INVESTING IN
ASSISTED LIVING
Investing in Assisted Living
Supported Living - an ethical investment indeed, providing homes for vulnerable adults suffering from mental illness or permanent disabilities, who deserve a normal life with a level of care that suits them. Not a hospital ward or alternate inadequate environments. Thousands are awaiting a supported living home.
What is it? Here we list the main features of a SL investment property and the benefits.
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A quasi-residential property investment. The property has an institutional tenant – a not-for-profit charitable organisation, which is also registered with the Financial Conduct Authority (FCA).
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With a 25-years lease agreement in place and no break clause – it's a great pension provider!
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The property features an FRI lease (full repair and insure) so ALL costs are covered - service charge, management fees, repairs, insurance etc., are all paid for by the tenant.
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The rent is set at 10% NET in year one and is CPI linked annually. Last year was 5%. It is also floored, so can never go down – A great hedge against inflation.
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With a unique exempt tenancy agreement in place, payments are made by HMRC's Department for Works & Pensions (DWP) – No risk of void periods or rent not being paid, ever!
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The property is income generating from day 1 of ownership as the tenant and lease is already in place prior to completion, so no risk with delays to completion etc.
A truly hands-off investment.
So, what are the preconceived negatives with supported living (SL) properties?
The price
The fact is SL properties are valued by the future income in place. Expect to see an average 30% premium to SL properties versus similar size/condition properties in the immediate area. This is a pure investment property. It is not and cannot be compared to BTL properties. The higher price is absolutely justified given the length and security of the and the quality of tenant and with a government backed rental agreement. No change in government or change in government policy can change an exempt tenancy under Section 117.
Financing
There are many factors that can have an impact on the lenders available. These can include: the net yield; the length of the lease; a break clause within the lease; the level of care required; experience of the care provider in place. But there are plenty of lenders available and with reasonable rates.
The awareness for SL accommodation has only just begun but will become common knowledge as an attractive alternative to standard buy-to-let property in the coming years.
For more information make an appointment and I’ll explain the benefits in more detail, and we can establish if this is something that fits with your investment profile.
Exit options
The development is purpose built with the severely disabled and mentally ill tenant in mind and so it can never be used by the owner.
If you wanted to exit, a local real estate agency would look at it. They certainly would find it easy to sell to their savvy investors.
Due to the severe shortage in supply and growing demand there's a plethora of housing associations, charities, community benefit societies, care companies and local authorities, all looking for more supported living properties.
Alternatively, it can be sold via your sales agent (me) or a dedicated reseller of supported living property to another investor, possibly to an existing investor in the same block looking to add to their portfolio, or elsewhere.
We have relationships with family office, PE, and pension funds and so we implement a mandatory buy-back agreement with all of our investors at the point of sale which provides for a minimum 30% return on capital appreciation within the first three years if an aggregated deal can be arranged.