Nursing home investments – Attractive for property investors

11 May, 2020

Nursing home investments – Attractive for property investors

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Investing in real estate is becoming an attractive proposition for more and more investors. The tangible asset is very popular. So-called nursing homes are particularly in demand. These include, nursing homes and other sheltered accommodation properties closely related to the accommodation of seniors and those in need of care. Many property and home owners have a propensity to consider property investments.

Nursing homes – currently very attractive for investors

Read on to find out why nursing home investments are currently attractive to investors.

In addition learn what else you should know about nursing homes as an investment.

nursing home investments
Nursing homes and properties can make good investments

What are the characteristics of a real estate investment at the moment?

Before we deal specifically with the investment in nursing real estate, we would like to briefly explain what is currently characterized by a real estate investment in general. Real estate brokers such as Paul and Partner as brokers from Wiesbaden are of course also familiar with these advantages and advise their customers on them.

First of all, there are some basic properties that real estate has been attributed to as a real asset for decades, namely:

  • Lasting value
  • Inflation protection
  • Intrinsic value
  • Good returns

In addition to these general advantages, there are currently other specific reasons why real estate investments are currently particularly attractive. On the one hand, these are the cheap mortgage rates, so that investors can finance the corresponding properties at a low rate.

On the other hand, real estate is in a growth market, which is impressively underpinned by real estate prices, which have been rising for more than five years. For example, if you buy a house in Wiesbaden, it’s more likely to be worth five years from now than it is today. These facts mean that investing in real estate is currently very attractive to a growing number of investors.

What distinguishes nursing home investments in particular?

With a planned investment in real estate, investors can choose between different types of property. Money is currently most commonly invested in the following types of real estate:

  • Student dormitories
  • Vacation resorts
  • Residential parks
  • Shopping centres
  • Hotels

Nursing home investments

All of the property types mentioned are commercial properties. The nursing home investments, in particular, can stand out from the previous list. This is primarily due to the fact that it is real estate in a real growth market, namely the care market. But who owns most of the nursing homes ?

Nursing real estate is particularly popular because the supply is significantly smaller than the current demand. Experienced real estate agents such as Paul & Partner as brokers in Wiesbaden often find this to be the case. This certainly has to do with the nursing emergency that we have in Germany. This refers not only to the staff but also to the objects in which the elderly and people in need of care are supposed to be accommodated.

The growth market for nursing homes is also due to demographic developments. This means that in the future there will be more and more older people at an older age. This means that the number of people in need of care will increase significantly again in the next 10 to 20 years.

With a future promising secure growth the nursing home investments market needs to look at ways of optimising performance and growth. Every aspect of running a nursing home will become increasingly scrutinised in a competitive market. Management of all aspects of running a nursing home property from writing progress notes to reviewing property maintenance will be under scrutiny.

What types of care home properties are there?

The term nursing real estate mainly includes real estate in which older and/or people in need of care live and are partially cared for. On this basis, there are in particular the following types of care properties:

  • Nursing homes
  • Retirement homes
  • Senior housing
  • Housing developments (residential quarters) for seniors

Care properties that are of a higher standard and are accordingly more expensive. However, being more expensive for the buyer of a flat or for the tenant, makes them particularly attractive for investors. With well-situated tenants, a particularly noteworthy return can be achieved in the area of ​​nursing homes. If you basically want to buy real estate in Wiesbaden, for example, and don’t yet know which type from among the range of nursing home investments is the right one, you can also trust Paul and Partner as experienced brokers from Wiesbaden.

Direct investment in nursing homes: Market knowledge urgently recommended

Now we come to the question of how you can invest in nursing homes if you are also convinced that it is a growth market and that yields will remain stable or even increase in the coming years. The first way is a direct investment in nursing homes.

This means that, for example, you buy a nursing home and then take care of the operation or delegate this task to an administration. Your income then consists of the rents paid by the individual in need of care. This income is often relatively secure because the person in need of long-term care either has a good pension or the long-term care insurance covers a larger part or sometimes even all of the costs.

The second alternative way is to invest indirectly in nursing homes. This is a particularly sensible option for private investors who do not have sufficient market knowledge or do not have enough capital to make a direct investment. There are several options available on the market for indirect nursing home investments, in particular:

  • Open real estate funds
  • Closed real estate funds
  • Real estate loan
  • Crowdfunding or crowd investing

However you raise capital for investment

Both when investing in closed-end real estate funds and when investing using crowdfunding, you decide to invest your money in individual projects. However, be aware of the risks. If the project is not as successful as planned, you may incur losses from nursing home investments for the corresponding investment.

A somewhat safer way is to opt for an open real estate fund. In this case, however, you should make sure that the focus of the fund is actually nursing real estate.

In contrast to investment via closed-end real estate funds, less capital is needed to finance projects using crowdfunding or crowd investing. The minimum investment amount is often only between 200 and 500 euros. In addition, crowd investing platforms offer some services and by distributing your money over several projects, you achieve a recommended risk diversification or diversification.

What return can be achieved with nursing home investments?

If carefully managed nursing homes bring a good return in some countries

The return you could achieve from your investment nursing home investments depends very much on the individual property and location. Bear in mind this may also lead to an impairment or an increase in value for most types of property.

So it may well be that comparable objects have different values. For example, if you buy a house in Wiesbaden or Düsseldorf. The location is not insignificant for successful nursing home investments. Only an average statement can be made about the return on investment in nursing homes and nursing home investments. The factors influencing the actual yield are simply too complex to be considered as a flat rate.

The following factors and circumstances influence the possible return that you can achieve with your nursing home investments:

  • Property location (city, district, region)
  • Condition of the property (need for a renovation?)
  • Financing costs (mainly mortgage interest)
  • Rental prices
  • Number of apartments
  • Other factors

To give a number nevertheless: In recent years, investors have achieved returns of between 3.5 and 5.5 percent on average through nursing home investments. These figures also underline that investing in care facilities can be a worthwhile investment at the moment.

However, please keep in mind that the return is not only dependent on the performance of the property and rental income. Furthermore, the costs must be considered. Every Euro or Dollar of expenditure naturally reduces the achievable income or the return.



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