All Active Adult Communities Are Not the Same
A 2007 New York Times article explored how New Yorkers, the most jaded, brazen, and savvy folks in the world, are like lambs led to the slaughter when it comes to purchasing real estate. They have complete command of topics like views and space, but when it comes to examining expenses and community rules that will have a major affect on life in their new homes, they have a shocking lack of curiosity. Here is a link to the NY Times article on active communities
Our editors thought that the parallels of this situation to that of people over fifty buying into active adult communities were strong, so we developed this short list of 10 questions. These questions assume that the new retiree has previously researched the area where there new community is located for concerns about recreational, tax, cultural, and political compatibility. Topretirements.com, which offers objective reviews and a database of over 400 best retirement cities and towns and 400 active adult communities , can help with that process.
1. Who owns the land your home sits on? Some communities own the land under their members' homes, but in other cases the developer or other investor owns it. In the latter case you can count on steady rent increases and possibly an uncertain future. Sometimes there is a plan for the community association to buy the land in a certain number of years or under certain conditions.
2. How solid is the financial situation of your developer or association? There are a host of questions under this topic, but the basic one is this - can they weather a storm, either physically (think mold, hurricane, fire, flood) or financially (a rise in the percentage of people who don't pay common fees on time, or who default on their mortgages). It is worth the time examining annual budgets if you can get them - stability is what you want to see. Contingent liabilities are what you don't want to see (possible lawsuits or claims).
3. Is there a sinking fund for maintenance? As a baby boomer you have learned by now that roofs wear out, just like air conditioning and septic systems. The smart organization has a sinking (reserve) fund that prepares for these eventualities. The less savvy one will be unprepared and have to hit you with a big assessment, which could cause problems with some of your co-residents. The age and condition of your development is very important - if you see signs of major maintenance being postponed - look out!
4. What type of assessments have there been? Look for stability and predictability. Sooner or later, almost every development that is community owned will have an assessment. But erratic, big surprises are a bad sign.
5. What is the reputation of the builder/developer? Sometimes you might love the property and the concept, but the developer or the development is relatively new. In that case you need active due diligence, finding out everything you can about the...
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