Communities designated specifically for residents that are 55 years old or over can be affordable investments compared to non-restricted housing in the same areas. While there are often limitations associated with 55-and-over properties, these can be beneficial investments for residents or property managers.
Are 55-and-over properties cheaper? Properties designated for those 55-and-over are typically at or slightly below the market rate for property cost. You can often find these properties at cheaper rates because of a limited buyer pool, smaller properties sizes, and potential deed restrictions.
While homes with age restrictions tend to be cheaper than those without, we will look at what drives these decreased prices as well as factors you should consider that may drive your overall costs up when deciding to live in this type of community. You will also have to consider additional membership fees and costs. Understanding all the variable expenses in a community will help you determine if a 55-and-over property is right for you.
Why Are Over 55 Communities Cheaper?
There are multiple factors that contribute to the decreased costs in properties that are designated for residents over the age of 55. We will go over each of these categories in detail so you can understand what investing in these properties looks like.
55-and-over properties are cheaper because they have:
- Limited Buyer Pool
- Deed Restrictions
- Smaller Home Sizes and Options
- Limited Buyer Pool
The primary reason that 55-and-over properties are cheaper is because of a smaller group of people that are looking to purchase and invest in them. Consider the ages of the overall population, those who are 55 and older comprise a more limited percentage. This plays on the economic principle of supply and demand.
Because a small group of people are eligible and want to purchase these properties, the prices cannot be driven up by many people competing over them. The prices often fall below the market rate as the properties need to be attractive for the people that want them. If few people are interested in the property, the price will drop to encourage greater investment.
When there is greater demand for a good, the price is driven up. When this demand goes down, so do prices. At the same time, when there are a large number of properties available (supply), prices do not have to be as high as there are many options. These factors work together to drive down the price for these living communities.
- Deed Restrictions
A deed will lay out the details of the ownership of a property and what rights are included in that ownership. In 55-and-over communities, there may be restrictions to that deed. These restrictions make the property less desirable for a larger group of people and therefore decrease the pricing of the property.
You will have to look at the restrictions associated with individual properties as regulations and practices may be different depending on location and community design. Some of the most prominent deed restrictions you may run into on a property include:
- Inheritance clauses: There are different ways in which a property can be inherited depending on the set up of the retirement community. Some properties may operate on an 80/20 Rule where children and those under 55 can live in the home as long as the community maintains 80% of 55-and-over residents.
- Hard age restrictions: Even if your community abides by the 80/20 Rules, many communities do not allow those under 18 years old to reside in the properties. You will not want to give this property to children with young kids unless the primary intention is to sell it.
- Co-op Communities: These retirement properties are oftentimes determined by one deed, and this means that the entire group will need to vote on transferring deeds. This takes away the autonomy of choosing what to do with your property when you want to sell or make changes.
- General deed restrictions: These may not allow you to make specific changes to your property, including house color, additions, tree removal, and other rules the community has put in place. Not having these freedoms available to you may impact your decision to purchase a property.
You will need to look closely at the details of the deed before you invest in the property. These laws and regulations will vary by state and should be inspected to ensure you know your rights. Deed restrictions may drive the price of the property down, but if you are stuck in a bad situation because of the deed, it may be difficult to get out of.
- Smaller Home Sizes and Options
In many retirement communities, the variety of home styles you can choose from is limited. These homes are typically designed to house 1-2 people with one-bedroom and two-bedroom layouts being the most common. There is often no need for larger homes with many bedrooms as these properties are not designed to house families.
The smaller homes and fewer square footage make these properties cheaper overall. While you will most likely be paying more per square foot outside of these communities, this is a small factor that contributes to the overall lower pricing.
Costs to Consider for 55 and over Properties
While 55-and-over properties may be cheaper to purchase, you should be mindful of additional costs that could drive up your overall budget for one of these properties. Factoring these costs into your property price will give you a more accurate depiction of what to expect financially.
These are some costs and tips to consider when purchasing a 55-and-over property:
- Membership dues: In addition to paying the price of the property, you may be required to pay a one-time, annually, or more frequent membership fee as part of a homeowner’s association. This could be a requirement to cover landscaping and maintenance of the community or fund the community organization. You will need to see if this is a mandatory cost as part of your property ownership.
- When to buy: The cheapest times to buy 55-and-over properties are usually at the end of the ‘high season.’ Buyers will have greater negotiating and purchasing power as the interest starts to die down.
- Local tax rates: Tax rates may also dictate your decision to buy a home in a specific state. While some states are advantageous from an income tax perspective, the property tax may be higher. You will need to see what is more important to your specific financial situation.
Once you consider these other costs, they may help you make a better decision if, in fact, the 55-and-over property is cheaper for you. Many times, the extra amenities offered in a community can drive up the value of your experience and feel as if you are getting a good deal on the property with all that is included.
Benefits of Purchasing a 55 and Over Property
If you are not concerned with the deed restrictions placed on 55-and-over properties, they can be an affordable and convenient option for seniors to live. Oftentimes, maintenance costs are wrapped up into one fee after the property is purchased, so you no longer have to worry about doing repairs and upkeep on the home. You can enjoy the home and the amenities these homes offer.
These communities are catered specifically to the needs of this age group, ensuring that you have resources and peers accessible to you. The extra value that these living communities bring enhances the value of the property, even when the cost of living and the price of the property is relatively lower.
With the restricted number of people wanting to live in these properties, potential buyers can find great pricing and investment opportunities with a 55-and-over property.