Legislators Should Outlaw DMF Model – Australian legislators should outlaw the retirement village deferred management fee business model.
This business model for retirement villages has a devastating effect on the capital value of the residents over the period of occupancy. In the shorter term because of the deferred management fee heavily loaded to the early years of occupancy, in the longer term because of the combined impact of –
- the deferred management fee
- maintenance fees
- refurbishment costs
- exit costs
- devaluing effect of inflation on the balance of the in-going amount to be refunded on exit
The following table shows the differing impacts for both the resident and the village operator.
Both parties commence with a capital base of $850,000.00, the in-going amount required to obtain a lease (not ownership) of residential accommodation within the village.
The resident loses $607,227.09 in capital value over just 7 years whilst the operator gains a whopping $1,140,697.09 over the same period. This is for just one unit within the village, the combined numbers across a village of 150 units is alarming and should be outlawed by governments.
Legislators Should Outlaw DMF Model.