With banks giving minimal returns, are there savvier ways to invest your money?
If you're approaching retirement, you might have considered investing in a 'buy to let' for retirement income. Retirement property investments generate healthy returns and give you time to decide whether you want to move in at a later stage or use the rental income for something else. This is one benefit of investing in a unit in a retirement home, but there are others. If you'd like to know the pros and cons of investing in retirement property, read on...
Benefits of investing in retirement homes
1. The area and surroundings
Retirement homes are generally situated in picturesque villages and towns in regions popular with mature residents, such as the south west of England. Residents can enjoy their surroundings and a slower pace of life. They’re often situated next to National Trust parks or near to 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. Even if you don't feel ready to move into a retirement village yet, you can invest and enjoy the rental income in the meantime. Even if you decide not to occupy your investment in the future, the rental yield could go some way to covering their expenses elsewhere.
3. Social benefits
Perhaps an aspect that is much 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 ten of those aged 65 or over say they feel lonely either all the time of often. Half of all older people consider the TV to be their main form of company, and 36 per cent of over 65-year olds say they feel out of pace with modern life.
Loneliness can also have a significant impact on one’s health. Research has shown it can have the same detrimental effect to 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 hospitalisation.
Some luxury retirement homes host regular wine tasting events and organise outings to explore the local area, giving residents the opportunity to socialise with each other in measures to alleviate loneliness, and get out and about, if they were previously restricted to the house due to poor transport systems and no longer being able to drive. Residents are free to socialise as much or as little as they wish, and can also enjoy daily home cooked meals together prepared by the country’s top chefs.
4. Hands-off investment with strong rental projections
One thing is for certain, with the UK’s ageing population, there will always be a demand for residential home units. If you're not quite ready to sell up the family home and move into a retirement village, good rental returns are guaranteed. Units at Millpond View luxury retirement home in Cornwall offer a 10 per cent net yield per annum that is guaranteed for ten years. The lease is flexible too and can be passed on to other family members should anything happen to you over the period of ownership.
5. Care always on hand
These sort of retirement homes allow residents to really enjoy their independence, but also have peace of mind that if they do need care, it is always on hand. This is especially reassuring to those who can do most things for themselves, but who may require a little more support as they get older.
The cons 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 may have to move a considerable distance from your friends and relatives.
2. Management fees
The benefit of having a management company in place who oversees the day-to-day running of the care home is that it makes for a completely hands-off investment. The downside is that there are fees incurred, which reduces the overall rental yield you can achieve. Fortunately, the yield is still high because of a strong demand, but it is limited due to these additional fees.
3. Limited market
Of course, these care homes are limited to the over 55s, so there is a limited pool of potential residents. Fortunately, Britain currently has a sizeable elderly population, but it is worth being cautious in case that number dips in future.