Children’s Care Home Investment FAQs
What is a fully managed children’s care home investment?
A fully managed children’s care home investment is a freehold property leased on a long-term basis to a specialist children’s care operator.
The investor owns the physical property, while the care provider takes responsibility for operating the home, employing and managing staff, maintaining compliance, and delivering the required standard of care.
This structure allows the investor to receive long-term rental income without becoming involved in the day-to-day operation of the children’s home.
How is the income secured, and for how long?
Once the investor has purchased the existing property and land, but before the refurbishment begins, an Agreement for Lease is signed.
The Agreement for Lease sets out the legally binding terms of the investment, including the agreed rental income, the refurbishment obligations, the development timeframe, and the conditions that must be satisfied before the property becomes operational.
Once those conditions have been met, the Agreement for Lease transitions into the full 20-year lease.
The lease provides the investor with a contracted rental income, with annual rent increases linked to the Consumer Prices Index, commonly known as CPI.
Who pays for bills, maintenance, repairs, and insurance?
The property is operated under a repair and insure lease.
The care provider is responsible for the property’s utilities, bills, maintenance, repairs, compliance costs, and day-to-day running expenses throughout the lease term.
The investor’s only ongoing property cost is insuring the physical bricks and mortar shell against insurable damage.
This means the investor does not need to budget for ongoing maintenance, unexpected repair bills, utility costs, staffing costs, operational compliance, or the day-to-day management of the property.
Why is demand for children’s care home placements considered resilient?
Local authorities have a statutory responsibility to provide suitable care for children who cannot safely remain with their birth families.
Therefore, demand for suitable children’s care placements is not based solely on discretionary consumer spending. It is supported by an ongoing legal requirement for local authorities to find appropriate accommodation and care.
There continues to be a need for well-located, appropriately designed, and professionally operated children’s homes that provide dignified environments for children and young people.
What happens if the care operator fails or the lease ends early?
This would be considered an unlikely event. However, the investment structure includes step-in rights designed to protect the continuity of care and assist the investor.
These rights allow us to support the process of identifying another suitable care provider that can continue operating the property and take over the lease.
Continuity of care is particularly important in children’s residential care. Ofsted and the relevant authorities would remain involved in any transition to help ensure that the needs, safety, and welfare of the children remain protected.
Although these protections are in place, investors should still review the lease, Agreement for Lease, operator covenant, and step-in provisions with their independent solicitor before completing their purchase.
How does ownership work? Do I own the building or a lease?
The investor owns the freehold property outright.
This is an extremely important distinction. Our investments are asset-backed property purchases, rather than loan notes, fractional ownership arrangements, unsecured investment schemes, or structures where the investment company retains ownership of the underlying asset.
The freehold is held by the investor, meaning the investor owns the physical bricks and mortar property.
This provides a clear and transparent ownership structure that differs considerably from weaker investment schemes offered by some firms, where the investor may only have a contractual entitlement to a return and no legal ownership of the underlying property.
What yield can I expect from a children’s care home investment?
Our children’s care home investments provide a fixed rental income equivalent to 12% NET per annum of the total investment price, excluding VAT.
The agreed rental income is written into the lease and increases annually in line with CPI.
The NET yield reflects the fact that the care provider covers the property’s bills, maintenance, repairs, operational costs, and compliance costs. The investor’s only ongoing property responsibility is the insurance of the physical bricks and mortar shell against insurable damage.
Larger investments, including SEN schools and adult care homes, provide a fixed 10% NET income. We set these rents at a sustainable level that reflects the larger total investment amount and the long-term affordability of the lease.
What due diligence should I carry out before investing?
We are an open and transparent firm, and we actively welcome appropriate due diligence from serious investors.
Investors should review the property ownership structure, the Agreement for Lease, the full lease, the rent review provisions, the refurbishment specification, planning requirements, building regulations compliance, the care provider, and the proposed exit arrangements.
Our directors are openly available to speak with serious investors and answer questions about our company, development model, care provider relationship, previous projects, and the structure of the investment.
Investors should also instruct their own independent solicitor, accountant, tax adviser, and other relevant professional advisers to review the opportunity before proceeding.
Can I sell a children’s care home investment before the lease ends?
Yes. The property can be sold during the 20-year lease term.
However, the lease gives the care provider, as the tenant, the right of first refusal to purchase the property back from the investor.
The purchase price would be based on a fair market valuation of the property as an operational care home, rather than merely assessing it as an ordinary residential property using a bricks and mortar valuation.
This provides the investor with a defined potential exit route through the operating care provider. It also means the investor may receive their original investment amount back, together with an additional amount reflecting the property’s fair operational market value at the point of sale.
The exact valuation and sale price would depend on the property, the remaining lease term, the rental income, the performance of the home, and market conditions at the time.
Who typically invests in this asset class, and why?
Children’s care home investments may appeal to individual investors, experienced property investors, high-net-worth individuals, family offices, pension-led investors, and specialist healthcare property investors.
Investors are often attracted to the combination of freehold ownership, long-term lease income, CPI-linked annual increases, and the absence of day-to-day property management responsibilities.
Individual investors typically purchase and own a single freehold care property, while institutional buyers may acquire larger portfolios of operational healthcare assets.
