Care Home Investment

newlandlord555

Is this  a good idea ? Or scam ?

This is a 45 bed care home facility which was stylishly refurbished in 2018 and brought into full occupancy in 2019.

 Investment Summary

 This is a resale property purchase from the existing owner

• Care home room within an operating care home with proven income
• Purchase Price: £70,000
• Annual Income: £5,600
• Payment Schedule: Paid Quarterly @ £1,400
• Original Purchase Date: Completed Dec 2018 (Title registered in March 19)   
• 25 year underlease from: 1st May 2018
• Income Payments received at June 2020 – 24 months
• Income Payments outstanding at June 2020 = 23 years
• Leasehold Title 125 years from: 1st May 2018

 The terms of the lease and underlease are assignable. This means that the all the benefits bestowed by the current owner are transferred to the new owner.

dharm999

Lots of threads on here about similar investments, they are beset with potential problems, the consensus of advice on here is to avoid like the plague.

bigadaj

Sounds good but impossible to separate from the wider operation, may suffer from internal competition etc For similar google airport parking spaces, hotel rooms etc

NotSureWhichUsername

If you’re determined to invest in care homes, take a look at something like Target Healthcare REIT plc (THRL). This way you’d own a share of several care homes, not just a single room in a single care home (if I understand you right.) Also, the yield of THRL (6.06% per HL) is not that far off what you’ve been offered on a likely much more risky basis! 

Stubod

..if it looks too good to be true...etc.....?

Stubod

..if it looks too good to be true...etc.....?

bowlhead99

dharm999 said:

Lots of threads on here about similar investments, they are beset with potential problems, the consensus of advice on here is to avoid like the plague.

Yes agreed. These sort of unregulated investments make the papers every few years when they fail and it emerges that the directors or lawyers have embarrassing pasts including scandals from running former companies and operating while being struck off etc. We see the same old unregulated schemes come out all the time because people think that as interest rates are really low it would be much better to invest in good old bricks and mortar and what easier or more reliable way to do it than buy a 'bite size' property within a bigger block with a sitting tenant who will be there until they die. Sounds great. If only we hadn't already heard all the horror stories of such investments and how the marketers of 'unregulated' property investments can say whatever they want because there is no financial regulator making them stand by it - it's "buyer beware".

Looks like you're seeing an advert for a 25 year sublease for a room in a leasehold property, a couple of years in. The lease may be 'assignable' but like with the hotel room schemes and student pod schemes and carpark space schemes and caravan park schemes, you presumably won't be able to independently market it if you want to exit your investment, and anyone running the scheme will have their own interests ahead of yours in terms of how they market whatever rooms are available for sale at a point in time and whatever they say they are 'worth', as traditional estate agents and valuers don't put values on individual rooms within someone else's care home. 

The 'income payments' sound nice but for the first several years they may just be paying your own money back to you, as with all these sorts of 'contractually assured rental' schemes, which are only as good as the companies writing the contract - who may no longer be around in x years time. If they are 2 years into the lease and now fully let, why are the existing owners jumping ship to let you on board at a high yield? Presumably they will talk about an initial net rental income but then the rental expenses or service charges or maintenance costs associated with the premises (as you get with any large co-owned leasehold block) may rise over time.

The rooms are allegedly in full occupancy. When people using the rooms die (a bunch of deaths per year are to be expected, in a 40+ room care home), the home will no longer be in full occupancy. When a new person comes to the centre, whose room do they get? Presumably it wouldn't particularly be yours over anyone else's? Any rooms owned by a developer or scheme operator will presumably get a better occupancy rate.

If you like the idea of relatively stable income from care homes or similar properties, there are some specialist real estate investment trusts run by credible investment managers. For example Target Healthcare REIT (https://www.targethealthcarereit.co.uk/) and Primary Healthcare Properties https://www.phpgroup.co.uk/about-us are each listed on the London stock exchange and own a portfolio of modern buildings let out to private care home operators (THRL) and primary healthcare real estate generally let to NHS or government agencies (PHP).   

If you bought shares in both those investment trusts (which you can do easily inside an ISA or SIPP for much more income tax and capital gains tax efficiency than buying an individual care home room), between the two investment trusts you would have exposure to hundreds of properties with a collective value of over £3bn, supported by some long term debt finance (like a mortgage), and very diversified exposure in terms of an individual tenant having a business or operation problem that caused cashflow to dry up - a far cry from owning an individual room in an individual care home.  You would simply invest a small percent of your overall investment portfolio in such funds, and take the generally reliable dividend payments of 3-6% a year as well as benefiting from long term growth in the property values. 

Although such investments are niche, it's still a heck of a lot more mainstream than investing in some unregulated financial promotion to buy a part of a building yourself that someone else is using to provide care services. 

dunstonh

If the money is so good, why does the developer/care home need to sell you rooms?
Loads of threads on these and in the public domain. Many end badly or are on route to heading that way.

noClue

just buy reits, but... https://www.youtube.com/watch?v=vfAH1ZCyDZw

barnstar2077

As above, if the returns are that good, why would they sell it to you?  Sounds an awful lot like the car park scam etc.

Run away, run away!

kangoora

barnstar2077 said:

As above, if the returns are that good, why would they sell it to you?  Sounds an awful lot like the car park scam etc.

Run away, run away!

Agreed, it appears identical to storage pods, car parking spaces, student accomodation, hotel rooms and loads of others that ended horribly for investors. I wouldn't go anywhere near this form of 'investment' (investment used in the loosest possible sense)
They're promising you 8% return p.a. on your 'investment' for 25 years (lease period). In these days of low bank interest if the business case was so good to guarantee 8% return to investors they could easily raise funds from a commercial lender with that return - if any commercial lender wouldn't immediately dismiss this.