Nursing homes are a highly regulated business

Retirement homesWhy investors should be cautious about care properties

The offer sounds tempting: private investors buy a single apartment in a retirement home and then don't have to worry about anything for the next 25 years. The operator of the nursing home takes over the rental and maintenance of the apartment and pays rent to the owner on a regular basis. The long-term rental contracts promise an annual return of between four and six percent. Operators also like to advertise with the preferred occupancy right: If you buy a room in a retirement home today, you can live in it yourself later in old age - uncomplicated and without long waiting times.

Corresponding offers can be found in abundance on real estate portals such as Immobilienscout24. The prices for care apartments are often well below the average price for the respective region. For example, a 33 square meter apartment in a retirement home near Bayreuth costs 123,335 euros. In Bonn, private investors pay around 170,000 for 41 square meters. Even in Munich, the city with the highest square meter prices in Germany, 50 square meters in a retirement home cost just 243,000 euros. That's a good 4800 euros per square meter. For comparison: According to a study by the online portal Immowelt, the people of Munich pay an average of around 6540 euros per square meter.

Occupancy right is a marketing gag

Are the operator's promises realistic? Or are there more risks than the providers would lead you to believe? Experts consider at least the priority right to occupy a marketing gimmick. “With care properties there is no termination due to personal use. Whether or not you can move in when you are old usually depends on whether there is a vacancy, ”says Hans Kersel, partner at the auditing company EY. He has known the market for 20 years and urgently advises private investors against buying individual apartments in nursing homes. “Such an investment may be fun in the short term, but the long-term risks are not to be underestimated,” he says.

In contrast to traditional home purchases, investors in care properties operate in a highly regulated market. Politics is constantly setting new rules. "North Rhine-Westphalia, for example, stipulated in 2014 that homes may offer a maximum of 80 inpatient nursing home places," explains Kersel. Many houses with more rooms then suffered a drop in sales.

The biggest disadvantage for the investor, however, is the loss of control. The individual investor has no influence on the quality of the care services, the personnel key and cost management. All of this is up to the operator of the nursing home - and is decisive for economic success. “Whether or not a retirement home is successful depends on the entrepreneurial skill of the operator,” emphasizes Kersel.