Embarking on the journey to a retirement community prompts a crucial decision: should one opt for a senior living arrangement with a substantial buy-in fee or choose the flexibility of a strictly rental model? Here, we delve into the nuances of each option, dissecting the advantages and potential drawbacks. From understanding the intricacies of Continuing Care Retirement Communities (CCRCs) to the appeal of monthly rentals with inclusive packages, we aim to provide valuable insights into the financial risks associated with buy-in fees and advocate for the benefits of maintaining control over one’s retirement savings.

A Buy-In Community

In moving to a retirement community, what are the differences between one that has a large buy-in fee, in our markets starting at more than $300,000 up to $1,500,000, and one that is strictly rental?  And what are the advantages of one over the other?

A Community that requires a large buy-in fee, or entrance fee, is usually a CCRC, a Continuing Care Retirement Community or Life Care Community, most of which are not-for-profit. They typically offer a continuum of care where one may age in place, including Independent Living, Assisted Living, Memory Care, and Skilled Nursing. 

While “not-for-profit” may sound appealing, that often comes with significant downsides.  The not-for-profit sells the CCRC model more like an insurance company.  They utilize profits from the community to fund other endeavors.  And most likely, they are governed by a board that is not in tune with the day-to-day management of the community.  

A Rental Community

A strictly rental community can offer a continuum of care, including Independent Living, Assisted Living and Memory Care.  The monthly rents are usually a package including meals, transportation, a daily activity calendar, and housekeeping.

Which One Offers the Greatest Advantage?

In our view, it is clearly the rental community.  The biggest difference is that in a rental community, there is no financial risk involved. You pay monthly rent, and you remain in control of the rest of your retirement savings, allowing your savings to grow if you choose to invest.

Potential Disadvantages with a Buy-In Community

With a community requiring a large buy-in fee, the setup is very different, and a financial risk is involved:

• The buy-in fee for this kind of community can often be six figures, as mentioned above, and comprise the majority, if not all, of your retirement funds. In some areas of Dallas, Houston, Austin and Fort Worth, the base entry fee on a 1,200 square-foot, two-bedroom, two-bath apartment is $750,000.
• After “buying in” to such a community, you still have to pay a monthly fee that is pretty much equivalent to that of a rental model.
• If a buy-in community fails or goes into bankruptcy, and it happens, you risk losing all of your money.
• With a community requiring a large buy-in fee, you lose 10% of your funds right off the bat. If you move or pass away, you or your family usually get back only 90% of the amount you originally put down.
• Regarding the buy-in fee you put down, you could be getting 4% to 5% in earnings if you were still in control of that money. That could amount to $30,000 to $37,500 a year that you are giving up, and even more for the larger apartments.
• And if you leave or pass away, your unit must be sold before you or your family get any money back at all. And sometimes, that takes months or even years. If an entry-fee community has financial problems or even files bankruptcy, it becomes significantly more difficult for the community to resell your apartment.

Our Recommendation

So, our recommendation is to find an excellent, all-inclusive rental retirement community with a good continuum of care, including Independent Living, Assisted Living and Memory Care. You pay for all your needs in one monthly package—and can forget about utility bills, mowing the lawn, property maintenance and property taxes.  And you will have the freedom to be in control of your own, hard-earned retirement savings instead of putting them into one, large buy-in fee you may never get back.

The Tradition

Long before The Tradition opened its first community in 2010, I shopped several communities for my Mom, and I determined that our communities would be all rental and not buy-in.  I realized that most often, the buy-in communities benefit the developer (if those communities don’t fail), and the rental communities are best for the residents. At The Tradition communities, we always put residents first.  There are two Tradition communities in Dallas, two in Houston, and our newest Tradition community, The Tradition-Clearfork, is now open in Fort Worth.  All of our communities are comprised of Independent Living, Assisted Living, and Memory Care. 

Contact us to learn more about our communities and find the location that is right for you.  Go to www.thetradition.com.