Returns from a Care Home? The Sensible Alternative to Care Home Investments
This guide refers to German law and the German tax system. It is a translation of our German original and does not replace individual tax or legal advice.
Care apartments, shared flats for seniors and classic care home properties (Pflegeimmobilien): with demographic change and the growing housing shortage on the open market, care home properties are becoming increasingly popular with investors. What at first glance looks like an always-let and attractive investment turns out on closer inspection to be a risk for sustainable, long-term wealth building. In this article, we would like to explain which market risks are particularly evident in care home properties and why investors are better advised in almost every case to choose conventional real estate investments. We also show you the optimal alternative for benefiting from the property market as an investor in a tax-optimised and sustainable way.
Neo Capital supports entrepreneurs and high-earning employees in tax-optimised investment in real estate and other asset classes. We rely on cooperation with our network of tax advisers and on the expertise gained from working with numerous clients across Germany. Together, we look after your wealth building comprehensively and convert your tax liabilities into private wealth.
How investing in a care home becomes a trap for investors
Young or old: investors, too, cannot fail to notice the rising demand for care places and the ageing population. As life expectancy continues to rise, care home operators earn money by looking after their residents. However, anyone wishing to invest in a care home property should be aware of the disadvantages arising from the nature of this investment. Starting with operator dependency, care home properties are run by external companies in the form of a care home. In economically difficult times, the operator may change or become insolvent, which not least drives occupancy and the management of the properties into a negative state of emergency. In recent years, this fate befell Convivo, an operator of more than 60 care homes in Germany. And that is not all: in recent years, dozens of care home operators have filed for insolvency, often with negative consequences for the owners of these care homes. Besides operator dependency, the limited flexibility of use is another factor that makes care home properties appear less attractive compared with market-standard alternatives. People in a care home property depend on the special design of care apartments, which makes later alternative use for normal residential purposes almost impossible. Demographic change also clearly shows that in numerous structurally weak regions of Germany, hardly anyone spends their retirement there; instead, people move towards larger cities at an early stage. Anyone who then looks for a buyer for their investment amid an overcapacity of care home units will find it difficult to sell compared with alternative forms of housing on the open property market. The reasons for this are the absence of renewed subsidies and only a very low increase in the property's purchase price, which can sometimes be below the rate of inflation.
New builds and recent properties as an alternative to care homes
Anyone who does not want to rely on a care home to manage their property should consider different alternatives for their real estate investment. With declining care needs in structurally weak regions and new technologies in the field of "assisted living", this decision may well prove forward-looking for private investors in particular with regard to returns. With the legislator's increasing requirements for the maintenance and possible renovation of properties, new-build flats in prime locations and classic existing properties meeting current KfW standards are coming into the focus of future-minded investors, despite currently higher interest rates. These types of property are not subject to third-party operators and are financed by banks on considerably better terms and with less equity. As part of an investment, the market and location analysis often reveals that local demographics do not point to long-term success for the care homes that are currently so widespread. Choosing a conventional property gives investors the same tax advantages and allows them to act much more flexibly. In terms of value appreciation, properties outside a care home are always the better solution.
Neo Capital: sustainable prime-location properties with first-class returns
In order not to take an incalculable risk as an investor when buying a property and thereby jeopardise the growth of your wealth, a financial expert should always be consulted. Only in this way can you avoid costly wrong decisions, which often have an impact over decades and set your retirement provision back by high five-figure to six-figure amounts. Having cleared up the myths surrounding care home properties and presented the alternatives to care homes mentioned above, you should now be aware that flexibility in dealing with the property and a prime location are among the most important criteria, even in times of housing shortage. Are you interested in an attractive alternative to a care home and would like to make your real estate investment secure? Our team of independent financial and real estate experts will advise you comprehensively on this matter and show you, from an exclusive selection of off-market properties, what return you can expect without any care home property. In this way, we rule out the risks mentioned and provide you with the framework for an almost passive and still flexibly adaptable investment model.