Big returns are available if you invest in care homes. But is it an investment you can justify?
Where do you draw the line when it comes to investing? Do you care if your money is pumped into tobacco or gambling firms? What about arms manufacturers?
Generally, I have been fairly laid back about where my money has ended up. But when it comes to care home investments, I seem to have found the line I simply cannot cross.
Profiting from the infirm, the elderly and the mentally ill is just too much for me. Here's why.
The “hottest investment sector of the decade”
What do you think of when you think of care homes? Personally, I think of the lovely set-up where my grandmother has lived for the past year, where the staff work incredibly long hours dealing with people with severe dementia who simply cannot care for themselves.
I don’t look around and see the opportunity to make a few quid.
Plenty of others do though. Graham Rowan, a “wealth coach and renegade investor”, says on his website that dementia care home projects represent “the hottest investment sector of the decade”. Meanwhile Principal International describes care homes as “one of the UK’s most exciting property asset classes”.
So just why are some investors getting so excited?
The returns on your investment
The supposed returns from pumping your money into what is essentially care home buy-to-let look significant.
One sold out project from Principal International promised a 10% net rental return, with rooms at the development in Yorkshire starting at £95,000.
Meanwhile, on Select Portfolio you can currently invest in a room in a care home in Greater Manchester for £59,500. In return you get 10% annual returns, with the first three years’ returns paid in advance. What’s more, the firm promises to buy back the room from you after 10 years at 105% of the purchase price.
The figures look even better at CareInvest, from the aforementioned Graham Rowan. Invest outright at £75,000 and you’ll get £9,000 back a year. Or you can take the first two years’ rental income as an upfront discount, meaning you only need to stump up £57,000 at the outset.
On top of that, there’s the option to sell back for 125% after 10 years.
The care home conundrum
Care homes are big business. The sums charged for care are astronomical – we are talking thousands of pounds a month. And with the Government pushing back its plan to cap care costs at £72,000 until 2020, it’s not about to get cheaper any time soon.
We will need more of them too. According to the Alzheimer’s Society, there are currently 850,000 people with dementia in the UK. This will pass one million by 2025, with someone developing dementia every three minutes.
Someone will have to pay for specialist care facilities to look after these people. I can cope with that. It’s the idea that buy-to-let is creeping into the sector that sticks in the craw.
Perhaps I’m just being hypocritical. I don’t expect the state to run all care homes, and I don’t have a problem with businesses stepping into the breach and offering them. There are profits to be made there, and I can live with that.
It’s inviting individuals to buy a single room and rent it out that bothers me.
Is it just because of who the renter is? If the room was being rented out to a student, or a young professional, I wouldn’t object to it. But because it is a frail old person, suddenly it feels exploitative.
What do you think? Is investing in care homes ethically acceptable for individuals? Or should it be left to specialist businesses? Let me know your thoughts in the comments box below.
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