Why Are Care Homes Good Property Investments?
Care home investments are one of the quickest growing sectors in property investment within the UK property market. Many investors are seeing the traditional buy-to-let market decline in demand, consequently giving investors a lower rental yield than ten years ago. Because investors are always looking for the most profitable investments, many have decided to venture out and diversify their portfolio by investing in a care home unit.
Care Homes Are High Yielding Investments With 10% Net Yields Annually
The Health and Social Care Industry is worth billions, which further confirms the high demand for care home properties and residential retirement homes. The demand is so high because the UK is experiencing the effects of an ageing population. The life expectancy has increased over the years and the UK has had to adapt to these changes by giving retirees more options when it comes to residential properties and specialist health/social care. The best option for the rising demand is to build more care homes to cater to the older demographic across the country.
Because the demand is so high, investors and developers are seeing a gap in the market. There aren’t enough residential options for pensioners who want independence, but still need care. Although the demand for care homes is acknowledged, the NHS hasn’t been able to keep up with the elderly’s needs.
As a result, private investors are putting their money into care home units to get a rental income from a high demand property. The high demand and low supply means the industry is less competitive and the rental yields per annum are very high at 10%. For an investor used to average buy-to-let yields of 5-6%, this is a massive opportunity for high profits.
How To Find A Good Care Home Investment Location
When it comes to care homes, the location is very important. With such a specialist commercial investment, it will only be successful if you choose an ideal location for your property. For a care home investment, the most ideal location will have:
- A high population of elderly people (over 65’s)
- A high demand that is not being met (not enough care homes in the area)
- A good quality care home development that appeals to the elderly (generally countryside locations near the coast)
A lot of the times, a new investor will assume that they can make the most return on investment by purchasing at a cheap price. You can purchase at a low price, but because you didn’t consider location there may not be any tenants at your door, reducing your chances of making a profit even more. However, if you consider location and how it will affect your prospects and in turn, your income, then you will see that the cheapest property won’t mean the most profit.
Locations such as the south west, more specifically Cornwall, Devon and Somerset have a high population of elderly residents. Out of those many people, there will be a lot who need health or social care as well as their own place that is provided in care homes. Areas such as Manchester and Liverpool (where student and buy-to-lets are popular) won’t have the same demand for care homes because there are a higher density of young people populating those areas.
Where To Invest In A Care Home
If you are experienced in property investment, you may have a contact with a developer or other investors who can get you care home investment opportunities. In this case, you won’t have to go far. For those who are less experienced in property or are new to care homes investments, you will need the help of a property investment company. A property investment broker will be able to offer you valuable investment opportunities without you needing to deal with the ‘middle man’.
A property investment company will give you investment opportunities at a discounted price. This is because all the maintenance, repairs, tenant sourcing, and health care is included in the investment price. For a fixed amount, you can have a long-term, high yielding, hands-free investment.
Because the property is for elderly people, the care of the tenants won’t be your responsibility. There will be trained staff hired to look after the residents, maintenance, medical, repair and operating costs.
A care home investment will make a good addition to any property portfolio, especially for those looking to diversify. A care home can be a good alternative to buy-to-let which are decreasing in rental yield as property prices increase. A property broker can give you information on the financing, deposits and legal requirements involved with this type of investment.
How To Find A Good Deal On Care Home Investments
A care home investment is much less popular than a traditional buy-to-let investment so you may not know someone who can get you a care home unit to invest in. However, that doesn’t mean that there aren’t any care home investment units on the market. A lot of property investment companies will realise the potential in a care home investment, so they offer profitable deals to their clients. The key is to find a property investment company that you can trust.
A property broker that specialises in commercial property investments is a good place to start. Care homes are a specialist commercial investment, so you need to go to a property investment company that covers those types of investments. They will be able to give you professional advice on care home investments as well as the profits you will receive, the property management involved, the legal paperwork needed and more. Also, they will be able to tell you about the exit strategy, which includes selling the property if the time comes.
Once you have chosen a property investment company that you can trust, you should be able to explain what you are looking for in the investment whether it is a passive income, more money aside for your retirement, or an investment to pass on to your children. Once you both have a grasp of the investment, you can begin the exchange of contracts and the keys will be yours.