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A guide to investing in care homes

Care home investments are rapidly becoming more and more appealing to investors, particularly when considered as an alternative to investing in typical buy-to-let property. Not only do care homes add an element of diversity to an investor’s portfolio, but the investments can also bring in some fantastic returns.

Why Care Homes in particular?

Throughout the UK, we have a large ageing population and so care homes are set to become an integral part of people’s lives for many years to come. As a result, care home investments present investors with an attractive investment opportunity, with demand quickly outgrowing supply.

In figures released by The Office for National Statistics, it was revealed that 18% of the UK’s population is over the age of 65, and that figure is anticipated to increase to 25% by 2044. In addition, the number of people living beyond the age of 75 is increasing, and so it is expected that there will need to be a 150% increase in available care home places over the next 50 years.

The NHS are also affected by the significant lack of care homes, with 61% of NHS beds occupied by those waiting for a space within a care or residential home, costing the NHS £250 a day. Therefore, new care home developments are a necessity and will be welcomed across the UK, helping to improve the functionality of the NHS and providing our ageing population with a higher quality of life.

Care Homes as Investment Opportunities

In recent years, a care home investment has typically been associated with institutional investors, but there has been a big shift in the market recently, with traditional buy-to-let investors showing an interest in this sector as a way of diversifying their investment portfolio and to take advantage of the high returns on offer.

The market for investing in care homes now appeals to many different kinds of investor based on the low-supply yet high-demand nature of care homes. This has led to a big increase in the number of care homes being planned and constructed, which in turn has opened up a whole new range of opportunities within the sector.

Another factor of their popularity is due to the reliability that care homes offer as a longer term investment. A lack of funding within the sector has opened up avenues for private investors to take control and add substance to the sector by funding the increase of care homes in Britain.

Healthcare property out-performs other forms of commercial property investments, with returns increasing by 3.4%; more than double of other commercial property types. Returns are high for care home investments, with most investments achieving at least 7% and some delivering more than 10% returns, as well as the potential for capital growth.

This particular type of investment is known to be a sustainable and lucrative opportunity, especially when compared to alternative investments. Despite this, investors should be aware that an investment into care homes possesses risks as all investments do, and that it won’t bring instant profit. As a care home is the home of vulnerable people, it is essential that they are carefully looked after as anything less than this can cause a care home investment to be damaged by bad reputation and press.

The most important thing to consider when investing in the healthcare property sector is the actual property itself. Securing your investment into a well established and a well managed home rather than one with a bad reputation can be the difference between making a great profit and suffering a terrible loss.

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