Are Care Home Investments Too Good to Be True?

August 26, 2026

Unfortunately, the care property sector has attracted a lot of bad actors over the last few years. Some are pushing very high returns through loan notes and mini-bonds, while others are promising tired landlords that they can simply place a care provider into an existing property and secure them a long-term “guaranteed rent” agreement. In reality, a large amount of this activity is coming from middlemen who do not own the property, do not operate the care service, do not employ the staff and, in many cases, do not even have a provider lined up when they make the promise.

We see the consequences of this all the time. We take around 30 calls a week from middlemen who have promised a landlord that they can secure a care provider for a property and then discovered that the property is completely unsuitable. It may be in the wrong location, have the wrong layout, require significant alterations, have planning complications or simply make no commercial sense for a care operator. By the time they telephone us, they have normally already promised the landlord a lease and are trying to find somebody willing to rescue the situation. Quite often, the supposed “provider search” amounts to asking around Facebook groups to see whether anybody will take the property.

That is not how serious care property development works.

The property has to make sense operationally from day one. The location, planning position, internal layout, room sizes, fire strategy, staffing model, local demand, regulatory requirements and refurbishment specification all need to be considered before anybody starts talking about long leases and rental income. A random HMO, tired buy-to-let or large house does not suddenly become a viable Children’s Care Home or Adult Residential Care property because somebody has put the words “guaranteed rent” into a brochure.

When the headline return becomes the risk

Another part of the care investment market that concerns us is the race to offer the highest possible return.

We have seen investments advertised at 16% and above, sometimes substantially above that figure. On the surface, that sounds attractive. The problem is that many of these structures are not property ownership investments at all. They are loan notes or mini-bonds where the investor is effectively lending money to a company in return for a promised rate of interest.

That is a completely different proposition from owning a freehold property.

If you put £500,000 into a loan note, you do not automatically own a £500,000 property. You own the contractual promise made by the company issuing the note, subject to whatever security has actually been put in place. If that company fails, the fact that the investment was marketed around property does not suddenly turn the loan note into a freehold asset.

This is where some investors get caught out. The high headline return becomes the main focus and the underlying ownership structure receives far less attention than it should.

For us, the first question should always be what the investor actually owns.

Our care property investors purchase the freehold asset itself. They are not simply handing money to us in exchange for a promise that we will repay it later. The property sits in their ownership, while the care provider occupies it under the agreed lease structure.

There is a very simple commercial point here. The higher the promised return becomes, the more carefully the structure needs to be examined. A 16%, 18% or 20% headline figure means very little if the capital underneath it is exposed to far greater risk than the investor understood when they entered the investment.

We invest in exactly the same properties ourselves

We are property investors ourselves, and our own capital goes into exactly the same type of Children’s Care Homes, Adult Residential Care properties and SEN buildings that we offer to private investors.

That point matters because there are plenty of people in this market who make their money purely from packaging and selling somebody else’s investment. They find a property, attach a fee, produce a brochure and move on. Their capital is rarely exposed to the same risks as the person they are selling to.

It is worth asking why.

If somebody continually tells investors that the properties they are selling are exceptional investments, yet they never seem to retain any of them personally, that should at least make an investor think about how much conviction sits behind the sales pitch. If the returns are as strong as claimed, the leases are as secure as claimed and the properties are as attractive as claimed, why is the person selling them not buying their own stock?

Our position is different because our own capital is already deployed across the acquisition and development process. We are continuously buying suitable properties, funding planning work, architectural design, refurbishment, compliance work and development before those buildings become operational care properties.

The reason we make some of those properties available to private investors is not because we do not want to own them ourselves. It is because our own capital alone cannot fund enough properties to satisfy the level of demand for good quality Children’s Care Homes, Adult Residential Care accommodation and SEN buildings.

Every property we sell to a private investor allows capital to be recycled back into developing another suitable building. That allows us to provide more high-quality homes and educational properties than we could produce purely from our retained capital, while private investors are able to purchase the same type of assets that we are prepared to invest in ourselves.

That is a much healthier relationship between developer and investor than a middleman earning a fee from a property they would never consider owning personally.

Why our terms can look unusually favourable

A lot of investors first come across our care properties after years of owning buy-to-lets or HMOs. They are used to refurbishment overruns, void periods, maintenance bills, management issues, unexpected repair costs and waiting longer than expected before a property starts producing income.

When they then see a care property with a fixed income commencement date, a price lock promise, no day-to-day management and no routine repair or maintenance costs for the landlord under the lease structure, it can sound almost suspiciously straightforward.

The reason we structured things this way is simple. We are investors ourselves, so we looked at the development process from the same position as the person putting the capital in.

Our forward-funded care developments have a set six-month period before the contracted rental income begins. If planning or refurbishment runs beyond the original programme, the investor should not be financially penalised for a delay that they did not cause. The development responsibility sits with us, so the commercial impact of that delay should sit with us as well.

The same thinking sits behind the price lock promise we use on applicable developments.

Anyone who has been involved in refurbishment for any length of time knows that unexpected items can appear once work begins. Buildings can reveal structural issues, specification requirements can change and additional compliance work can become necessary. We have operated in property for more than 34 years, so none of this comes as a surprise to us.

