Why investing in Retirement homes is a brilliant opportunity!



http://www.wealthwatch.tv Every so often you get a perfect storm of circumstances that presents a brilliant investment opportunity. I've been sensing such a situation building over the last six months in a particular niche in the commercial property sector and I want to share it with you today. You may have noticed that we're all living longer. Local authorities move heaven and earth to keep people in their own homes with multiple daily care visits. But what happens if they develop dementia or need round the clock care? The answer is that they are placed in specialist care homes that meet strict EU standards on size and facilities. Councils or commissioning groups pay anything from £500 a week to £1500 a week depending on the level of care needed. The problem is, only one such bed exists for every four that are needed. And the problem is only going to get worse. At the moment one in six of us is over sixty five. By 2050 a quarter of the UK population will be ready for their bus pass. Perhaps most scary of all is that eight million of us will be over eighty in just three and a bit decades time. The care sector already contributes over twenty three billion pounds to the UK economy. This figure will explode as the demographic time bomb I've described works itself through. So we've got big and growing demand, serious shortage of supply and one other very large fly in the ointment. My favourite friends, the banks. When they're not manipulating Libor rates or treating their customers like terrorists, they also refusing to fund off plan care home development. However, once the home is built and operational, they'll lend up to seventy five per cent of its value! For once, the banks' over cautious stance is a blessing. Because it means developers are forced to look for private funding to get their projects off the ground, which creates opportunities for the likes of you and I. We can invest in a suite in a new care home, typically with a hundred and twenty five year lease, receive a guaranteed rental income of ten per cent for ten years then either sell the suite or enter into a fifty/fifty profit share with the care home operator. But, like all investments, you need to apply some intelligence to it. The large groups are focusing on the big cities in the South of England, forcing up land prices, construction costs and operating expenses. I can see why they are doing this, but believe me there are just as many old people further North who need the specialist care that these homes can provide. And the local councils have the same duty of care to their citizens as those in the overcrowded South. The company I'm working with is targeting niche populations in the North of England, looking at potential sites then doing detailed due diligence. First, they look at local population and demand levels. Then, they meet with local authorities and commissioning groups to confirm what type of care they are looking for in that specific area. They look at the competition and their ability to provide specific types of care such as dementia and respite. Only if the numbers add up do they take things to the next stage. Which is to look at the specifics of the site. How many suites could it house? A minimum of fifty tends to be the point at which the care home will be financially viable in this type of location. What level of occupancy would be needed to make the facility financially sustainable? With the current shortage of supply, existing homes are operating at greater than ninety per cent occupancy. But that would be too high an assumption going forward. To give some confidence to investors, an independent feasibility study and valuation is commissioned by a major player like Savills, while the tax, financial and escrow arrangements are taken care of by a Big 4 player like KPMG. The first care home offered to private investors on this basis sold out in July. I expect the latest one to attract even more interest as word spreads about what I'm calling the hottest investment sector of the decade. It was a key topic at my recent sell out event, the Wealth Summit, and judging from the animated conversations afterwards quite a few of the delegates will be in the queue to reserve a suite or two. What's proving very popular is the developer finance option that means you can invest as little as thirty six thousand pounds and take the balance as an interest free developer loan. When you add in the positive cash flow over and above the loan repayments, you end up acquiring the suite for jsu over sixteen K net . You can get full details at www.whyretirementhomes.co.uk But promise me you won't tell anyone else. It can be our little secret.

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