How to Invest in CCRC Bonds

As a large segment of the population begins to approach retirement age, the interest in senior living becomes more pervasive. One option is the continuing care retirement community (CCRC) model. Under the CCRC model, residents can choose among different levels of health care and assistance, making this attractive to many seniors. As these communities continue to develop around the country, CCRC bonds are becoming available to investors.

Things You'll Need

• Funds with which to purchase bonds

Instructions

1. Learn if the CCRC bonds that you are considering purchasing are for a new community or an existing community. CCRC bonds being issued for new communities often carry greater risk than CCRC bonds that are issued for established communities. A CCRC is most likely to default on its bonds between the time that the CCRC is established and the time it is fully occupied.

2. Check the rating of the bonds that you are considering for investment. The ratings can provide you with information about how likely the CCRC is to default on the bond.

3. Research the real estate market in which the CCRC is located. Low demand for real estate in the area may indicate that the CCRC will have difficulty reaching full occupancy and may lead to default.

4. Understand the eligible market size. Based on the income and age restrictions imposed by the CCRC, only a limited number of seniors may be able to afford living in the CCRC. With a larger base of potential buyers, the CCRC will be able to fill its vacancies faster.

5. Compare the rate of return provided by the CCRC bonds with the rest of your investment portfolio. If you invest in highly rated CCRC bonds that have low risk, you may not achieve as a high return as you could with stocks that carry a greater risk. The balance of return to risk should be based on your preferences and investing goals.

6. Choose your bonds based on your research and advice from a qualified financial broker. This could be an independent broker or a representative at your local bank.

Tips & Warnings

• Ratings on the bonds may not be available for newly created CCRCs. If an existing CCRC is refinancing or funding its expansion, it will have an investment rating.

• Among the factors to consider when examining the real estate market is the length of time that houses remain on the market, the median home price and changes in home prices over the years.

• If you do not have extensive investing experience and want to invest in CCRC bonds, a financial planner can help you invest in diverse financial products.