How to finance a nursing home

Are you considering investing in or buying a nursing home?

Unlike residential property, which is a consistently growing need of the population, some commercial property investments are more popular at different points in time. For example, physical shop fronts are becoming less popular as a commercial investment, whilst warehouse space is becoming more so as retailers move to selling their products digitally to minimise on company running costs.

One form of commercial investment that is becoming increasingly popular is care home facilities. Demand for mortgages for care home facilities is on the up, and lenders are ready to meet the demand. This is considered a safe facility for lenders, because the UK’s aging population means residential care home facilities are more in demand than ever before.

Of course, as well as supporting the UK’s aging population, nursing homes also offer very attractive returns. When run correctly, many individuals are willing to pay for a quality service.  The demand for quality care home facilities is not likely to decrease, meaning this could be a solid long term investment.

Mortgages for care homes in the UK

In terms of what you could actually look to borrow when financing the purchase of a residential nursing home, the answer will depend on your circumstances and history. Theoretically for this sort of purchase, loan to values (LTV) can reach up to 75%, though this is really at the upper end of the LTV spectrum.

When looking to acquire owner-occupier finance, it is vitally important that your business plan is watertight as this will form the basis of your loan’s exit. Generally speaking, your business’ income will make up the capital for your loan repayments, so it is crucial that income is consistently maintained. A lender may look at your previous experience to judge if they think you can run a facility that will generate a consistent income.

If you’re just starting a business, this may not be the right path for you.  Typically, you’ll need to have experience of running a care home—although lenders may also consider you if you have other solid business experience which demonstrates your ability to successfully run a care home.

Of course, you could also consider investing in a care home which will be run by another individual or group. If you’re looking to invest in commercial property in this way, we can also assist you. Whatever your commercial property ambitions are, a consultation with an experienced commercial finance broker is a good place to start, giving you a starting point in terms of how much you could expect to borrow.

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