With Government subsidies shrinking and construction costs rising, the future of care villages depends on upfront capital – and the operators willing to back themselves.

In private aged care, certainty comes from cash flow – and that means bringing money in at the start. Unlike residential aged care, where Government subsidies underpin every bed, retirement villages offering private aged care must fund the full cost of staff, systems and compliance themselves.

The only way the numbers add up is with capital that can be recycled into operations, governance and facilities.

It is a debate that has become louder as more operators explore alternatives to the traditional Deferred Management Fee (DMF).

In the last edition of SATURDAY, we asked whether the DMF is heading for extinction.

At Odyssey Lifestyle Care Communities, CEO Aaron Lavell says the DMF remains the foundation – with one important caveat: the upfront option is king.

The DMF with upfront certainty

Aaron, a chartered accountant turned CEO, says Odyssey continues to operate on a DMF model with four options, with the 22.5% upfront option the clear winner.

“Our most popular contract option is what we call the fixed and simple,” Aaron told SATURDAY. “Residents either pay upfront or at the back end, but the majority choose upfront because it gives them clarity, and it gives us the certainty to invest.”

That certainty is what distinguishes private aged care from both traditional retirement living and Government-funded aged care. With care delivered at cost – charged in 10-minute increments – Odyssey’s only source of profit is the DMF. All care revenue is reinvested, and Aaron says annual financial information is provided to residents to build trust.

Price, quality and rising demand

When Odyssey’s Robina community first opened, its smallest apartments sold for just under $500,000. Today, the same apartments fetch closer to $650,000. Penthouses at its Chevron Island project are priced at more than $7 million, with half already sold ahead of next year’s opening.

“We’re at parity with residential developments on a per square metre basis,” Aaron explained. “I’m convinced the reason for that is the combination of care and the facilities. The food, the concierge service, the allied health – that’s the secret sauce.”

With 154 apartments at Robina already generating more than 3,000 hours of care a month – and another tower still to open – scale is proving central to Odyssey’s financial model.

“Unless you have 180 apartments or more, you can’t deliver the services and keep costs down,” Aaron said.

Systems that prove value

But cash flow alone is not enough. Caroline Lee, founder of enterprise care platform Leecare, says the real financial defence lies in compliance systems.

“Directors need governance structures and systems that can prove they’re meeting standards – in every assessment, every rostering decision, every medication round,” she said.

Leecare’s Platinum6 platform generates that audit trail automatically, with guided assessments, medication charts and dashboard reporting. The result: fewer compliance failures, less wasted staff time, and fewer margin-eating mistakes.

“Every compliance failure costs money,” Caroline stressed at DCM Group’s recent Ask the Visionaries Anything event series. “Technology that minimises those errors isn’t just operational support – it’s financial defence.”

With wages accounting for up to 70% of operating costs, reducing duplication and error is no longer a back-office exercise. It is the difference between surplus and deficit.

The risk operators can’t outsource

Some retirement village operators have avoided private aged care altogether, preferring to contract care services out. On paper, this limits regulatory exposure. In practice, eevi CEO David Waldie argues, it undermines the value proposition.

“One of the arguments for a village operator not to do private aged care is the compliance risk –that you’re opening yourself up to the regulator and the challenges that come with it,” David said. “But having technology where everything is monitored, recorded and analysed is what makes the model safe.”

More importantly, outsourcing strips out ownership.

“What you’re really missing when you outsource is you don’t own it – and the customer knows you don’t,” David said.

“The trust that one organisation is going to look after Mum for housing, for community, for care, right through to the end – that’s a really powerful value proposition, and families are voting with their feet.”

That ownership also strengthens the financial equation: steadier cash flows, stronger resale values, and better investor confidence. For lenders, the combination of upfront capital and in-house control makes the risk easier to model.

Courage and cash flow

Private aged care is not the easy path. Carrying staff costs without subsidies, embedding governance systems, and proving value to residents all take discipline.

“You have to set up your financial model to succeed from day one,” Aaron said. “That means getting the money in early, investing it smartly, and showing residents the value in what they’ve paid for.”

For Odyssey, that model is working. Sales are strong, occupancy is above 95%, and institutional capital is backing its growth. The DMF may be under siege elsewhere, but the upfront option remains the most powerful driver of certainty.

Private aged care is not about waiting for Government to catch up. It is about owning the promise of ageing in place – and having the financial backbone to prove it.

As they say, cash upfront is king.