Last week we explored whether senior living - a rental model aimed at the over-75s - could be the next major property investment trend. Here, Silas Campbell - head of marketing at care home supplier Blueleaf - argues that it's actually care homes which provide the best option for investors.
Forget cryptocurrency, stocks and bonds - the care home market is arguably the most up-and-coming investment opportunity within the UK, posing as a perfect hands-off approach to investing. From high yields which provide higher than average returns when compared to more traditional asset classes, to huge growth opportunities, there are many benefits to investing in a care home and Blueleaf discuss them in this article.
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 that 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.
The large growth opportunity in this investment option is largely down to the current high demand within the UK care home sector, which is due to an increasingly ageing population. The Office of National Statistics (ONS) predicts that circa 20.7% of the UK’s population will be over the age of 65 by 2027, and this is simply a demand in which the government are struggling to keep up with when it comes to providing the elderly with care and accommodation.
Some 11.6 million people are aged 65+ in the UK, and this figure is set to rise by 2.4 million over the next ten years. As well as the government, care homes are struggling to keep up with the demands that an ageing population brings, especially when it comes to specialised housing and the quantity of staff needed to offer adequate care for all residents.
There are many reasons for people living longer than before: from achievements in modern science and healthcare, to an increased fertility rate. Unfortunately, the ageing population is putting a huge strain on the healthcare industry and will continue to do so - particularly within care homes.
The individuals in need of nursing homes or residential homes come from a fast-growing demographic, therefore spaces within care homes are undersupplied in a lot of areas of the country and demand is constantly on the rise. In fact, demand is set to increase by 150% over the next 4 years (OFT).
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.
What is the process behind investing in care homes?
Investing in a care home 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 properly.
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) name 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.
What are the benefits of investing in a care home?
As discussed previously, there are many benefits to investing in the care sector. Here is a recap on a few of them:
- 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
*Silas Campell is head of marketing at Blueleaf