03.Case study
TABLE NOTES * For the first nine years, plus a one-off 5% sinking fund fee in the first year. All figures are rounded.
Nine years ago, Joan and Edward each bought a two-bedroom unit in different retirement villages with different fee and capital gains structures; both cost $360,000 to buy. Edward paid a 32% fee (3% annual fee for nine years plus a 5% sinking fund contribution) while Joan paid a one-off 20% fee. Joan receives only a 20% share of the capital gain, whereas Edward gets 80%. In the case of an 8% capital gain, Edward comes out on top; in the case of a 2% capital gain, both suffer a similar capital loss. By comparison, if they’d bought a low-maintenance unit, they would have received the full value – $720,000 in the first scenario and $430,000 in the second.
Note: Other costs such as refurbishment and selling costs have not been taken into account and would also have to be deducted from the payout figure.