Look around at the care homes for sale you will find a number of care home agents or business transfer agents that are marketing care homes. A large percentage of the businesses for sale are in need...
Invest in care home rooms and nursing investment opportunities
Care Home Investment for Sale
Investors now have access to care home investment opportunities by way of a sale and lease back arrangement. Our chosen developers work closely with the NHS trusts and local authorities to identify areas of significant demand and buy care homes in most under-supplied parts of the country - ensuring a buoyant market.
It is a good idea to invest in a care home room because you are purchasing an existing property with a proven cash flow and no development risk (for completed properties). The operator leases the property from the investors and conducts their business from the premises. The typical leases are up to 25 years with 10% net income. Thereby providing a vital service to the community and a high yield and truly hands-off asset for the investor.
As Britain's population ages and the shotage of available bed spaces in care homes persists, the demand for existing beds continues to be strong. Investors can achieve good returns whilst also making a difference to the community.
Contact One Touch Property today to learn more about investing in care home rooms.
Care Home Properties Market
Care Home Properties Investment Opportunities
One Touch property consultants are an experienced team who will share their expert knowledge to help you take an investment decision with confidence and ease
Globally, the median age of populations is rising. In the U.K, seventeen percent of the population is over 65. The proportion of the United Kingdom’s population aged 90 or over has been increasing ever since the 1980s and by 2040 nearly one in seven is projected to be aged 75. As part of this growth, the number of over-85s is estimated to more than double from 1.5 million in 2014 to 3.6 million by 2039 according to the NHS Confederation. What this means is that the there is an extensive demand for care homes in the UK.
The aging population is one of of several reasons why it is a good idea to invest in care homes. The increase of dementia, lack of government built care homes, undersupply in key locations, restrictive planning permission and lack of post operation recovery accommodation are all positive contributors the care home investment market. Click the arrow below to discover whether these fundamentals mean that care homes are really worth investing in =>
Reasons why it is worth investing in the UK care home market
- How the government helps provide
- Britain's ageing population and underfunding
- Number of people with Dementia
- Government care to people with Dementia
- How investors make direct investments
- The risks
- The Luxury Sector
How does the UK government help provide for the cost of care in the UK
At the moment, if a person living in the UK has the need for Nursing Care and they have less than £23,250 worth of personal assets, the government will cover the full cost of care. This applies to care for the elderly infirm and specialist dementia care. There is a means test whereby some level of contribution will be made towards care for those who have less than £118,000. In a way, as an investment class, the UK care home sector provides a level of certainty of income because the rich can afford to pay – will pay – and the government subsidises those who cannot.
Britain's ageing population and underfunding
Britain’s population is ageing and the government does not have the resources available to provide care for them. In 2018 central government gave local authorities £21.3bn for social care, less than the £22bn it gave in 2011. The ageing population has only exacerbated the funding issues. According to the Office for National Statistics, in 2016 18% of the population was aged 65 and over and in some regions as many as one in three people were over the age of 65. With regards to future demand, according to The Lancet more than one million more people aged 65 and over will need round-the-clock care by 2035, which is a rise of over a third.
A budget shortfall has meant that the government is more reliant than ever on private companies, who are willing to bridge the gap as there is a sustained demand for beds. Whilst Boris Johnson has pledged to invest more money in the social care sector, going off records of previous government’s investment suggests this isn’t likely to materialise. Under the Conservative government, spending on adult social care in England has fallen by 3% since 2009/10 according to the Institute for Government.
Even if the cash injection is delivered as promised, many are in double whether it will go far to remedy the situation. Think Tank the King’s Fund described the social care funding boost as “the bare minimum needed to patch up services for another year”, suggesting it is just papering over the cracks of a much deeper problem.
The number of people with dementia
Number of UK patients with recorded diagnosis of dementia increases by 62 per cent over seven years between 2007-14 (according to the Health and Social Care Information Centre). They need specialist 24-hour care with qualified nurses.
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Is the government looking after people with dementia?
The National Health Service in the UK has been reducing capital and seeking out private partners to develop and manage care homes. Virgin Care entered the market in 2010, and over the past six years has been awarded contracts worth more than £1billion and runs over 200 NHS services. So private companies are developing and managing the care homes. The government will pay the bills – where the people can’t afford to.
How investors can make direct investments in this sector?
One can purchase a UK care home suite in a luxury retirement home for over 65’s or a nursing home catering for dementia patients. In both instances the care home operator will lease the property back from the investor at net yields of up to 10% per annum. The care home operator essentially runs their business from the premises and rents property from the investor on a long lease of 10 years.
‘High yielding, hands off investments like care homes and student accommodation investments have been very popular with overseas investors because they are fully-managed and pay regular income’ says investment director, Arran Kerkvliet, at One Touch Property; a specialist property broker in London that sources well-researched property developments for global investors seeking to diversify their income.