We therefore price the development properly at the outset and take responsibility for the development risk we have agreed to carry. If we uncover something that requires additional work, we do not believe the investor should automatically receive another invoice simply because the project has become more expensive for us to deliver.

That approach can cost us money on individual developments, but we have a 34-year trading history to protect. Passing every unforeseen cost onto the investor might improve the margin on one project, but it is not how we want to run a long-term property business.

“No repair or maintenance costs sounds too good to be true”

This reaction normally comes from investors who have spent years in residential property.

They are used to paying for boilers, plumbing problems, replacement appliances, damaged doors, decorating, electrical work and all the other costs that come with conventional buy-to-let ownership. When they see a commercial care lease where the operator carries extensive responsibilities for the building during the lease term, they assume there must be something unusual going on.

There is not.

Commercial leases have operated with repairing obligations for decades. Large retailers, supermarkets, industrial occupiers and many other commercial tenants routinely occupy buildings where responsibility for repairs and upkeep sits substantially with the tenant under the lease.

Our care properties sit within that commercial framework. The provider is operating a regulated business from the building for a long period of time, so keeping that building operational and properly maintained is part of running the service.

The fact that a private residential landlord is accustomed to paying every repair bill does not make a commercial repairing lease too good to be true. It simply means the two sectors work differently.

For investors leaving the private rental market, that difference can be one of the most attractive parts of care property ownership because it removes many of the day-to-day problems they have spent years dealing with themselves.

How we arrive at a 12% NET yield + CPI

A 12% NET yield with CPI-linked increases over a 20-year term can also raise eyebrows, particularly for somebody comparing it with conventional residential property.

We do not arrive at that figure by deciding what would look attractive on a brochure and then trying to make the numbers fit afterwards.

There is a substantial amount of commercial work behind each development. The acquisition price, refurbishment budget, size and type of service, number of placements, likely operating revenue, staffing requirements, utility costs, regulatory costs, management structure and long-term rent all need to make sense together.

The rent has to be attractive for the investor, but it also has to be comfortably affordable for the care provider over the lease term.

That becomes increasingly important once CPI-linked increases are factored into a 20-year lease. Staffing costs, wages, energy, insurance, compliance and other operating expenses will all move over time, so setting an unrealistic rent simply to produce an inflated headline yield would be commercially reckless.

Our directors have an ownership interest in the care provider, so we see both sides of the equation.

We want the investor to receive a strong return, but we also need the care provider to remain profitable and comfortable with its rental commitments throughout the term. That means the property has to be acquired and developed at the right cost, the service itself needs to work commercially and the rent needs to sit at a level that both sides can sustain.

The 12% NET return is therefore produced by how the property is acquired, developed and operated, not by pushing an unrealistic rental obligation onto the provider.

Regulation is one of the reasons we operate in these sectors

We deliberately concentrate on Children’s Care Homes, Adult Residential Care and SEN property because these are heavily regulated areas.

That is something we see as a strength.

Children’s care services, adult regulated care and specialist educational settings have clear standards around how they operate, who can run them, how the buildings are used and how the services themselves are inspected. The regulatory burden is substantial, but it should be. These buildings are being used to care for children, vulnerable adults and young people who require specialist support.

For investors, that level of regulation also creates a meaningful barrier to entry.

It is one of the reasons why the casual “we will put a provider in your property” approach causes so many problems. A genuine care property cannot be treated like a standard residential letting exercise where somebody simply finds an occupier once the keys are available.

The property itself has to suit the service. The operator has to meet the appropriate regulatory requirements. The building has to be developed around how that service will actually function.

That is exactly why we only operate in Children’s Care, Adult Residential Care and SEN property. These sectors sit within established statutory systems where local authorities, health bodies and education authorities have ongoing responsibilities to provide appropriate care and educational provision.

That does not remove all commercial risk, and no serious developer should pretend otherwise. It does, however, mean that the underlying services exist within a far more structured environment than many of the loosely packaged “guaranteed rent” schemes currently being sold into the wider property market.

Care investments should stand up to scrutiny

We do not mind investors asking whether care property investments sound too good to be true. In fact, we would much rather they ask difficult questions before investing.

Look at what you actually own. Understand the lease. Check who the tenant is. Look at who controls the care provider. Find out what happens if refurbishment takes longer than expected. Establish who carries development overruns. Work out whether the rent can genuinely be supported by the care operation for the full lease term rather than simply looking attractive in year one.

It is also worth looking at whether the company selling the investment is prepared to put its own money into exactly the same type of property.

We are.

Our own capital is deployed alongside the private capital that comes into our developments, and the only reason private investors are given access to some of these properties is that we cannot personally fund enough of them to meet the demand for suitable care accommodation.

There are certainly care investments in the market that deserve to be treated with extreme caution. Loan notes carrying extraordinary promised returns, vague “asset-backed” structures and middlemen promising leases before they have even found a provider are all areas where investors need to understand exactly what sits underneath the marketing.

A properly developed care property is a completely different proposition. The investor owns the freehold, the building is developed for a specific regulated use, the lease terms are agreed around the economics of the care operation and the developer has its own capital exposed to the same market.

For more information about our Children’s Care Homes, Adult Residential Care properties and SEN investments, visit www.footforwardproperties.co.uk/care-homes-for-sale.