Why investing in a care home is a wise move

Why investing in a care home is a wise move
Jul
08

Why investing in a care home is a wise move

The return on investment that is achievable on traditional buy-to-lets has been hit hard by tax relief cuts and rule changes. The political and economic uncertainty that Brexit has created is slowing down investment in the buy-to-let market.

So, is investing in a buy-to-let care home a good move? The straightforward answer is ‘YES’, and here’s why.

Changing face of the UK population

Over the last 50 years, the UK population has steadily been getting older. Figures by the Office for National Statistics reveal that in 2016, 11.8 million people or 18% of the population were aged 65 or over. By 2041, this figure is expected to rise to 20.4 million or 26% of the population.
The reason for this is two-fold. Firstly, there have been significant improvements in healthcare. Secondly, people are having fewer children or are choosing to have children later in life.
While, it’s lovely to think that our loved ones will be around for longer, it’s putting a huge strain on the UK’s social care system.

Provision of public sector care homes

The government funded ‘Care homes market study’ which was released in 2017, states that there are around 5,500 care providers operating 11,300 care homes for the elderly. With around 95% of these provided by independent care providers.

While on paper, this mean seem a lot, it’s not when you compare it to the UK’s elderly population figures. Plus, the provision of public care homes that are available is severely lacking in investment. Research by the Care Quality Commission classes one in four care homes as ‘inadequate’ or unfit for purpose. A truly shocking statistic.

Who are care home investments suitable for?

Care home investment may be suitable for an investor who is looking to expand and or diversify their portfolio. It may also be of interest to people who are interested in ethical investing – investment opportunities that align with their personal principles or which offer environmental or social benefits.
It may also be an option for investors who are looking for a steady market to invest in during their retirement.

What returns can you expect from buy-to-let care homes?

Figures show that investors who are willing to invest for a minimum of 10 years, can on average look forward to receiving 10% yield per annum. So, for a £60,000 investment, you could be looking at a return of £6,000 per year. This is far more attractive then what you can expect to achieve from traditional buy-to-let properties.

According to the publication, Landlord Today, in select postcodes, landlords can look to receive around 8% returns. In reality, though, the average return on investment on a standard buy-to-let is 5.4%.

Other benefits of investing in buy-to-let care homes

If you’re looking for a hands-off approach to investing, choosing to put your money into a care home could be the perfect option. In most cases, the care provider will manage the care of the tenant and the maintenance of the property. This saves you having to pay money to a property management company. However, this is not always a given, so it’s vital that you thoroughly check the legal pack of any property you’re looking to buy.

The care home investment market remains relatively unaffected by Brexit as demand for space outweighs supply. Currently, care homes have occupy levels nearing 90% and some providers have had to introduce waiting lists.

Buy-to-let care homes tend to be purpose-built and offer state-of-the-art amenities and as such, they hold their value. One such provider is RB Care Homes, who offer bespoke homes in picturesque locations, with dedicated facilities onsite facilities such as a pharmacy, GP surgery and treatment rooms.

In addition, the demographics of the people renting the property means that it is less likely to suffer from substantial wear and tear.

For some, care home investment can be a secure investment that provides a steady income in a time when traditional buy-to-lets are struggling because of Brexit, tax-relief cuts and rule changes. Plus, with an ageing population, it’s a given that there will be a continuous need for care homes.

Speak to us on 0207 624 5555, about how you can expand your property portfolio to include care homes.

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