Opal Ridge, Newcastle
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Opal Ridge, Newcastle
Opal Ridge is the latest opportunity to purchase rooms within a UK social care facility, offering 8-10% net assured rental income (min £6,500 per year) and a 125-year long lease.
Opal Ridge enjoys a prime location in Newcastle, North East England, and it is ideally positioned to service the increasing need for personal and nursing care in the local area and beyond.
Why invest in Care Homes?
Care home investment is the latest alternative/commercial sector to reach the mainstream and often considered by retail investors due to the high yields, fixed income and long-term tenant demand. Private care home builders and healthcare operators offer individual properties within their purpose-built care homes in return for contractually guaranteed income. If done correctly, this represents a fantastic opportunity for private developers to improve the significant under-supply of such property across the UK and provide investors with a secure and reliable income-generating investment.
One of the first things most investors look for in examining an investment property is the rental income. It’s important not to analyse this as a cash figure, but more so in relation to the cash outlay/purchase price. We work on a net return basis, as an example, if you invest £100,000 and earn £6,000 per year (after all costs), in income, this is a 6% net return. In regional cities such as Manchester, Liverpool, Leeds etc you will be able to find residential properties which return 4-7% net yields after costs. The Care sector offers 8-10% net returns, so in terms of cash flow and consistent income, care home property investment offers a significantly higher return than typical residential single let properties.
With care properties, the developer that owns the care home will contractually guarantee your income. So commonly your rental return of 8-10% is fixed for 10-25 years, this provides certainty and predictability knowing there will be no fluctuations in your income (some developers provide the assurance for the entire lease period up to 250 years, others will renew the contract after the first 10 years). This is typically for a longer period compared to student accommodation which is normally 2-5 years, so for those looking for long term and transparent additions to their portfolio, the care home investment class should be considered.
No Stamp Duty Land Tax, furniture pack costs, service charges, ground rent, lettings or management fees. It’s purely the investment price and legal fees investors should consider prior to earning a stable and consistent rental return.
Firstly, we all know we are living longer with advancements in medical research and improved technology, the older population is increasing. According to the Office of National Statistics, in 2016 the UK population was 65.6m, the largest ever. 18% of this population was quoted at over 65 and 2.4% aged 85 and over – see here. The UK has a long history of providing quality care home accommodation, the demand for such accommodation is already substantial and will only increase into the future as the population continues to live longer. The occupancy rates for all care homes across the UK for 2018, is at 89.4%, see here. The lack of government funding for the public sector means publicly funded built and operated care homes are less common, as a result, private providers e.g. developers are stepping in and meeting the demand for quality accommodation within the market. Knight Frank quote there is likely to be a shortfall of 192,000 care suites by 2024.
Market Data & Analysis
The healthcare sector has been one of the best performing in recent years underpinned by exceptional demand, we expect to see this asset class continue to receive interest from retail and institutional investors. This was reiterated by Savills, who stated, “care homes, independent hospitals and primary care properties are currently achieving a higher combination of average annual rental income returns and five-years annual capital growth compared with many of the mainstream investment markets.”
As medical treatments and technology improves our elderly population is expected to continue to rise aggressively. The latest data from Knight Frank shows an average UK wide care home occupancy rate of 88.9%. Due to the specialist care received, the weekly fees for residents average £837, thus paying 8-10% to private investors is viable and sustainable for experienced investment providers (source: Savills & Knight Frank)
Frequently Asked Questions
Below you can find a range of common questions from previous investors. If you require specific details and advice please do not hesitate to contact us today on +44(0)203 627 3987 or via [email protected]
Unlike traditional leasehold property purchases, given the investment structure, care homes offer an income which will not fluctuate. Service charges, ground rent and management fees do not apply. A care home purchase would typically be exempt from stamp duty with no furniture pack costs either. And sometimes you can even have the legal fees covered, a key factor attracting investors.
Firstly, as you are buying a physical property with registered title deeds rather than a share of a management company/profits you have the security of a tangible asset. Should anything happen in terms of the operational aspects a new operator would be appointed to continue running the home and if the home is sold, the buyers would have to adhere to leaseholder obligations.
We always suggest investing with an experienced developer who has a range of care homes to act as operational and financial support, as well as a strong track record of occupancy rates.
According to Knight Frank the average weekly fees paid by residents across the whole of the UK is £837, even considering running costs, there is a hefty profit margin in most cases. Specifically, 27.4% in 2019 (see statistics above). The demand is already substantial and only likely to increase as the population demands quality care accommodation as we all live longer, this demand will help to maintain resident fees and profit margins making for a truly sustainable business model.
Your presence will not be required during or after the purchase process. There is a specialist care home team onsite who ensure residents receive the specialist care and attention required for the high standards of a regulated home, monitored by the Care Quality Commission. As a result, you can be assured you will have professionals looking after the property on your behalf taking care of all operational aspects of ownership.
Care home suites are funded via cash-only purchases, mortgages can’t be used.
Supplied upon enquiry, we have to keep the location confidential where possible to protect current residents.
Opal Ridge enjoys a prime location in Newcastle, North East England. The home is ideally positioned to service the increasing need for personal and nursing care in the local area and beyond, offering high-quality residential, nursing and dementia-specific provision for people aged over 65.
Expert Industry Analysis
Knight Frank latest Care Home Trading Performance Review
- Profitability measured as EBITDARM is 27.4% for 2019
- Over one third of homes are achieving EBITDARM margins in excess of 30%
- Weekly fees UK wide range from £721 to £897 per week
- Only 1% of English homes were rated as “inadequate” by the Care Quality Commission
- Improving care standards: Pressure from regulators is forcing many providers to improve and reinvest in their facilities and the operations.
- Increasing medical needs: Elderly people continue to enter care later and with more severe medical needs, resulting in a shift towards more expensive nursing or dementia care
Knight Frank Healthcare Capital Markets Report 2020
- Transactions hit £1.76 billion in 2019 up 17% from the year prior
- Demand from a range of investors, including institutional funds, private property investors, REITs and overseas buyers.
- Overseas capital account for 32% of healthcare property deals in 2019
- 95% of care homes are privately owned
- Mixed funded residents in well occupied homes are producing 5-6% yields
- Healthcare returns have also been the most consistent and least volatile since 2015
- With allocations to alternative and specialist sectors predicted to increase and healthcare property providing one of the most stable income streams, we expect to see a similarly strong profile of performance in 2020
What does Nick, our Founder and Director, think of Opal Ridge?
“I’ve personally worked with a number of healthcare investment providers and I think what makes this opportunity exceptional is the structure and support from the homes within the portfolio, of which there are 14. This provider has an exemplary track record of paying investor returns, ensuring particular homes operational profits are above average and generating high and consistent occupancy rates.
When you add the experience and expertise of the investment provider plus the actual investment structure, this investment class is hard to beat – fixed income, clear exits, transparency and predictability, there is certainly a lot on offer for a hands-off investors”.
Nick Hyland, Director
"Effectively advised me on a range of different investment products always with great professionalism"
"Professional, concise and on point. I would highly recommend"
"A very professional service from enquiry to completion."
Our role is to advise, educate and present the most suitable property opportunities to investors. If you would like to discuss your options with the team you can call us on +44(0)203 627 3987, email us on [email protected] or send us a message below.
Track Capital is designed to help new and experienced property investors navigate the market by providing unique investments, free of charge.
Company No: 11053957. TPO Membership: T02475. Track Capital is not authorised or regulated by the Financial Conduct Authority, we recommend investors seek advice from a qualified professional. Images are for marketing purposes/illustration only.