Do Retirement Communities Make Good Rental Properties?

Investing in a rental property can guarantee the financial back-up you need to retire early. But if you want to carve a niche out for yourself in a somewhat competitive market, consider investing in a retirement community. 

With more and more people retiring every day and the increase in average life expectancy (77 years), there will always be a need for nice rental retirement communities. Sound too good to be true? Stay with us as we analyze whether retirement community makes good rental properties or not.

Understanding The Retirement Market- An Investor’s POV

Investing in a retirement property basically includes single-family homes, retirement villages, nursing homes, condos with medical assistance, etc. The targeted tenants are of course retirees over the age of 55. 

Retirement homes have always been a goldmine for new investors who just want to play safe. That’s because there are less ups and downs. Just a few years ago, no one could believe the housing market in California could see a low. However, due to multiple tech companies relocating, the city’s real-estate appeal has been gradually declining. 

But that almost never happens with a retirement property.  Older people generally prefer living in suburbs or smaller towns where they can live in a community. And, such places are easy to find and cost way less than a metropolitan apartment. Also, the retirement community market is predicted to be growing at 6.1% from 2023 to 2032. That’s an impressive growth.

Pros & Cons Of Retirement Community Rental Properties

Pros

Low Turnover 

The turnover rate indicates how many times a year a rental property changes tenants. So, a lower rate means, you lose less money waiting to get new tenants. Apartments in urban cities like New York see frequent tenant changes due to a busier lifestyle. But the scenario is different for a retirement community. If the retiree likes the amenities and surrounding community, there’s a high chance they will like to hold on to that property as long as they can. 

Requires Less Capital

We already mentioned that retirement communities are mostly located in smaller towns or suburbs. It’s common human psychology. Old people want to escape the noisy and always-on-the-go city life once they retire. And, land costs tend to be lower in suburbs like Florida. So, you save big on the capital.

Reliable Source Of Cash Flow

Renters in big cities often default on their monthly payments. And, it can continue for months if the renter gets fired from work suddenly. The income source is just not reliable enough. On the contrary, retirees receive a fixed pension every month. And, when they get paid, you get paid as well.

Opportunity To Reduce Income Tax

One big benefit of investing in retirement property is you can deduct quite a lot of money as depreciation, and maintenance costs from your income. That subsequently reduces the final amount of taxes owed. Furthermore, new renovations like installing smart features for older tenants will also be deducted from your taxable income

Cons

Niche Market

The targeted tenants are limited by age. It’s not possible to let someone below 45 or 50 enter the community. So, you lose a large spectrum of tenants due to the age issue. 

Difficult To Assess Location

The baby boomers are currently retiring. And, most of them are used to the advanced home features available in big cities. So, they are not going to be impressed only with a serene location. The community and its amenities must align with their lifestyle. It makes the assessment of location ten times more difficult.

Unable To Increase Rent 

Your tenants are not actively working anymore. They are dependent on a fixed monthly income. So, you will be less likely to be able to increase the rent. However, you might have to bear the fixed management fees (such as paying to maintain the property) yourself during any vacancy periods.

HOA Rules & Regulations

It refers to some pre-set rules every tenant within a particular community must follow; monitored by the Homeowners Association (HOA). And, it can be quite a challenge to follow through all the restrictions. Some communities even ask tenants to avoid pets, gardening, unnotified visitation, etc. If the community you have invested in has too many strict guidelines, you will most likely lose clients.

Check Out These Retirement Communities To strengthen Your Rental Portfolio

The community experience matters more than the particular property. Retirees want to have social circles more than individual perks. So, picking out a random suburb property won’t get you the high-paying client you are looking for. Here are some of our suggestions.

Banyan Springs Retirement Community

Located in Boynton Beach, Florida, Banyan Springs is the perfect location for anyone craving to wake up every morning to a splendid view. It’s a gated community with ample lush greenery and various daily activities to participate in. Your tenants can enjoy the clubhouse, play sports, relax by the pool, and simply enjoy each other’s company. The Tricoli Team website has a listing of available properties in Banyan Springs. Check that out to find a suitable property for your next investment.

Sun City Lincoln Hills

Let your tenants soak in the California sun in Sun City located in Lincoln Hills. It famously has the best-maintained golf course ever. You can leverage the friendly community to attract clients who are in for a pack experience. From jacuzzies, cardio, and aerobic gyms to parks;  it surely deserves a visit.

Tellico Village

30 miles from Loudon County, Tennessee, the picturesque Tellico Village awaits. Covered with smoky mountains and lakes, it’s really a treat to the eyes. If you want to stand apart from other investors in terms of the aesthetic appeal of your property, Tellico Village should be on your list.

We hope you found our analysis helpful. Remember that no investment is 100% risk-free. But helping a 60+ year old find his/her dream home will definitely be worth every bit of it.