Is a CCRC an investment?

In case you missed it the first time, here’s a classic Senior Housing post.
It’s no secret that entrance fee CCRC’s can be very expensive.  Most seniors sell their homes in order to pay the entrance fee.  With that big of a commitment, it’s not a surprise that people think of entrance fees as an investment.

But is it really a fair classification?  There are several reason that it is not: Residents don’t actually own their own apartment; instead they have a life lease.  If real estate prices rise and the community starts charging more for its apartments, the current resident doesn’t benefit.

As far as I know, there’s no way to actually make money off of a CCRC contract.  Most people actually lose part of their entrance fee due to selecting contracts that have refundabilities of less than 100%.

On the other hand, a CCRC is a huge commitment.  If you think of an investment as an activity that helps secure your future, then your entrance fee is most certainly an investment.  Since your time in the community is valuable, investigating all aspects of the process can help ensure that there are no nasty surprises following the move.

Investors have a term for this process: due diligence.  Due diligence is a period of time prior to completing a deal where the potential investor does all of the research necessary to know if the investment is actually a good idea.  If it isn’t, then the investor can withdraw from the contract and move on to other prospects.

Just as investors complete due diligence, potential CCRC residents should take their time and find out whether or not the community is a good fit.  This includes:

  • Understanding your budget and whether or not the CCRC fees are affordable.
  • Reading and understanding the Resident Agreement and Disclosure Statement.
  • Visiting the community and meeting residents.

Ultimately, a CCRC is not really an investment in the traditional sense.  It is, however, a large commitment, and it shouldn’t be taken lightly.