Care homes are an essential service to look after ageing members of our society. Globally, people live longer than ever before, meaning there is a higher demand for residences to care for retirees. The number of people in the UK over the age of 85 is expected to double over the next 25 years. As such, many people are considering investing in care homes for the elderly. However, there are some factors investors should consider before parting with their money. Continue reading for more information.
Is Buying a Care Home the Right Investment for You?
Whether or not care home investments are a good idea often depends on the investor. Investing in these residences can be a rewarding and lucrative opportunity for driven and switched on investors who want to diversify their portfolios.
Typically, investments in care homes offer high yields, generating returns of up to 10% per annum. Additionally, it is a relatively easy market for smaller players to get into. Care homes are cheap compared to other property investments (entry to the market starts at around £65,000).
If you are looking for a more hands-off investment opportunity, investing in a care home could be perfect for you. Generally, the home itself will be fully managed by a care home operator, who will care for the residents and handle maintenance.
Overall, these factors make care homes an attractive prospect for many investors. Not only are the potential returns on a relatively low entry price excellent, but there is also a net benefit to society from these investments. As the population ages, more community housing is needed, so you will be able to care for vulnerable individuals while generating returns.
Perks of Care Home Investments
The benefits of investing in care homes are not solely financial. There is also the opportunity to secure your own future by investing in these businesses. This is especially relevant for older investors looking towards their own retirement. When savvy investors put money into a care home, they have the option of moving in in the future should they need to. Overall, this means investors can benefit from rental income until they decide to sell or move in themselves.
Care homes are also an excellent option since it is relatively easy to enhance their value once you have invested. Since care homes are often operated to provide a sense of community, amenities are usually included in the service to bring in new residents. Therefore, investors can enhance their returns by offering things like exercise classes and recreational activities. These are relatively cheap to bring in but can significantly increase the value of a care home.,
Additionally, there is the added benefit that care homes are generally cheaper to maintain than conventional housing. Landlords renting out private properties will often have to deal with a higher level of wear and tear caused by children and pets in their property. Since the residents in care homes are elderly people, this is less of a problem, so such properties typically require less upkeep.
Risks Associated With Care Homes
While there are upsides to investing in care homes, this isn’t to say it’s risk-free. There are some things investors should consider before parting with their money.
One thing it is essential to think about is care home insurance. Before investing in a care home, investors should check what insurance the property has. Check for sector-specific insurance like what is offered by barnesinsurancebroker.co.uk. This will ensure the business’s protection in any eventuality. If the insurance is not correct, you risk losing a substantial amount if the worst happens, so you need to make sure that you work with dedicated professionals such as these.
Another potential downside to care home investments is the monthly fees you will have to pay if you outsource the property management to a third party. While a lot of care homes will not need you to pay fees for maintenance, it is not unheard of. So, if you are on a tight budget or simply want to maximise your returns, you should ask about this before investing.
The final risk associated with care homes we will cover relates to the market itself. Unlike conventional property investments, care homes cater to a specific subset of the population. More conventional buy-to-let investments attract a wide array of potential tenants. However, not everyone will want or be able to live in a care home. This can make tenancy rates and rental income somewhat more unstable than with other property investments.
On the whole, care homes represent a lucrative investment opportunity for many. Typically, they provide high returns and as the population ages, there will be a greater need for assisted living facilities. However, this isn’t to say they are risk-free. Therefore, you should carefully consider your options and what you’re looking for before parting with any money.