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  • FIRST POST
    • sanfairyanne
    • By sanfairyanne 15th May 18, 4:30 PM
    • 39Posts
    • 4Thanks
    sanfairyanne
    Care Home Investments....Good Idea ?
    • #1
    • 15th May 18, 4:30 PM
    Care Home Investments....Good Idea ? 15th May 18 at 4:30 PM
    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
Page 1
    • Stubod
    • By Stubod 15th May 18, 4:33 PM
    • 507 Posts
    • 376 Thanks
    Stubod
    • #2
    • 15th May 18, 4:33 PM
    • #2
    • 15th May 18, 4:33 PM
    ..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.....
    • sanfairyanne
    • By sanfairyanne 15th May 18, 4:38 PM
    • 39 Posts
    • 4 Thanks
    sanfairyanne
    • #3
    • 15th May 18, 4:38 PM
    • #3
    • 15th May 18, 4:38 PM
    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
    • By davidmcn 15th May 18, 4:38 PM
    • 8,539 Posts
    • 8,999 Thanks
    davidmcn
    • #4
    • 15th May 18, 4:38 PM
    • #4
    • 15th May 18, 4:38 PM
    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?
    Originally posted by sanfairyanne
    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
    • By sanfairyanne 15th May 18, 4:43 PM
    • 39 Posts
    • 4 Thanks
    sanfairyanne
    • #5
    • 15th May 18, 4:43 PM
    • #5
    • 15th May 18, 4:43 PM
    Thanks Davidmcn,

    I appreciate your reply
    • eddddy
    • By eddddy 15th May 18, 4:48 PM
    • 6,902 Posts
    • 6,832 Thanks
    eddddy
    • #6
    • 15th May 18, 4:48 PM
    • #6
    • 15th May 18, 4:48 PM
    Has anyone got any negative thoughts regarding this scheme?
    Originally posted by sanfairyanne
    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
    • By sanfairyanne 15th May 18, 4:53 PM
    • 39 Posts
    • 4 Thanks
    sanfairyanne
    • #7
    • 15th May 18, 4:53 PM
    • #7
    • 15th May 18, 4:53 PM
    Thanks edddy, you guys are a massive help
    • elsien
    • By elsien 15th May 18, 4:55 PM
    • 17,131 Posts
    • 43,200 Thanks
    elsien
    • #8
    • 15th May 18, 4:55 PM
    • #8
    • 15th May 18, 4:55 PM
    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
    • By sanfairyanne 15th May 18, 4:58 PM
    • 39 Posts
    • 4 Thanks
    sanfairyanne
    • #9
    • 15th May 18, 4:58 PM
    • #9
    • 15th May 18, 4:58 PM
    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
    • By eddddy 15th May 18, 5:02 PM
    • 6,902 Posts
    • 6,832 Thanks
    eddddy
    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?
    Originally posted by elsien
    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
    • By Larac 15th May 18, 5:03 PM
    • 845 Posts
    • 529 Thanks
    Larac
    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.
    • lisyloo
    • By lisyloo 15th May 18, 5:13 PM
    • 22,499 Posts
    • 11,109 Thanks
    lisyloo
    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?
    Originally posted by elsien
    I was aware of this as recently we had to find somewhere for my FIL. We were very "lucky" that an empty room came up where we wanted. I say lucky as someone else had to die for that to happen.

    OT for investments, but it's quite worrying that in the immediate term our hospitals will be stuck with paying for whom were pending 3K per week in a hospital bed.
    • xylophone
    • By xylophone 15th May 18, 5:51 PM
    • 26,495 Posts
    • 15,735 Thanks
    xylophone
    Had you considered a REIT specialising in this sector?

    https://www.targethealthcarereit.co.uk/what-we-do/our-business/
    • AnotherJoe
    • By AnotherJoe 15th May 18, 5:57 PM
    • 10,616 Posts
    • 12,156 Thanks
    AnotherJoe
    OP, tell your friend to set fire to his money in the street, as it will save a lot of heartache and angst, And get the loss over with quicker, so he can move on with his (or her) life.

    Bottom line, if something like this isn't an actual deliberate scam, the end result will be the same as if it was, bye bye 90k.
    • sanfairyanne
    • By sanfairyanne 15th May 18, 5:58 PM
    • 39 Posts
    • 4 Thanks
    sanfairyanne
    xylophone can you suggest any plus point as to why I might consider REIT?
    • sanfairyanne
    • By sanfairyanne 15th May 18, 6:06 PM
    • 39 Posts
    • 4 Thanks
    sanfairyanne
    Thanks AnotherJoe,
    Damned I'm so pleased I logged on tonight
    • AnotherJoe
    • By AnotherJoe 15th May 18, 6:12 PM
    • 10,616 Posts
    • 12,156 Thanks
    AnotherJoe
    xylophone can you suggest any plus point as to why I might consider REIT?
    Originally posted by sanfairyanne
    Well I will. It spreads the investment out amongst multiple care homes and care home companies and avoids dubious (I am being kind here) schemes of the sort mentioned.

    This still says nothing about whether this is a good investment area, but if you wanted to invest in this area, this would be a reputable place to do it.

    I would say this area is a lousy investment though, for the simple reason that although the demand for these homes is growing, they are inherently expensive to run, which mean so most people can not afford them which means that inevitably government gets involved which means high costs and poor returns, by definition.
    • sanfairyanne
    • By sanfairyanne 15th May 18, 6:15 PM
    • 39 Posts
    • 4 Thanks
    sanfairyanne
    Well I will. It spreads the investment out amongst multiple care homes and care home companies and avoids dubious (I am being kind here) schemes of the sort mentioned.

    This still says nothing about whether this is a good investment area, but if you wanted to invest in this area, this would be a reputable place to do it.

    I would say this area is a lousy investment though, for the simple reason that although the demand for these homes is growing, they are inherently expensive to run, which mean so most people can not afford them which means that inevitably government gets involved which means high costs and poor returns, by definition.
    Originally posted by AnotherJoe
    Thanks, AnotherJo, I'll be sure to pass this on.
    • AdrianC
    • By AdrianC 15th May 18, 7:20 PM
    • 18,408 Posts
    • 16,619 Thanks
    AdrianC
    23k return over 10 years on a 90k investment is 2.5%pa.


    That's lousy, even before the risk.
    • sanfairyanne
    • By sanfairyanne 15th May 18, 8:05 PM
    • 39 Posts
    • 4 Thanks
    sanfairyanne
    23k return over 10 years on a 90k investment is 2.5%pa.


    That's lousy, even before the risk.
    Originally posted by AdrianC
    Yes AdrianC, That's the return on the rooms sale price. The rent is supposed to be a guaranteed 10% (depending which company).

    Considering nobody here has had a good word to say about this investment I think I can convince my work colleague to think of something else to invest in.
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