7/9/2019 | Care Mortgages

Challenges faced by first time buyers in the care sector

Residential and nursing care are areas that continue to attract significant interest from first time buyers. With life expectancy having risen significantly over the last 30 years, coupled with increasing dependency needs amongst the elderly, the demand for residential and nursing care is predicted to continue to grow.

Therefore, on face value, the care sector provides investors with an ideal way to generate consistent long-term returns, as well as the reward of making a positive impact within a local community. There are, however, several challenges facing potential investors and with first time buyers perceived to present the greater risk, those challenges are most keenly felt by this group of would be new entrants. This is no longer a sector for an investor to run as a side-line to other business interests, it takes real focus to ensure residents are well cared for and to satisfy bank and regulatory requirements.

 High street lenders appear to have adopted a more cautious approach within the care sector over the last two-years. Most have taken a similar position to the Care Quality Commission (England) in terms of the need for direct sector experience. Identifying a home with an existing, long serving management team may help but this alone may no longer be enough - this is especially true where a site is deemed ‘inadequate’ or ‘requires improvement’. The main fear from a lender perspective would be that the introduction of a new investor to a site could result in a registered manager deciding to exit the business. In response to this we’re increasingly seeing investors partnering with successful care home managers and developing their own knowledge through qualifications, such as the Level 5 Diploma in Leadership for Health & Social Care. Both approaches will ensure the requisite skills are available to take a business forward and provide ongoing support to a home’s care home staff.

Providing funding for smaller converted residential or nursing homes has also become more challenging in recent months. As a result of stagnation in local authority funding levels an increasing emphasis has been placed on occupancy levels in order to ensure a home remains profitable. The loss of a resident and their corresponding fee income in a 10-bed home will be far more pronounced than the same loss in a 40-bed home. Because of this, we have seen some banks introduce unofficial bed limits below which it can be challenging to secure mainstream finance. Similarly, the standard of buildings used for care settings that banks are prepared to accept as security continues to rise. Shared bedrooms are no longer seen as a positive, and a significant proportion of en suites a necessity, as bedrooms begin to more closely resemble those found in boutique hotels. Of course, not everyone wants to move to a large purpose-built care home and demand does remain for smaller converted properties that provide a more homely feel.

 Despite these challenges Christie Finance continues to have repeated success in securing funding for first time buyers. Drawing on over 40-years of care sector expertise we’re able to provide a lender perspective on individual sites and their potential suitability. In addition, our whole of market approach and extensive network of lender relationships ensures buyers are matched with the most competitive terms in the market. So, if you are considering investing in the residential or nursing care sector please speak to us as part of your initial research. We would be happy to explain your funding options and provide an independent view of how banks are likely to view your application.

 For more information please contact Ed Brown on 07734 553659 or ed.brown@christiefinance.com or Lawrence Roberts 07702 809 566 or lawrence.roberts@christiefinance.com.