When I developed my first supported living property I could not find any property investors talking about supported living on social media. I set up the Supported Living Property Facebook group to try and find other people and bring people together. I felt supported living was an amazing way to invest in property that met a real need in society, and I wanted others to know about it so that together we could create the homes that were needed.
In the last few years I have seen a complete turn around. Everyone seems to be talking about supported living, sadly there are those who are in this space for the wrong reasons who are abusing the system and their poor practice is causing damage. So much so supported living is almost being seen as a scam by some commentators. This is heartbreaking as there is still a real need for quality property and most of the providers I speak to, do not have access to enough property to meet the rising need they are seeing.
So to help keep you safe I thought it would be helpful to write about the 6 main mistakes I am seeing property investors making:
1. Mortgage
Most buy to let mortgages will not allow you to lease a property to a supported living provider and will not allow supported living tenants to live in the proeprty. Many property investors do not understand that they need to get a supported living compliant mortgage in place, or worse still they know they do they just choose not to! Not having the right property finance in place can put you at risk and can also risk supported living tenants being evicted
2. Insurance
Many property investors assume any buy to let insurance product will be ok, they do not realise that when leasing your property to supported living providers you may need a different insurance product.
To protect your property and yourself it is important that you have the right insurance in place. Make sure the insurer knows about the lease arrangement and the type of tenants living in the property so that you know you have the right product in place and your asset is protected.
3. Expecting long leases
I speak to property investors who have heard about 25 or even 40 year lease and expect that they will be able to get a lease of this length. They do not understand the changes in the sector and pressure the regulatory bodies are placing on organisations to be compliant. It is important to understand the pressures supported living providers are under and how you can work with them.
It may be far better for all to have a 5 year lease that keeps being renewed than the push a provider to sign a longer lease that may put their organisation at risk.
4. Expecting crazy high rents
There are still property investors out there who expect a highly inflated rent when they lease a property to a supported living provider. They do not understand that supported living rents are under scrutiny by local authorities. They do not understand sustainability and how supported living providers are funded, they do not understand that often to pay these very high rents the provider may have to take money from the support budget or other funding and this will mean the tenants are not getting the support they need. This may result in the organisation failing and the provider defaulting on payments.
Of course, property investors need to make a return on their investment, but when negotiating rents try not to be greedy, find a rent that work for all parties involved and this will result in a long term secure investment.
5. Not understanding leases
I hear of people signing leases that they do not understand, they are signing without getting a lease checked by a suitable lawyer and so they do not understand what they are entering into. Unless you are very used to reading leases it is a good idea to get any lease checked over by a good commercial property lawyer before you sign anything.
6. Not doing due diligence
I hear from property investors who have signed leases with providers and are then surprised when the provider goes bust, they got excited they had a provider interested in their property and did not take time to do due diligence on the provider before they signed the lease. It is important to understand who you are signing the lease with, how they are funded and structured and whether they are the kind of organisation you wish to work with or not.
Many of these mistakes come down to a lack of education around supported living. It is easy to get excited about the benefits, but it is important you understand what you are doing to keep you and your property business safe. If you want to learn more about supported living property investing and how to do it maximise the befits while minimising the risks, then please have a look at the options I have for property investors: Supported Living Property Training.
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