UK Care Home Investment – The Facts

The financialization of the care industry has created a massive opportunity for investors to make a well-calculated investment as well as making a positive contribution to society.

In recent years, the United Kingdom government has struggled to keep up with demand for specialist care homes. This has caused a ripple effect in posing a risk to the healthcare needs of senior citizens due to the lack of available rooms in care homes and even lack of quality in some of the already existing homes. The government has reached out to private homes to help bridge the gap in the market, and ensure that elder citizens are receiving the healthcare they need. So what is it specifically about this £16 billion industry that’s interested the financially savvy?

The Facts - UK Care Homes Investments

Market Overview

Earlier in 2016, the NHS Trust deficit was calculated at £2.45 billion and in consequence, external investment was deemed necessary to help support the industry and maintain the supply of healthcare needs.  Not only are there budget cuts leading to the need of external aid, there is also a continuously growing demand. Currently, 18% of the entire UK population is made up of people over the age of 65, and according to predictions from the Office for National Statistics, the percentile will grow to 24% by 2035.

Regarding industry growth, care home investments is deemed one of the fastest growing sectors globally, consuming over 10% of the GDP in most countries. Age UK, calculated that 16% of retirees are living in poverty with a household income of less that 60% of the average household. This means that there is definitely pressure on government funded care for these citizens that are unable to afford it – making even more room for investors.

 

What’s the process behind investing in care homes?

Put briefly, the process of investing is composed of the following steps;

  1. The care home operator will identify a care home in need of refurbishment, improvement or one that is already high performing
  2. The care home operator will then purchase the freehold of the property
  3. The care home operator then sells individual units to you as an investor on a 250-year lease with title deeds registered in your name on the UK land registry.
  4. Investors will lease their unit back to the care home operator who will then handle the maintenance and tenancy at no extra cost, and generate your quarterly return

The types of care homes vary as well. Investors have the choice of investing in local authority funded care homes or luxury care homes, from specialised care to general care. Your investment manager can advise you on the best opportunities based on the location, current state of the market and the demand of that specific home. Contact HyLife Investments to see which care homes are worth investing in today.

 

Risks and Rewards

Care homes are a high-yielding asset-backed investment opportunity that provide vital funds to develop highly sought after social infrastructure. The risks are minimal in comparison to other investment products with similar returns due to the nature of the healthcare industry.

Benefits

  • Diversify your investment portfolio
  • Make an ethical investment
  • High yielding 8%-10% pa
  • Threshold for entry is relatively low (typically from £65,000)
  • Hands-free investment as the unit is fully managed by care home operators
  • Great buy-back options from just three years of ownership

Risks

  • Luxury care homes may demand a higher weekly fee per room. However, they are affected by the economy and rely on individual’s private wealth. For this reason, they are considered to be higher risk. HyLife only works with local authority funded homes.

Where to Invest

Market Inspector conducted research to evaluate the most in-demand locations for retirement within the UK. The factors used to assess each location included life expectancy rates, access to care, standard of living and crime-rates (to name a few). They considered cities with over 100,000 inhabitants and excluded all the towns and metropolitan boroughs in order to provide an accurate representation of the market. In England, the top two locations for retirement are Dorset and Surrey. These would be ideal areas to invest as Dorset holds the country’s third highest concentration of people over the age of 65 and has been notoriously popular with the retiree demographic. This means that demand for care is incredibly high in this area. Moreover, Surrey is a location in which its citizens receive the highest average annual retirement income, at £21,200 – providing  fruitful prospects for those interested in investing in luxury care homes especially.

On the other hand, some of the hottest opportunities for investors are currently located in Wales. This is due to the recent changes in Welsh legislation surrounding the care savings limit. From April 2018, the care savings limit in Wales increased by £10,000 to £40,000. This means that more people are eligible to receive funding for care from local authorities. Meanwhile, citizens in England are required to prove that they have savings or assets amounting to less than £23,250 in order to receive government funding for their care.

