Real Estate Investor Magazine South Africa Real Estate Investor Magazine March 2018 | Page 36
RETIREMENT
A different way to retire
Life rights and options for buyers
BY MONIQUE DU TOIT
M
ost working people look forward to retirement. The
chance to sit back and relax after years of hard slog
seems like a dream when one is stuck in the eighth
meeting of the day. Thing is, longer lifespans and economic
uncertainty mean it’s more difficult to plan for retirement than
ever before.
Even someone who has planned well and saved carefully
could find their investments running out as they reach their
late 80s or 90s. And without new income coming in, the need
to draw from savings often means that capital starts being
eroded.
Knowing this, retirees should think carefully about every
decision they make, including how they go about buying re-
tirement property.
Most people know about full or sectional title properties,
which involve purchasing the entire property. But there is an-
other option, which could go a long way to helping retirees
alleviate financial insecurity.
Known as the Life Right Model, this option involves buy-
ing the right to live in a particular housing unit rather than
owning the real estate itself.
In South Africa, the model is comparatively new but, as
Evergreen Lifestyle’s Chief Executive Officer Arthur Case ex-
plains, it is becoming increasingly popular, especially among
retirees. A major reason for this is that it takes a great deal of
stress off their plate.
“One of the major benefits of the Life Right Model is that
it relieves you of the burden of care for the property as this
responsibility vests with the developer, who remains the legal
owner,” he says.
Specifically relating to Day Zero, the onus would fall on
the developer to invest in alternative water supply projects a
commitment to their residents. Had this been in a sectional
title estate, it would have come at significant extra cost
The low down on life right
Residents buy the right to occupy the property throughout
their lifetimes – the lifetime of both spouses, if there are two –
so guaranteeing a roof over their heads. When the Life Right
ends, the developer takes the residential unit back, and offers it
out to the next Life Rights buyer.
Given that most homeowners are advised to spend one per-
cent of the value of their property on maintenance annually,
the Life Right Model also presents a major savings opportu-
nity for retirees:
• Transparent and affordable levies
• Flexible pricing
• Tenure guaranteed for life
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MARCH 2018 SA Real Estate Investor Magazine
According to Case, this isn’t the only financial security the
Life Right Model offers retirees.
“Because a resident is acquiring the right to occupy the
property, but not a full ownership right, the purchase price of
a life right may be lower than a house or apartment of similar
size in a comparable area,” he explains.
“In addition, the life right offers much more than just a
home. Estates are equipped with lifestyle centres, as well as in-
house healthcare. When retirees decide it’s time to downsize
from their family home and enter a retirement community,
they can use this difference in value to supplement their in-
come-generating investments.”
Ultimately, the Life Right Model is a welcome addition to
the options available for acquiring a retirement home. The
significant financial benefits, coupled with the fact that the
responsibility for the care and maintenance of the property
does not fall on the shoulders of the resident, makes it very
attractive.
Regardless of the way in which you choose to acquire a re-
tirement property, there are certain pointers to look out for.
Business Reputation
Try to find out as much as possible about the facility - gather
references, read reviews, learn about the history of the estate.
Quality
Find out about the quality of care and facilities at the retire-
ment village. Visit the complex and walk around - do residents
look happy and relaxed? Do the communal areas look neat
and well-functioning? What is the staff-to-resident ratio? De-
pending on your needs, find out about health care services and
their availability to residents.
Safety
Does the facility have requisite safety equipment, such as fire
extinguishers, smoke detectors and a sprinkler system? Are
there guards or other security measures in place?
Lifestyle
Look around the facilities and establish whether or not it of-
fers you what you want from a lifestyle perspective. Are there
activities planned? Do you have access to facilities such as a
gym or pool? Are meals provided?
Setting
We can’t look at property and not talk about location. Get to
know the neighbourhood and find out if there are any safe-
ty concerns. Find out if there are shops, doctors’ offices, and
restaurants within reach.