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Care Home Investments....Good Idea ?

Someone I know has become interested in investing in a care home scheme, if I'm honest I'm also curious. As I understand it you buy a room in a care home. The company that sells the rooms guarantees rent from the room for a period of 5, 10 or 15 years. They guaranteed the rent even if the room is empty. Once the term is up (5,10 or 15yrs) the company will buy it back, their buyback price is fixed. It works out around £23,000 on a £90,000 investment (over 10 years). This isn't so great, but the guaranteed rental income at 10% seems attractive.
I'm told the buyer would get their name on the deeds of the room. So my question is:

Has anyone got any negative thoughts regarding this scheme?
For instance how on earth would you get your money back if the company went bankrupt?

Many thanks in advance
«13

Comments

  • Stubod
    Stubod Posts: 2,141
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    ..I think your last question about sums it up.

    In the same vein as Los Pandos / caravan sites / motor home hire / car parking spaces et all.....
    .."It's everybody's fault but mine...."
  • sanfairyanne
    sanfairyanne Posts: 158
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    Thanks Stubod,

    I guess some people do quite nicely from this scheme. Perhaps it's one of those investments where you definitely don't put all your money into this one area.
  • davidmcn
    davidmcn Posts: 23,596
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    I'm told the buyer would get their name on the deeds of the room. So my question is:

    Has anyone got any negative thoughts regarding this scheme?
    For instance how on earth would you get your money back if the company went bankrupt?
    Well, quite. No point having a rental or buyback "guarantee" if they go bust.

    And it seems pretty unlikely that the room is going to have "deeds", or that you'd otherwise have the ability to deal with your interest on the open market.

    File in the same place as all the student accommodation investment opportunities which work along the same lines.
  • sanfairyanne
    sanfairyanne Posts: 158
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    Thanks Davidmcn,

    I appreciate your reply
  • eddddy
    eddddy Posts: 16,294
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    Has anyone got any negative thoughts regarding this scheme?

    A few years back, I read the 106 page legal pack for a similar scheme - buying a hotel room.

    It was breathtakingly unfair. I'm pretty sure that anybody investing the £50k to £60k per hotel room was destined to lose all of it - plus the ongoing annual charges.

    The buyback conditions were a great example. To paraphrase:
    • We will guarantee to buy back the hotel room after 5 years...
    • ... but only if we have sufficient funds to do so
    • We will not tell you what constitutes sufficient funds
    • We will not tell you how much funds we have
    • We will decide whether we have sufficient funds, and our decision will be final
    • We will not enter into any discussion with you on this matter

    So no guaranteed buy back. And probably nobody interested in buying it off you - so probably a complete loss of £50k to £60k...

    ...plus £1.5k per year in charges for the next 150 years.
  • sanfairyanne
    sanfairyanne Posts: 158
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    Thanks edddy, you guys are a massive help
  • elsien
    elsien Posts: 32,523
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    You are aware that care homes are closing at a rate of knots and one of the larger chains is on the verge of going into administration?
    All shall be well, and all shall be well, and all manner of things shall be well.

    Pedant alert - it's could have, not could of.
  • sanfairyanne
    sanfairyanne Posts: 158
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    I wasn't Elsien, as I say this really is for someone else, so I was only mildly curious myself. I'm glad to have learned something tonight and will pass this info' on.
  • eddddy
    eddddy Posts: 16,294
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    elsien wrote: »
    You are aware that care homes are closing at a rate of knots and one of the larger chains is on the verge of going into administration?

    Yep - but that's very much secondary.

    These types of investment schemes are generally bad (almost verging on a scam).

    Even if the care home industry was booming, these investment schemes would typically be bad.
  • Larac
    Larac Posts: 945
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    This is a similar debate to whether to invest in a 'student pod' - they offer as headline figures as similar % -but going into the small print, subject to service charges, it comes right down. That's without scrutinising the 'legals' and the dichotomy of what happens if the government in the future decides to reduce down the number of places. Could be loads of these 'pods' not generating rent as a consequence.
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