The pros and cons of investing in retirement homes

Of course, the likelihood of President Jacob Zuma being ousted from power was small.

The vote of no confidence was a shining beacon of hope for those who wished to expunge the government of corruption and the misappropriation of public funds. However, having already survived previous votes of no confidence during his eight years in power, it was always likely that Zuma would stay – even if this time the balloting was done in secret.

His continued tenure will have a negative effect on the rand. The currency went up in value when there was a vague hope that his term would end prematurely, but with that prospect dashed, its value has once again plummeted.

As the president clings to power, it seems unlikely that the rand will increase in value anytime soon. Therefore, it makes sense that people would consider investing their money elsewhere to achieve better returns. The idea of investing somewhere more politically stable has never looked more attractive.

For the disaffected in South Africa, the UK is an attractive country in which to invest. Despite the political events that have occurred there over the past year, the UK’s political integrity and infrastructure remain strong and stable. One of the few negative effects has been the weakening of the pound, which is encouraging for overseas investors who can now get more for their money.

One investment class that remains robust due to continued demand is the care-home sector and retirement properties. UK retirement property investments generate healthy returns and give investors time to decide whether they want to move in later or use the rental income elsewhere.

That is one benefit of investing in a unit in a retirement home. What are some of the other benefits and drawbacks? Here is your checklist to buying retirement property.

Benefits of investing in retirement homes

1. The area and surroundings

Retirement homes are usually situated in picturesque villages and towns in regions popular with an older clientele, such as the south-west of England. Residents can enjoy their surroundings and a slower pace of life next to National Trust parks or near the coast.

2. Financial incentives

More and more people are discovering the benefits of downsizing and distributing their wealth to ensure their family gets as much of their equity as possible. If they are not ready to move to a retirement village, they can invest and enjoy the rental income while they decide whether they want to move and, if so, where they’d want to go. Even if they decide not to occupy their investment, the rental yield could help cover their expenses elsewhere.

3. Social benefits

One aspect that is often overlooked is the social benefit of investing or living in a retirement village. Half of all people over the age of 75 live alone, and one in 10 of those aged 65 or over say they feel lonely all the time or often. Half of all older people consider the TV to be their main form of company, and 36% of over-65s say they feel out of pace with modern life.

Loneliness isn’t just unpleasant – it can also significantly affect one’s health. Research has shown it can have the same detrimental effect on health as smoking 15 cigarettes a day, and people who feel extremely lonely are twice as likely to develop Alzheimer’s, have poorer mental health, and suffer from more falls and periods of hospital care.

Some luxury retirement homes host regular wine-tasting events and organise outings to explore the area, giving residents the opportunity to socialise with each other to alleviate loneliness and get out and about – especially if they were previously restricted to their homes due to poor public transport and no longer being able to drive. Residents are free to socialise as much as they want and can even enjoy daily home-cooked meals prepared by top chefs.

The drawbacks of investing in retirement homes

1. Limited locations

More and more retirement homes are being developed, but they are often confined to typical retirement towns and villages. This may mean that if you choose to occupy your unit later, you might have to live a considerable distance from your friends and relatives.

2. Management fees

The benefit of having a management company in place to oversee the day-to-day running of the care home is that it makes for a completely hands-off investment. The downside is the fees that are incurred, which reduce the overall rental yield. Fortunately, yield is still high because of strong demand, but it is constrained by these additional fees.

3. Limited market

Of course, these care homes are limited to the over-55s, so there is a smaller pool of potential residents. The UK has a sizeable population of elderly people, so projected occupancy levels are good – but it is worth being cautious in case that number dips in future.