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How much rent can you expect from a supported living property?

1st July 2024

If you're a property investor or developer looking at the supported living sector, one common question is "How much rent will I receive?"  

The short answer is that with a supported living lease arrangement, you can generally expect to receive a net market rent similar to what you'd get by renting the property on the private rental market.

What we mean by "net market rent”, is the rent amount you have leftover in your pocket after operating expenses, not just the headline rent number. With a standard buy-to-let rental, there are many expenses like letting agent fees, repairs, maintenance, safety certifications, etc. that eat into your gross rental income.

With a supported living lease, those types of operating costs are taken care of by the care provider leasing the property from you. You simply receive the rental payment each month with zero deductions for repairs, agents, certifications and so on.

As an example, one of the Gateway founders own a 2-bed terrace house that was previously rented out for £500/month on the private market. After agent fees, maintenance, and certifications, the actual take-home "net rent" was probably around £410. 

This same property is now leased to a care provider at £500/month rent. However, since there aren’t any of those extra expenses, the property is netting much more take-home income than before - even though the rent amount itself is exactly the same.

For an HMO property, the cost savings of a supported living lease are even more pronounced. Let's say you have an HMO grossing £3,000/month in rent revenue. After paying for an agent, utilities, maintenance, council tax, refuse removal, void periods and more - your actual net income will be significantly less. Fees can commonly take 25-30% leaving a net rent of £2,100 along with all the time and admin needed to operate an HMO with private tenants.

With a supported living lease, you can set a lower headline rent number, say £2,000, knowing full well that you will receive the full £2,000 rent payment each month with zero deductions for operating expenses and zero time and cost spent on the property by you.

An important thing to factor in as well,  is the lack of voids in the property with a supported living lease.

The key takeaway is that with supported living properties, you can potentially accept a slightly lower "headline" rent number, because your net operating income will be similar (or higher) compared to a private rental, once you account for the lack of extra expenses. The rent amount itself isn't as important as the actual cash flow you receive at the end of the day.

Of course, rent levels still matter and will vary based on the local market. But evaluating supported living properties based on the net income potential (versus just the rent amount) is crucial for estimating your investment return accurately.

We should also mention that you must ensure that you have the correct mortgage and insurance policies in place for supported living properties.

We have specialist mortgage brokers and insurance specialists who work closely with us.  If you want to find out more, drop us a line at hello@supportedlivinggateway.com

 

 

 

 

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