 

Opportunities

HyLife Investment offers calculated, high yielding care home investment opportunities. Here are a few of the government funded, specialised care homes that we have on offer;

PLAS-Y-BRYN – Wales

Important Features:

  • Type of service:Care home with nursing registered for a maximum of 36 service users
  • Local Authority / Social Services: Carmarthenshire County Council
  • Registered care categories:Dementia, old age, physical disability & sensory impairment
  • Specialist care categories:Alzheimer's, epilepsy, hearing impairment, multiple sclerosis, Parkinson's disease, schizophrenia, speech impairment, stroke & visual impairment
  • Weekly charges guide:£550 - £700

MANOR PARK – Wales

Important Features:

  • Type of service:Care Home only (Residential Care) registered for a maximum of 28 service users
  • Local Authority / Social Services:Wrexham County Borough Council
  • Registered care categories:Dementia, mental health conditions & old age
  • Specialist care categories:Alzheimer's and challenging behaviour
  • Weekly charges guide:£500 - £700

PONTYPRIDD – Wales

Important Features:

  • Type of service:Care Home with nursing, Registered for a maximum of 58 Service Users
  • Local Authority / Social Services: Rhondda Cynon Taff County Borough Council
  • Registered care categories:Dementia, mental health condition, old age & physical disability
  • Specialist care categories:Hearing impairment & visual impairment
  • Weekly charges guide: £650 - £750

For all three opportunities, the figures and key elements you’ll be looking at as an investor are as follows;

  • From £64,999 to £149,999
  • 250-year lease
  • Immediate returns
  • 8%-10% assured net returns per annum
  • Demand for beds expected to exceed 40,000 by 2020
  • Completely operational: No development risk
  • Fully managed & hands-off investment opportunity
  • Secure buy-backs with capital uplift payable
  • Strong performing care homes with a solid track record
  • Risks in care home investments are tackled because the provider takes care of management costs AND provide a specialised team

The financials of investing in care homes with HyLife

The process of investing in care homes with HyLife is very straight forward as you have a dedicated portfolio manager to help with the transaction. Post investment your portfolio manager is tasked with keeping you up-to-date with your investment as well as helping you exit the investment should you wish or should another opportunity surface.

The minimum investment amount with care homes is £65,000, this will secure a care home suite in a specialised care facility in the UK. Currently, most of HyLife’s opportunities are based in Wales following the legislation changes in minimum savings limit (described above).

To better understand the financials we’ve put together a timeline of facts and figures:

Month 1:

Invest with HyLife into a specialised care home of your choosing and receive title deeds registered on the UK land registry. Full fact sheets are provided to help identify which care home suits your preferences and portfolio best. All of HyLife’s care homes are operational and therefore the investor receives an immediate income. Apart from the initial legal fee of £1,000, the investor is not charged any additional upfront or ongoing running costs throughout their investment term.

Month 3:

Receive your first returns instalment! The return is fixed at 8-10% dependent on amount invested. If £100k was invested, your first four instalments would be of £2,250 (9% spread across 4 instalments) in year one. In year two and three, your return would rise to 9.5% giving you 4 yearly instalments of £2,375. Finally from year four onwards your investment return would rise to 10% pa divided across four payments throughout the year, ie 2.5% which in this example is £2,500 per quarter.

Month 35:

Your HyLife Investment Portfolio Manager will get in touch asking if you wish to proceed with your investment or if you would like to exit in month 36 (3 years after purchase). If you wish to exit your investment then HyLife will take care of it on your behalf and return 100% of your investment with capital-uplift. If you wish to keep your investment then you will continue to receive quarterly payments.

 

Other investment amounts:

Care Home Investment HyLife Returns

How to exit a care home investment?

The care home operator offers investors an assured buy-back at year 3, 5, 9, 15 and 20 with increasing capital uplift. However, investors are also able to sell their care home suite to any third party at any time and at their own discretion.

See below the details of the operator’s contractually assured buy-back options:

Buy-Back Options for Care Home Suite at HyLife Investments

*capital uplift + total quarterly returns throughout the duration of investment

Find out more by getting in touch!

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