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Investing wisely in the future

Erickson Living residents explain how

Created date

February 22nd, 2011

Bill Williams is a self-described numbers guy. The retired vice chairman of KPMG, one of the Big Four accounting firms, likes to boil things down to dollars and cents. So when he started looking at retirement communities in the Houston area, it s no surprise that he let his spreadsheets lead the way. I lived in a high-rise condominium near the Galleria before I moved to Eagle s Trace [an Erickson Living community in Houston] in 2005, says Williams. I paid a monthly maintenance fee, but I didn t have much to show for it. The fact that a comparable monthly fee at an Erickson Living community covers one meal a day, apartment home maintenance and utilities, and all the amenities offered on-site is very appealing. When I sat down to calculate the total value of these benefits, I found they re actually worth quite a bit. As evidence to support his conclusion, Williams points to the facilities located a few steps from his front door. When I lived in the condo, I had to get in the car every time I needed a stamp. Now I just walk down the hall to the store and get all the stamps I need, he says. Same thing with the medical center, pharmacy, fitness center, and bank. They re all located right here, so I save a lot of time and money I used to spend driving to these places. Close proximity to the bank is especially important for Williams, who still has several ties to the financial sector and does day trading from his apartment home. I have absolute privacy when I want to do my trading, but then I can open my door and be part of a community have an extended family, so to speak, he says. I haven t found any place that compares to Eagle s Trace in terms of all it has to offer. As an ambassador for the community, Williams is often called upon to answer the financial questions of prospective residents. Many of those questions center on home equity and appreciation from people who are reluctant to sell their single-family homes. I put a financial number to a lot of aspects of home ownership, including property taxes, says Williams. If I take the amount that I was paying in property taxes every year and put it in a safe income-producing investment or some type of annuity, then at the end of a certain period of time, say 10 or 15 years, I will have made as much on that deposit as anyone can make on a house.

A short road to recovery

Along the same vein, people who are holding out for the housing market to improve before they make a move might be surprised to learn that any substantial increases are unlikely over the next few years. Texas has done much better than the U.S. in terms of overall economy, employment, and housing market, says Jim Gaines, a research economist with the Real Estate Center at Texas A&M University. That s not to say that Texas has gone unscathed, but we don t have very far to go to recover and get back to a normal market. Texas avoided most of the decline seen in other states like California and Florida, mainly because we didn t have the big bubble to begin with.

Rent vs. buy

Ironically, as Gaines points out, many people are turning to rental properties even though interest rates are low and inventory is plentiful. There are several reasons for the increase in rental activity, says Gaines. Tighter lending requirements and an increase in foreclosures are two of them. One resident at Highland Springs (an Erickson Living community in Dallas) first considered a rental property because he didn t want to pay the community s entrance deposit. But after talking with his accountant, he realized that, from a tax perspective, Highland Springs was the better choice. My accountant showed me all the tax angles, he says. He pointed out the fact that if I invested my money and relied on the investment income to pay rent, I d have to pay taxes on the money my investments drew. Coupled with the fact that I had to start withdrawing from my IRA at age 70, there was the possibility I could have been bumped up to a higher tax bracket. However, if I took the same lump sum and used it for my entrance deposit at Highland Springs, I wouldn t have to pay taxes on it.

Pride of ownership

And once he moved to the community, he discovered another, less obvious benefit. There s a certain intangible here, he says. It s the pride of ownership. We ve invested in this place, so we re committed to making it feel like home. Where I used to see the entrance deposit as a hurdle to be overcome; now I think it s an asset. It s what makes this place unique. There s a certain community camaraderie and respect that exists here because we ve bought into this place.

No surprises

Janice Linsenmayer and her husband, Griff, were among the first residents to move to Eagle s Trace when it opened in 2005. Their financial interest in the community was two-pronged. We were attracted to Erickson Living s fee-for-service philosophy, says Linsenmayer. So many other communities make you pay for services you don t really need or use. Here, we only pay for what we need. The other major financial benefit, according to Linsenmayer, is the monthly service package. When we lived in our home, we had an air conditioning unit go out and the skimmer on the pool broke. Both were big, unexpected expenses, she says. Now that we ve moved to Eagle s Trace, there are no surprises. We live on a fixed income, so it s nice that our monthly expenses are fixed too.

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