Why investing in residential care homes is a good opportunity

Despite current economic uncertainty and rising costs, care homes are predicted to remain a compelling asset for investors seeking to establish a healthy balance between risk and return.

Care home investments are suitable for investors looking to expand their portfolios, or for those who are attracted to ethical investments – one that aligns with personal principles or contributes to societal and environmental causes. Care homes are also a perfect investment opportunity for buy-to-let investors as they offer regular income payments with no ongoing fees and are fully asset-backed.

If you’re considering expanding your property portfolio and investing in residential care homes, then read on; as we explore what has led to the high demand for care home living, the process of purchasing a care home, and the benefits that owning one can bring.

Increased demand for care home living

The large growth opportunity in this investment option can be pinpointed down to the current high demand within the UK care home sector, due to an increasingly ageing population.

11.6 million people are aged 65+ in the UK, and by 2040, it’s estimated that this will rise to 15 million people in the UK. By 2034, approximately 90,000 UK citizens will be over 100 years old.

This increase in age leads to the likely probability that more people will need to move into a care home, with their increasingly complex health problems resulting in live-in care.

The ageing population can be attributed to several things, with the two largest factors being modern science, and a decrease in mortality rates.

It’s this ageing population that is increasing the demand for spaces in care homes and retirement villages – predicted to increase by 150% over the next four years, which is why they are currently an excellent investment opportunity.

Attractive annual rates

A new wave of investment is needed to overcome the UK’s long-term care needs and underserved care homes market; which is exactly why this option presents such an economically viable investment opportunity.

Investors have the choice of investing in local authority funded care homes or luxury care homes, from specialised care to general care. The increasing wealth of the ageing population provides a great opportunity for making an investment in the luxury care home sector, as people are retiring at a later age and therefore have more money to invest in their retirement. Luxury retirement care homes are also fast becoming a preferred choice amongst the elderly and could be an alternative investment option to consider.

High yielding, hands-off investments like care homes have also become increasingly popular with overseas investors, mainly because they are fully-managed and pay regular income.

In fact, recent stats have shown that an investment in a care home – or rooms within a care home – can offer annual returns of 10% or more.

What is the process behind care home investments?

Investing in residential care homes is pretty straightforward and there is the option to choose from local authority funded or self-funded care homes. Operators regularly identify care homes that are in need of refurbishment or improvement, as well as ones that are already performing adequately. The operator will then purchase the freehold of the carefully identified property.

After the freehold has been purchased, individual units are then sold to an investor on a 250-year lease with title deeds registered in the investor’(s) on the UK land registry.  

Investors will then lease their unit back to the care home operator, who is responsible for handling the maintenance and tenancy at no extra cost, allowing the investor to generate a quarterly return.

Are care homes a good investment?

The short answer is yes, they are! We’ve already touched on some of the benefits that care home investment opportunities can bring, but here is a recap:

• You will have full ownership of your purchase with the title deeds registered on the UK land registry
• It is a high yielding investment paying up to 10% return per annum
• Multiple exit strategies with assured capital growth
• The property will be fully managed by the care home operator, ensuring a hands-free investment
• Offers diversity to an existing investment portfolio and pays immediate income
• The care industry is regulated by the CQC in England and CIW in Wales ensuring transparency
• Positive contribution to society and ethical investment

Final thoughts: care home investment opportunities

Whether it’s your first time entering the care property sector, or you’re a seasoned investor; this is one sector that can bring you great results, and it doesn’t look like it’s about to stop any time soon.

For the latest news in the care sector, head on over to our blog. Alternatively, to find out more about our care consultancy services and how we can help you, get in touch with us today.

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