What’s an attractive living option for an elderly homeowner who is house rich and cash poor, yet cannot afford to sink all of the equity of the family home into a newer, maintenance-free house or condominium with people his/her own age?
Builders and developers in many areas of the country have begun to explore Active Living Rental Communities (ALRCs), upscale apartment buildings with elegant entries and comfy common sitting areas in neighborhoods where rental housing would accommodate longtime local residents who no longer choose to own.
“There are a lot of people out there who want to move out of the responsibilities of maintaining the home they have lived in for decades,” said John Rhoad, president of RMJ Development Group LLC. “They want to move and they feel they are still young enough to move – maybe even more than one or two more times. They want to stay close to their familiar surroundings but they don’t want to take all money and sink it into a home that costs as much as the one they left. That’s one of the downsides of home-price explosion.”
The typical client would be a single man or woman in his/her late 60s who has lived in his/her home for 30 years. Other than the home this person bought for $30,000 that’s now worth $350,000, he/she doesn’t have significant other assets. A small pension, Social Security benefits and minor stocks and bonds provide steady, yet not exorbitant, income of $4,500 a month. About 30 percent continue to work full time or part time, and many are involved in volunteer projects within the community.
The targeted customer would be much like a reverse-mortgage candidate who no longer wishes to stay in the home but would like to remain in the immediate area. Perhaps the memories of a loved one are simply too constant, too close in every room of the family home. Maybe this person has always wanted to move into a brand-new space with fresh paint and appliances where persons of similar age consistently gather for a card game downstairs in a warm, cozy den where hot tea is available at any time.
This person desires the flexibility to invest the equity of their current home and maintain liquidity for future health-related needs. In addition, the rising costs of homeowner’s insurance, property taxes and condominium association fees have sparked a search to alternative living possibilities.
“There is a market for this sort of rental apartment because of the changing demographics,” said Robert M. Lefenfeld, principal in Savage, Md.-based Real Property Research. “There are also more and more people who prefer not to deal with condominium associations. A couple of people in board positions can make a real difference in how other people live.”
The ALRC idea is to load resort-style amenities in neighborhoods that can support rents at $1.45 per square foot per month. (A 1,000-square-foot unit would cost approximately $1,450 per month). The building would have high-quality architecture, extensive landscaping and a variety of exterior features – heated pool, sap, walking trails, greenhouse, and gate-controlled access to parking and a covered entry. Interior common areas would include a business center, fitness center, catering kitchen, clubroom or library and a game room.
Individual living units include large bedrooms, crown moldings, 9-foot ceilings, maple cabinets, ceramic tile floors, granite breakfast bars, seated shower with grab bars and glass enclosure, all-electric kitchens with built-in microwaves over the range, lower-height wall switches, lever handle door hardware and faucets and full Internet access.
Ed Hord, a Baltimore, Md.-based architect, said activity, convenience and entertainment will be the atmosphere to draw active adults to upscale rental housing. Rocking chairs, tiny apartments – any clue the place says “retirement” will incite a stampede to the parking lot.
“The current multifamily seniors’ rental product is typically focused on affordability and services for frailty,” Hord said. “The average age of the resident is about 75 and the building was financed by low-income housing tax credits. This model has absolutely changed and we are just now seeing the demand in the past 18 months that stresses activity for persons who are much younger, or feel much younger.”
The ALRC model, with floorplans ranging from 710-840 square feet for one bedroom to two-bedroom, two-bath, den apartments at 1,150-1,300 square feet, will also be promoted to “snowbirds” who prefer to spend the colder months in warmer climates.
“It’s easy to just lock the apartment and go, “Rhoad said. “The place will be safe and secure when they are gone. It’s a huge factor for someone getting along in years.”
Just don’t tell them they are getting along in years.
Tom Kelly’s new book “The New Reverse Mortgage Formula” (John Wiley & Sons) is now available in local bookstores and on Amazon.com. Tom can be reached at news@tomkelly.com.
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