What are the risks
Nursing care, qualified nurse shortage. Inflation and minimum wages driving costs up. This is why those leases are only 8% Net.
The luxury care sector
Luxury care homes typically attract more self-paying residents, due to the higher weekly rentals. Luxury care homes are aimed at 65+ year olds who wish to downsize and move into a community environment. They provide an assisted living environment where residents still maintain a degree of independence, but are given help with personal care and have opportunities to attend social events such as wine tastings, social games and nature walks. There is a strong demand for suites in luxury care homes in the affluent parts of the South West of England, such as Somerset, where twenty-six per cent (26%) of the population are over 65 years of age. Tom Morgan, a senior director for CBRE comments that staying in a care home has “become more of a lifestyle choice. People choose them for the mental stimulation and sociable environment”.
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With a typical unit costing under £150,000, this type of commercial property investment bypasses stamp duty fees, and investors can make a healthy 10% contracted return per annum – much higher than returns achieved from putting the money in a savings account (typically around 1%). Retirees who sell their homes can trial living in a retirement home and avoid paying stamp duty if they make a subsequent purchase within three years. This affords them enough time to see if they like the retirement living environment or whether they wish to purchase accommodation elsewhere. Investors can also choose to rent out the unit for a set period and then decide whether they want to live in the unit or use the rental income to live in another development. If they choose to sell their house and downsize to a retirement property, they can gift money to their children and grandchildren, limiting the amount of inheritance tax they’d have to pay otherwise.
Many luxury retirement home investments restrict the sale to over 65s only on a lifetime lease basis. The benefits of the luxury care investment opportunities One Touch offer are that they can be sold to owner-occupiers or investors alike. This opens a wider pool for resales, and allows for better capital uplift. Also, lifetime leases cannot be passed on to a beneficiary so if the occupant dies within 5 years the investment is returned to the company with no benefit to the remaining family’s inheritance and at a far greater cost. Conversely, the fixed-term nature of the leasehold that accompanies investments offered by One Touch can be passed onto other family members should the owner pass away before the leasehold is up.
In short, retirement property investments give individuals a lot of flexibility to choose what they want to do with their wealth, and at the very least they let them choose whether they are suited to living in a retirement home environment.
The opportunity to invest in luxury care homes and purchase a studio in a luxury retirement village is proving to be a lucrative one, as Berkley have reported that they make £30,000 profit per bed, and £2million in profit per care home. Weekly fees have increased in some instances by over 50%, driven by the lack of beds in luxury care homes. Investors have recognised the high returns that can be made, and appetite for high-end care homes with self-paying residents is surging. Knight Frank cites £10bn of overseas equity that is set for investment in the sector, attracted by the stable income stream and the “hands-off” nature of the investment. Start a conversation to explore how investing in care home rooms could work out for you
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Care homes are a popular and relatively new investment type in the commercial sector. Investment funds and individuals alike are buying care homes and care home beds, buoyed by the fundamentals in the sector. As Britain's population ages, a lack of care home beds is becoming ever-more apparent, and this allows for good occupancy levels of existing beds.
What has attracted investment to this sector, and are care homes really a good investment? What are the pros and cons of investing in the sector?
Click the green arrow to find out.
If you're considering a commercial property investment, you have probably wondered whether care homes make good investments.
Many are attracted to care homes due to the high yields that are on offer. A care home typically costs between £50,000 - £80,000 and due to the shortage of care home beds in the UK, existing units can command higher rents. The care home and all the units within it are usually run by a management company, so investors can enjoy the "hands-off" nature of this sector.
As we mentioned earlier, care homes typically offer good rental returns. Contracted yields of 8% + are common in the sector, and rents are buoyed by the shortage of care home facilities which has increased the demand for existing beds.
Care home investments have a lower entry point, with costs for a unit ranging from £50,000 - £80,000. This makes the investment more accessible to investors who do not want to spend a large amount of money. They are also classed as commercial assets and bypass stamp duty charges if the total cost is under £150,000.
Care homes have a management company in place which makes them completely "hands-off". This is convenient if you are investing from overseas as the day-to-day running is done for you.
There are some downsides of investing in care home units. As it is classed as a commercial asset, few mortgage companies lend on it. This means that investors would need to have the cash sum to hand. Also, as the sector is reliant on cash buyers, you may find there is a smaller market to sell to when you wish to sell the unit on. Typically, care home investments do not increase in price like residential buy-to-let investments do. Those looking to achieve capital growth in the long term should consider residential investments.
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For those interested in a fully managed, hands-off investment that commands high rental yields, care homes should be considered. Just keep in mind that you would need the full cash amount to hand. If this sector is of interest to you, get in touch today. If you want to do further reading on the sector, why read more about what makes a good retirement property investment?
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