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Care facilities: An investment that the market needs.

INVESTMENTS IN NURSING CARE FACITILITIES

Studies have shown that about 15,000 nursing beds have to created every year. Without private investment in housing for senior citizens, there is no hope to reach this number. In many cases, communities and small non-profit operators do not have the necessary reserves to renovate older housing for senior citizens or to build new one. In addition, existing senior citizens’ homes cannot continue to operate or have to be replaced with new buildings, because of the regulations for building homes has changed or the residents’ usage behavior has changed. This will result in a higher need for modern facilities nationwide for the foreseeable future, which makes nursing care facilities a good capital investment for institutional investors, who are looking for sustainable investments in real estate.  

THE OPERATOR MODEL MINIMIZES EFFORT AND OFFERS SECURITY

In comparison to traditional residential and office real estate, nursing care facilities offers a range of important advantages. Reliable rental income is guaranteed over many many with the help of professional operators who have many years of experience.  

 

Operators of nursing care facilities are concerned with the running operation of the property, renovation work, letting and vacating. Nursing care facilities are a clearly defined asset class and are relatively easy to finance. A significant portion of the property can be refinanced by long-term care and social insurance funds. Higher yields than residential investments, currently between 5 % and 6 % make this asset class attractive for investors.

WHY INVESTMENTS IN NURSING CARE FACILITIES ARE SO LUCRATIVE

  • Secure rental income: Long-term lease agreements (usually 20 years) with the operator of the nursing care facility secure rental income – and guard against high vacancy rates.
  • Tax advantages: Nursing care facilities can be written off over 50 years at 2 percent per year, the non-depreciable land amounts to about 5 percent.
  • Attractive yields: Secure rental incomes in combination with tax advantages make it possible to generate yields of up to 6 percent per year.
  • Minimal effort: The operator of the nursing care facility handles the leasing of individual rooms and is responsible for operating costs, including electricity, water and gas.
  • Minimal risk: An investment in a nursing care facility is crisis-proof and stable, and is not subject to dramatic market fluctuations.  
  • Value add: As a result of the growing market and automatic rental increases, the value of the real estate increases automatically. This also increases resale yields.

 

 

WHAT INVESTORS NEED TO KNOW ABOUT NURSING CARE FACILITIES

  • Typically, when an investor acquires a nursing care facility, they also acquire a lease agreement that extends over 20 to 25 years. Increases in rent are just as clearly guaranteed in the lease as are the provisions assigning responsibility for major maintenance works to the operator.  

 

  • The owner does not have compile operating cost statements or undertake any other administrative duties.  

 

  • Not everything marketed as housing for senior citizens is a nursing care facility in the eyes of the law. Each state has regulations concerning nursing care facilities, which specify exactly how a nursing care facility is to be built.

 

  • Nursing care facilities are usually only marketed by specialized agents.  

 

  • It is not always the case that the dimension and future demand for a nursing care facility is accurately forecast. This can only be done by expert developers and operators, with many years of experience. Investors are therefore advised to follow the advice of experienced developers and operators.

 

TERRAGON, with its nationwide network of partners and developers, has a strong track record as a reliable and serious providers and advisor in the senior and nursing care real estate sectors. In relation to development of nursing care facilities, TERRAGON has collected a wealth of experience from which investors can profit.