Retirement Homes Make Good Investments
Moscow, Russian Federation, September 2, 2015 (Newswire.com) - New research by Tranio, international property broker, shows that retirement homes in Europe and the US are profitable investments. This report explores the real figures behind profit forecasts and advantages like demand growth, revenue guarantees, yields and financial incentives. This market, however, is not for every investor as it has a higher market entry threshold and can be strictly regulated by national legislation.
Benefits
Specific aspects of this market make it a lucrative investment vehicle:
- steady demand and growth due to ageing nations
- high occupancy rates at about 90%
- 5-year-plus contracts with guaranteed revenue
- high yields of 7% and over
Above average yields
Retirement home yields are approximately 7%, reaching 15–20% in certain countries depending on concessions, subsidies and grants. The latter is dependent on the duration of proprietorship and ownership of the management services.
With gross profit margins at about 30% of the total income, a retirement home with 60–80 beds in the UK generates an average annual profit of £650,000, or about £9,000 per bed.
Financial incentives
Some countries offer incentives to retirement home investors. These include simplified procedures of obtaining a residence permit, tax exemptions, special mortgage terms and state protection from the tenants’ inability to pay.
What to keep in mind
There are higher construction and maintenance costs. Building a retirement home is 50% more expensive than a “regular” building and takes up about half of the total investment budget. Remaining funds go into planning, land acquisition as well as additional and unforeseen expenditures. Maintenance (utilities, taxes and minor repairs) claims 5–6% of the income. A considerable fraction of the revenue is spent on the staff wages. Laws governing the running of retirement homes vary from country to country, making it more or less difficult to enter the market. Financial incentives are also often dependent on the length of ownership.
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Get the full report here. It’s free to use and republish with a reference to Tranio.
Tranio is an international real estate broker with a large property catalogue working with agencies and developers across the world to help clients buy and lease property at no extra cost. Our editorial office publishes up-to-date news, reports and forecasts for foreign realty and has been cited by major business media players such as Bloomberg, Vedomosti, Kommersant, RBC and more.
