community will allow the greatest flexibility especially for a person that is unsure about their decision to move out of their home.
When possible it is desirable to talk with a trusted advisor about a move. At The Piper it is our goal to always have very candid conversations about the needs of the Elder and their financial situation. An accurate fit is the best fit!