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How to invest in supported living

Supported Living

8 August 2023

Author: Adam Camm

Over the last few years, we have seen more and more landlords have been considering alternative buy to let methods that will allow them to maximise their property investment income.

 

This has been achieved by looking at more diverse ways of investing, which has led to landlords moving away renting their properties on a standard buy to let or House of Multiple Occupancy (HMO) methods, instead looking at products such as serviced accommodation, holiday lets and most commonly, supported living.

 

Supported living mortgages are designed for landlords to rent out their property using a lease through a registered provider. This could include anything from a housing association, a charity, care providers or local authorities. A benefit of investing in a supported living property is that the rental income is guaranteed each month for an agreed number of years and with most leases the registered provider is responsible for the maintenance of the property, so as an investor, these are areas that you won’t have to worry about.

 

But what do you need to consider if you are looking to invest in a supported living property? We’ve asked Paul Hinchley-Bradshaw, Senior Property Finance Specialist to outline everything you need to be aware of when looking to invest in a property for supported living.

 

Over to Paul

 

Supported living leases can vary depending on which provider you engage with, so it is important as an investor to give yourself the best opportunity to secure funding that will work for your investment strategy. Below I’ve highlighted stages to consider when looking to secure funding to be able to invest in supported living.

 

First steps

 

As on a lending stance, the market is still relatively restricted and with all the lenders having different approaches to their criteria when it comes to supported living leases, I would always highly recommend speaking to your adviser before sourcing your property and speaking to any registered or care provider.

 

By doing this, your adviser will be able to provide you with an understanding of what rates/fees will be available to you based on certain key factors on the supported living lease, landlord experience, property type and other personal factors.

 

Approaching the provider

 

Having an idea of the products available based on the lease criteria this would be the most opportune time to start approaching housing associations, charities registered and care providers in order to decide which sector best suits your investment strategy. At this point you will be able to achieve an understanding of what type of property, commitment and lease they will be looking to use.

 

If at this stage you are able to ask them to provide draft version of the lease that they will be looking for you to sign, we are able to forward this to a number of lenders for pre application approval, certain aspects of this lease can determine which lenders will be available, these include:

 

  • Length of the lease

The number of years on a lease can impact which lender we are able to approach, a number of lenders will not look to accept leases over 5 years whereas a few will have no restriction on lease term and may even prefer the longer propositions.

 

  • Break clause

Most lenders will require a break clause to be included within the lease that is in favour of all parties, with some lenders not wanting more than six months to other lenders that can accept up to five years and longer depending on the length of the overall lease.

 

  • Amount of support/care provided

Depending on which provider you decide to proceed with, will then depend on what tenants are housed within your property, some tenants might be able to live independently and require little to no care or support. Other tenants may require support or care on a daily, 24 hour or even on a sleep-in basis, all these different levels of support or care will have a factor on lenders and rate available.

 

All the above areas will determine which lender, rate and loan to value will be available to you.

 

Adviser able due diligence

 

After determining which lender and product will be available, you will then proceed to full application stage. Like any other mortgage, this will be submitted in the same process however, the underwriter will also include extra due diligence on the provider. This will be a soft touch approach (which we would advise to be done by yourself) and will include looking at their website, internet searches for any media history and company house checks. Although it is not always necessary for the provider to have been trading for a certain period, further questions may be asked about funding if the provider is new into the market.

 

We are here to help

 

If you are looking to invest in supported living, our team are experts when it comes to supported living or social housing mortgages, with access to a wide range of lenders. To speak to one of our friendly advisers today, get in touch here.

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