top of page

OPENING UP A WORLD OF CHOICE

The Appeal of Assisted Living Investments

Assisted Living accommodations, particularly those falling under Section 117 of the Mental Health Act, offer an attractive alternative to traditional residential investments.

 

These properties provide housing with extra care services for individuals who can live independently but require assistance with daily tasks such as meals, housekeeping, medication management, and personal care. This sector not only delivers high yields but also contributes positively to local communities by supporting vulnerable populations.

Before You Invest in Social Housing: The Shocking Truth You Need to Know!

Unlock the Secret Benefits of Investing in Assisted Living Real Estate Investment Trust – See the Shocking Comparison Below!

Analytical Analysis

When comparing purchasing a buy-to-let assisted living property to investing in a Real Estate Investment Trust (REIT), key factors must be considered. While a buy-to-let unit might seem to offer higher gross returns, it comes with hidden costs and increased responsibilities, such as income tax, stamp duty, legal fees, market fluctuation risks, and limited capital appreciation. Additionally, the exit strategy is poor, as selling the property can be challenging, buy-back options only work once a portfolio has been aggregated and an institutional offtake partner is in place. Aligning the stars can often be impossible. Once you own it, be prepared to own it.

COMPARISONS

REIT

BUY-TO-LET

Entry Investment

Maintenance Fees

Management Fees

Voids

£100,000

£0

£0

£150,000

£0

£0

None

None

Stamp Duty

Gross Annual Yield

Diversification

Income Tax

£0

5 - 10% Compounded

Multiple Assets

£4650

10%

Single Unit

0%

45%

Capital Growth

Surveyor Fees

Legal Fees

ROI

£0

£0

Market could go Down

£1500

£1600

5%+

4%

Capital Growth

Surveyor Fees

Legal Fees

ROI

21 X Average Multiple

£0

£0

Market Could Go Down

£1500

£1600

5%

4%

The Appeal of Assisted Living Investments

Assisted Living accommodation, particularly those falling under Section 117 of the Mental Health Act, offer an attractive alternative to traditional residential investments.

 

These properties provide housing with extra care services for individuals who can live independently but require assistance with daily tasks such as meals, housekeeping, medication management, and personal care. This sector not only delivers high yields but also contributes positively to local communities by supporting vulnerable populations.

What is the Better Investment?

Both REITs and buying assisted living properties have their advantages, REITs are clearly the better opportunity. They are a low cost to market and require no additional costs; stamp duty, legal fees, surveyors cost, providing a diversified portfolio that minimises risk. Investing in REITs is also more straightforward, featuring professional management, better liquidity, tax efficient and multiple exit strategies with the potential for higher returns.

What is Section 117?

Section 117 of the Mental Health Act 1983 is a legislative provision in the UK that mandates local authorities and health services to provide aftercare services to individuals who have been detained under certain sections of the Act.
Aftercare services are designed to support the individual's mental health and ensure they can live independently in the community. These services are funded by the government, ensuring financial backing and stability.

Challenges of Social Housing Buy-to-Let Investments

An investment of £150,000 in an individual Assisted Living unit can produce a gross return of 10% per year, or £15,000. However, substantial initial and ongoing costs reduce the financial appeal. Investors encounter personal tax rates up to 45%, in addition to legal fees, surveyor fees, and stamp duty.

 

Once these expenses are considered, the net return in the first year becomes minimal. The 10% gross yield can be significantly reduced to well below 5%.

Liquidity and Exit Strategy Issues

Assisted living buy-to-let properties present a poor exit strategy for investors. Once purchased, these properties are difficult to sell due to the requirement for cash buyers, as they cannot be mortgaged with a 25-year lease. With a price tag of £150,000 per unit, there are few cash buyers interested in assisted living units when they could instead place a £50,000 deposit and acquire three standard properties.
 

Additionally, selling an assisted living property is challenging as investors prefer new units with a fresh 25-year lease, rather than older units requiring refurbishment and offering shorter lease terms and warranties. Estate agents often avoid marketing these properties due to their difficulty in finding cash buyers, opting instead to focus on more easily sellable standard properties.

Liquidity and Diversification

REITs provide exposure to a diversified portfolio of properties, reducing the risk associated with investing in a single property, while their shares can be bought and sold on the stock exchange, offering greater liquidity compared to direct property investments.

Regulatory and Tax Advantages

REITs mandate a 90% dividend payout, ensuring consistent income for investors, and they are exempt from corporate taxes. Forbes asserts that REITs provide a tax-efficient means to invest in real estate, making them an attractive option for portfolio diversification.

REIT's EBITDA
Valuation

REITs, as publicly traded entities, can leverage favorable market conditions to increase their EBITDA multiples and market value. This provides an extra dimension of value appreciation not commonly found in direct property investments.

Investing in Real Estate Investment Trusts (REITs) presents numerous advantages compared to direct investment in social housing buy-to-let properties.

The Advantages of REITs

A Real Estate Investment Trust (REIT) is a company that owns real estate, which makes money, like shopping centers, office buildings, or apartments. By investing in a REIT, you can earn a share of the income from these properties without having to buy or manage any buildings yourself. REITs usually pay most of their profits to investors as dividends, which makes them a good way to get regular income more tax efficiently.

What is a REIT?

Both REITs and social housing/assisted living buy-to-let investments have their unique benefits. However, REITs are particularly advantageous in terms of costs and valuation. They require lower investment levels and are easier to invest in, without the need for solicitors, surveyors, or stamp duty. REITs offer a cost-effective method to invest in property without the significant upfront costs reducing 10% claimed returns. Additionally, their high liquidity, professional management, and diversified portfolios minimise the financial and operational burdens usually encountered by individual landlords.

Discover More About REITs: Enhance Your Investment Strategy

Exit Strategy

  • Sell shares on the London Stock Exchange

  • Sell to another REIT

  • Sell Portfolio to Property Fund

  • Sell Portfolio to a Pension Fund

  • Sell shares to Private Investors

  • Sell shares to Institutional Investors

  • Sell to BTL Investors

  • Sell income strip to an Institution

  • Whole Portfolio Sale

  • Difficult to Sell

  • No Mortgage

  • No Second Market 

Get
in Touch

READY TO LEARN MORE?

Contact us to find out how you can get started.

Contact us to find out how you can get started.

READY TO LEARN MORE?

bottom of page