Is it the 55-plus label people pay for, or the pool and the programming?

Question

I've toured four age-restricted rental communities in the last month, which for someone who was selling insurance a year ago is a lot of clubhouses.

Two of them were amenity heavy. Saltwater pool, pickleball, a paid activities director putting out a monthly calendar, dog park with a wash station. Rents about 20 percent over the conventional apartments a mile away. Both were basically full and the manager at one told me she keeps a waitlist she never has to work.

The other two were plain. Age restriction, a small community room, a walking loop, no staff beyond maintenance and one leasing person. Rents maybe 6 or 7 percent over conventional. Also full, also older buildings, and one had residents who'd been there eleven years.

So which thing is actually producing the rent? If it's the amenities, then a new build has to spend the money up front and keep spending on staff to hold the premium. If it's just being 55-plus in a market where nobody else is, then the cheap version earns nearly as much per dollar spent and you're not running a social club.

I genuinely don't know which way to lean and everyone I ask answers with whatever they own. Voting below.

aliyah_b · Answer

The eleven-year resident is the number I'd chase, ember. When I was building my first pro forma for a 96-unit age-restricted rental I used conventional turnover and my broker laughed at me. Turnover in this stuff runs much lower, and every turn you don't do is a full make-ready you don't pay for plus weeks of vacancy you don't eat. That shows up in the bottom line whether or not there's a pickleball court.

The age restriction is probably doing more work than the amenities, because it selects for people who move once and stay. But I'd want to see the plain buildings' expense ratios next to the fancy ones before I said that out loud. The amenity communities are charging 20 percent more and I'd bet a real chunk of it goes straight back out in payroll for the activities director and the pool service, plus the extra maintenance hours on all that stuff.

nataliehsu · Answer

The plain ones being full doesn't mean the amenities are worthless, it means nothing else in that submarket is age-restricted.

Is it the 55-plus label people pay for, or the pool and the programming?

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