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Nursing homes for private investors – opportunities and risks
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The most important things in brief:
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Nursing apartments in residential and nursing homes are a growing future market that investors have also discovered for themselves.
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Anyone interested in buying a nursing home should carefully inform themselves and consider a few important points.
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Nursing homes are generally suitable as an investment, but not every property is profitable and generates a sufficiently high return.
What are nursing homes?
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Nursing homes are usually apartments (nursing apartments) that belong to the following facilities, for example:
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Retirement and nursing homes
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Homes with associated care
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mixed homes (assisted living and care)
Why are the properties recommended as investments?
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Today, care facilities are divided into individual care apartments in a similar way to condominiums under the WEG (Condominium Ownership Act). The difference, however, is that the resident does not rent the property from you. Rather, the rental agreement is concluded with the operator of the respective residential and nursing home . This operator also takes on a large part of the rental and administration tasks. By renting out the care apartment, you achieve a rental return . The lease agreement with the nursing home operator is usually designed for a period of 20 to 25 years with an option to extend for the tenant. The pro rata rent is paid regardless of the actual occupancy. Since the operator also takes care of finding and changing residents, the owner has no contact with the residents or their tenant. Likewise, there are no rental or subletting worries and the operator takes care of the essential maintenance measures, so that significantly fewer reserves need to be set aside compared to a conventional condominium.
The ageing society in Germany is increasing the demand for places in nursing homes. For this reason, more and more private individuals are interested in nursing apartments as a capital investment.
What are the advantages of nursing homes?
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Nursing apartments and units in assisted living facilities offer you various advantages. We have listed some of them below:
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The purchase is often commission-free because you purchase the property directly from the developer.
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Investing in the future market of care – a social, meaningful and attractive investment
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Automatic rent adjustment (inflation compensation) through indexed rental contracts (consumer price index according to the Federal Statistical Office)
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No rental costs as the rental is handed over to the operator.
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By handing over all tasks to the operator and manager of the care property, there is hardly any time-consuming administrative effort .
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As an investor, you can take advantage of tax benefits .
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A contractually agreed occupancy right guarantees you or your relatives priority on the waiting list for a vacant nursing apartment in the event that you yourself require care.
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Attractive return opportunities .
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Securing your property through your own entry in the land register .
What should I pay attention to when buying?
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Nursing homes do not only offer opportunities for investors. It is important that you know the risks of the property:
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The expected return depends on many factors. The financial incentives from the property for sale do not always turn out to be realistic. The promised return usually corresponds to the initial gross rental yield, which is calculated from the purchase price and the first year's rent.
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When purchasing a new building, the investor relies on the property developer . It is therefore all the more important to check the company's references.
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A major factor influencing all real estate is the location . Also consider possible changes that could affect the future value of the property.
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The financial situation of the facility affects how profitable your care apartment is overall.
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As with other real estate, please note that your investment is subject to interest rate risk . Rising interest rates can reduce your income.
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Negligent management of a property can lead to a reduction in value, limited rental potential and possibly increased repair costs.
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An investment in a new building to be constructed carries the fundamental risk of a construction delay , which may postpone the start of rent payments.
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Another significant risk is the insolvency of the operator . If the operator goes bankrupt, there is a risk of loss of rent.
What should I pay attention to when buying?
​
Nursing homes do not only offer opportunities for investors. It is important that you know the risks of the property:
-
The expected return depends on many factors. The financial incentives from the property for sale do not always turn out to be realistic. The promised return usually corresponds to the initial gross rental yield, which is calculated from the purchase price and the first year's rent.
-
When purchasing a new building, the investor relies on the property developer . It is therefore all the more important to check the company's references.
-
A major factor influencing all real estate is the location . Also consider possible changes that could affect the future value of the property.
-
The financial situation of the facility affects how profitable your care apartment is overall.
-
As with other real estate, please note that your investment is subject to interest rate risk . Rising interest rates can reduce your income.
-
Negligent management of a property can lead to a reduction in value, limited rental potential and possibly increased repair costs.
-
An investment in a new building to be constructed carries the fundamental risk of a construction delay , which may postpone the start of rent payments.
-
Another significant risk is the insolvency of the operator . If the operator goes bankrupt, there is a risk of loss of rent.
Would you like to learn more about this topic?
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Nursing homes are considered promising investments , which, however, involve a certain risk. For this reason, it is advisable to look into the topic in detail and to seek professional advice. Our experienced MLP consultants will show you what is important when buying and which nursing home property is the best option. Pension provision is suitable for you. Contact us and arrange a personal consultation.
Comprehensive advice and support from MLP
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In addition to detailed advice on selecting the property and incorporating the property investment into your personal asset structure, we are also happy to take care of financing and security. Simply arrange an appointment with your MLP advisor.