We came across an interesting DMF structure being successfully offered by a mature community not-for-profit village in Sydney in an upper middle class suburb.

A new resident pays an entry contribution. For instance a three bedroom unit is $730,000, two bedrooms $560,000 and one bed plus study $350,000.

The operator requires a fixed proportion of the entry contribution to become a progressive non-refundable donation to the charitable operator over the first two years of occupancy.

30% for a three bedroom unit, 35% for a two-bedroom and 50% for a one bedroom plus study.

If you leave before two years the donation is calculated pro rata.

After two years residency, half the balance of entry contribution is refunded to the resident by way of 10 equal annual instalments. In other words the resident has access to their capital investment.

On leaving the village, the remaining balance of the entry contribution is paid as a lump sum. (There is no capital gain).

Using a two-bedroom apartment as an example, the entry contribution is $560,000 and after two years 35% or $196,000 is donated to the operator.

This leaves $364,000 in capital. Half of this, $182,000 is divided by 10 years creating an allocation of $18,200 per year which is physically paid to the resident each year.

Assuming a 10 year residency the remaining 50% of $364,000, being $182,000, is paid as a lump sum.
Should they leave say two years earlier the lump sum payout will be two years of $18,200 plus $182,000, or $218,400.

With 56 apartments they have a waiting list and apartments are vacant on average of just three months.

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