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What makes a good retirement property

What factors makes a good retirement property investment

Can you make money from retirement home investments?

With banks offering minimal returns on your savings, are there savvier ways to invest your money?

For those approaching retirement age, they may have been considering investing in a buy to let for retirement income, so what are the best investments for retirement income? Retirement property investments generate healthy returns and give the investor time to decide whether they would wish to move in at a later stage or use the rental income elsewhere. This is one benefit of investing in a unit in a retirement home. What are some other benefits, and what are the drawbacks, and are retirement care homes a good investment? Here is your checklist to purchasing retirement property.

If you have money sitting in the bank you probably are wondering how to really make it work for you. Perhaps you’ve considered property and are wondering whether retirement homes are a good investment?


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What makes a good retirement property investment - four factors

If you have savings and you are thinking of investing in property, you will want to make sure that you choose the right investment in the right location. So what makes a good retirement property investment?

  1. Choose somewhere in an area with a high demand
  2. Choose an area where there is an undersupply
  3. Unique position or service offering
  4. Sustainability of investment

It is understandable that those with savings will be extremely attentive when assessing any sort of investment. If you’ve worked hard all your life and have managed to save a little money, you don’t want to pour it into something that might not meet your financial objectives. Here is our advice to everyone considering retirement homes, from the seasoned investor to the couple looking at investing in property for retirement income.


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Choose somewhere in an area with a high demand

Firstly, you will need to evaluate the demand for the property type you are purchasing in that area. There would be little point in buying a student property in the middle of the countryside away from all universities, or in a town where the local university is able to cater for most students. Similarly, with retirement property older people tend to move away from cities and settle in quieter villages in the countryside or by the sea, so it makes sense to look for retirement complexes that are situated in these areas. Our UK retirement home investments are often situated in seaside towns in the south west of England, in counties such as Devon and Cornwall. In an area where an existing retirement village is located, one in four people are over the age of 65.


Choose an area where there is an undersupply

Following on from point number one you’ve now chosen an investment in an area with high demand. The key is to uncover areas with a limited supply. Ideally, you would want to identify the demand in an area before other people have discovered it. Sometimes it is not always feasible to seek out undiscovered areas in the UK.

What is to stop other developers from recognising the appeal and lucrative returns, and build luxury retirement homes in areas that will eventually rival your own investment? You will need to consider that and barriers to entry. In areas such as Devon, there are lots of National Parks and Areas of Outstanding Natural Beauty, which must be conserved. Local government initiatives that control the supply of property can include restrictive planning permission for new build properties. Aside from local measures, the national government prohibits building on vast swathes of land under the Green Belt (Protection) Bill 2017-19. This means that there is only a limited amount of space to build upon, thereby limiting competition from other developers.


Unique position or service offering

If it is the case that you invest in a city with lots of competition, you should choose a property that has a unique appeal. This could be the additional onsite amenities, the build quality, the historical aspect of the building or location. “Often our retirement home investment opportunities are refurbishments of Grade II listed buildings, and their historical heritage really appeals to the elderly generation. Our investments also include luxury amenities such as spa and beauty treatment centres, cinema rooms and fine dining experiences”. Says investment director at One Touch Property.


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Sustainability of investment

Once you have done your due diligence and have selected an investment in an area where there is an undersupply, it is time to start considering the longevity of the investment. You don’t want to pick an investment with a limited market. For example, you may choose to invest in a retirement home in Portugal which accommodates British expats, but Brexit may affect the number of British people choosing to live in Portugal which would dramatically affect the income you receive. Therefore, if you are looking to invest for long-term income, it is also better to think long term.

The benefits of investing in retirement homes in the UK is that Britain has an ageing population and for the foreseeable future it is only going to get older. Last year the average age in Britain increased to 40, and the number of over 75s is meant to almost double by 2040 to 10m according to the Office for National Statistics. This generation is also as wealthy as it has ever been, which Knight Frank estimating that over 60s in England alone have over £1,200billion in unmortgaged housing wealth, which means they are in a good place to afford the fees associated with luxury living.


Benefits of investing in retirement homes

  1. The area and surroundings
  2. Social benefits
  3. Hands-off investment with strong rental projections
  4. Care always on hand

The area and surroundings

Retirement homes are generally situated in picturesque villages and towns in regions popular with an older clientele, such as the south west of England. Residents can enjoy their surroundings and a slower pace of life. They’re often situated next to National Trust parks or near to the coast. Financial incentives

More and more people are discovering the benefits of downsizing and distributing their wealth to ensure their family gets as much of their equity as possible. Even if the individual does not feel ready to move into a retirement village yet, they can invest and enjoy the rental income whilst they decide whether they want to move and if so, where they want to move to. Even if they decide not to occupy their investment in the future, the rental yield could go some way to covering their expenses elsewhere.


Social benefits

Perhaps an aspect that is much overlooked is the social benefit of investing / living in a retirement village.

Half of all people over the age of 75 live alone, and one in ten of those aged 65 or over say they feel lonely either all the time of often. Half of all older people consider the TV to be their main form of company, and 36% of over 65-year olds say they feel out of pace with modern life. Loneliness isn’t confined to being an unpleasant experience either, it can also have a significant impact on one’s health. Research has shown it can have the same detrimental effect to health as smoking 15 cigarettes a day, and people who feel extremely lonely are twice as likely to develop Alzheimer’s, have poorer mental health and suffer from more falls and periods of hospitalisation.

Some luxury retirement homes regularly host wine tasting events and organise outings to explore the local area, giving residents the opportunity to socialise with each other in measures to alleviate loneliness, and get out and about, if they were previously restricted to the house due to poor transport systems and no longer being able to drive. Residents are free to socialise as much or as little as they wish, and can also enjoy daily home cooked meals together prepared by the country’s top chefs.


Hands-off investment with strong rental projections

One thing is for certain, with the UK’s ageing population, there will always be a demand for residential home units. For those who are not quite ready to sell up their family home and move into a retirement village, good rental returns are guaranteed. Units at this north Leeds care home offer a 10% return over a 10-year commercial lease. It is fully operational and units can be purchased from £84,995.


Care always on hand

These sort of retirement homes allow residents to really enjoy their independence, but also have peace of mind that if they do need care, it is always on hand. This is especially reassuring to those who can do most things for themselves, but who may require a little more support as they get older.


The disadvantages of investing in retirement homes

  1. Limited locations
  2. Management fees
  3. Limited market

Limited locations

More and more retirement homes are being developed, but they are often confined to typical retirement towns and villages. This may mean that if you choose to occupy your unit later, you may have to move a considerable distance from your friends and relatives.


Management fees

The benefit of having a management company in place who oversees the day-to-day running of the care home is that it makes for a completely hands-off investment. The downside is that there are fees incurred, which reduces the overall rental yield you can achieve. Fortunately, the yield is still high because of a strong demand, but it is limited due to these additional fees.


Limited market

Of course, these care homes are limited to the over 55s, so there is a smaller pool of potential residents. Fortunately, Britain currently has a sizeable elderly population so projected occupancy levels are good, but it is worth being cautious in case that number dips in future.

If you wish to understand more about the care home and luxury retirement property market, download our care home guide. Start your property search today or speak with one of our experienced consultants to find out how it could work for you.

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