Top 5 reasons an over 55 community may not be right for you

Over 55 communities are a great solution for many retirees but they are not for everyone.  In this blog post, we take a look at the top 5 reasons an over 55 development may not be right for you.

1. Variety (of ages) is still the spice of life.  According to Deborah Diane, Baby Boomer Retirement blogger, “some people like living in a community where there are mixed ages.  They enjoy seeing children in their neighborhood, as well as young couples who are just starting out.”    There is a vitality that comes with a diverse neighborhood.  For some, living among “Seniors only” just doesn’t feel right.
2. Kids and grandkids not welcome.   Many adult communities have strict covenants particularly on grandchildren.   For some families, it may be a necessity to have grown children and/or grandchildren live with them for an extended time.  Who can predict life’s turns – sickness, divorce, unemployment?  And what greater joy is there than for a grandparent to spend time with their grandkids and help nurture them into successful adults?   In our case, my wife and I made a conscious decision to settle close to our parents, so that our children could enjoy the influence of their grandparent’s love and wisdom.
3. High fees.  Many over 55 communities have great amenities – golf, swimming, tennis, clubhouses – but these all cost money.   It is not uncommon to pay hundreds of dollars per month in fees.  Do you really want to be paying for a community pool that you seldom, if ever, use?  It’s important to evaluate how much those amenities mean to you and whether you want the long term liability of maintenance and capital improvements.
4. Cookie-cutter homes on postage stamp lots.   You’ve worked long and hard to reach this point in life and achieve success.   Sure it makes sense to rightsize, (see my blog post on rightsizing your home for a happylife), but do you really want to be living in a row of identical homes where you can reach out the window and touch your neighbor?    There are many well designed adult developments, but there is something to be said for the elbow room and custom home feel of an elegant single family home community.
5. Tougher resale.   Even if this is the last home you intend to buy, future resale value should still play a role in your decision making.  In an adult community, the rules and regulations imposed by the Condo Association inherently limit your market of potential buyers.  Age restrictions, pet restrictions, fencing/landscaping rules, parking, long term guest bans, etc. are all potential negatives.  Consumer's want choice and flexibility.  

At our Skyview project in Pelham, we attempt to strike the balance between the simplicity and benefits of an over 55 community while keeping fees to a minimum and offering a diverse, vibrant single-family home community in a phenomenal location.   

We offer gazebo areas with sunset views over the mountains, community gardens, open space and hiking trails.  Our lots are smaller than a conventional subdivision, averaging 0.7 acres, but large enough for privacy.    And our ranch model, The Currier, has all the convenience of luxury single story living with an open concept floor plan and the craftsmanship of a true custom home.   Here in New Hampshire we say – “Live free and thrive!”

What's the right size home for you? The Rightsizing Equation

There is a significant trend toward smaller homes amongst both empty nesters and young families.    The generally used term is called downsizing--but I prefer “rightsizing.”   I’ve always been a big proponent of efficiency – sometimes to the chagrin of my wife (why cook in early December when you can make at least 7 different meals using leftover turkey?).    Our family recently moved from a 3500’ McMansion (which would be considered on the small side considering the trend of the last 20 years) to a smaller cape which we renovated  -- and  the space feels larger and better utilized. (For some great examples of this, read about architect Sarah Susanka’s concept of the “not so big house” on her website  www.notsobighouse.com.)

There are a number of hard facts that make rightsizing a compelling argument.  Empty nesters moving to a smaller home can realize the economic benefits of lower mortgage, utility, tax and maintenance expenses while at the same time not feeling enslaved to the care of feeding of a large home.    Just as importantly it improves quality of life.   Not to mention the fact that equity from the sale of the larger home can be deployed to provide incremental investment income.

For younger families, there has been a general shift in sensibilities.   Bigger is not necessarily better.    A well-appointed, efficient home that is green and consumes fewer resources are the priorities.  Just as with the older set, the young families want a home that is a component of their lives but doesn’t rule their lives.  Along with this is the renewed interest in community, common spaces and neighborhoods where people of all ages have opportunities to interact.

In this post, I wanted to explore the hard numbers around the generally accepted notion that rightsizing for empty nesters saves money.   After some consideration I decided that there are really two independent scenarios to look at:  1) the cost reduction model and 2) the investment income model.

In the cost reduction model, I looked at a comparison between the estimated costs of ownership of the 2054 sq foot “Currier” model home at our Skyview project versus a larger, 5500 sq foot home in the same area.  We see this scenario playing out each day as buyers look to move from homes within Skyview’s town of Pelham, from the Boston area, or from other affluent communities in New Hampshire.    I assumed that all other variables were consistent between the two homes and did a rough estimate of utility cost based on square footage.  The net savings by rightsizing is $33,000 per year.  

  

In the second scenario, I assumed that equity in the larger home  could be invested to produce investment income.    In this example, I assumed $400,000 of equity in the home based on the current market value less the current mortgage balance.   For capital gains tax, I assumed a 25% long term capital gains tax rate X the difference between the sales price and original purchase price.  After subtracting  sales commission and down payment for the new Currier home, more than $290,000 is left for investment.   At a 7% annual return, that equates to over $20,000 in annual investment income.   

Every situation is different.   If you’d like a copy of this spreadsheet, just send  me a quick email or connect through our Skyview website.   Regardless of your particular circumstances, rightsizing your home can make a lot sense both economically and in your quality of life.