Finance For Landlords Letting To Specialised Support Housing

For landlords looking to generate secure rental yield, this long-term lease arrangement can be beneficial – but it’s one you need to consider carefully before entering into a contract. Leasing to a supported living provider or other specialist care group may breach your mortgage conditions or lead to more complex legal/regulatory issues. 

Due to the allure of a stable, long-term income for landlords, letting to specialist care providers can be a good option, provided you can find a lender who will support the arrangement. We’ve put this guide together to help you learn more about it before making a decision. 

If you’re a landlord considering working with specialist care groups, you’ll need advice on how to organise financing. A standard BTL mortgage will not allow for this type of tenancy in its conditions, so you’ll need help finding a lender who supports your intended goals.

Rangewell can help you identify lenders who understand this type of partnership and we can also arrange finance on your behalf at better rates than you could secure individually. Get in touch now about care home finance or keep reading to learn more about landlords letting to care groups. 

What care providers want

Care providers and specialist supported living groups looking for suitable properties each have their own requirements, which they will either list on their website or will stipulate when approaching potential landlords. In general, however, requirements are loosely based on the following: 

• Buildings with self-contained living accommodation suitable for residential usage
  • HMOs
  • Property split into self-contained flats
  • Bungalows with multiple bedrooms
  • Care property or other suitable commercial buildings 
• Landlords willing to invest in/consent to suitable adaptions or renovations to make property suitable for supported living. 
• Property that has a valid Gas Safety Certificate, Energy Performance Certificate (EPC) and an Electrical Installation condition report. 
• Landlord who have HMO licenses where required (for property accommodating 5 or more people). 

Why might landlords work with specialist care providers?

The main appeal of working with a specialist provider is in securing long-term leases that provide reliable income. Where a landlord of an equivalent property like an HMO has to plan for periods of underoccupancy, specialist care groups provide stable income for a fixed number of years. High renewal rates are common, so you may be able to negotiate multiple 3 to 5-year tenancy agreements at the end of each lease and generate decades of reliable income. 

Though the rates may be slightly cheaper than you’d get from letting your property individually, the reliability and long-term security make it worth it for many landlords.  However, there are other additional benefits that include:

Reduced risk and liability

In most cases, the provider group will take on the majority of risks and responsibilities associated with property management during their tenancy period. You’ll need to check the proposed agreement before you sign, but it’s generally assumed that the care provider will be heavily involved in managing rental payments and repairing any damage related to tenants. They’ll also be responsible for solving legal or compliance-related disputes arising amongst residents. 

Improved property quality

Most specialist providers have certain requirements they’ll need you to meet in order for them to take out a tenancy. Their expertise will help shape recommendations such as providing adaptions for disabled residents or improving safety measures. Provided you can fund the neccessary adaptions and works, you’ll have a property that is more suitable for long-term occupation by the care group and any future specialist providers you want to attract. 

Energy security 

Landlords with large properties that have been split into HMOs or student accommodation may have to pay utility bills during periods of underoccupancy – or even sometimes take a ‘hit’ on the bills by providing an all-in-one payment for students. If you’re working with a specialist care provider, they will generally agree to pay all utility costs regardless of spikes in energy prices. 

Post-tenancy value

Depending on the terms you agree to, the majority of care groups will aim to leave your property in a better condition than it was at the start. Not only will they have helped add value through adaptions and accessibility measures, but they should also agree to repair any damage incurred during their lease period and keep all outdoor and indoor areas clean and tidy. 

Working with supported living providers can also boost your corporate social responsibility credentials, so if you have a large portfolio and want to improve your business’s reputation, this might be a great way to do it. 

What landlords need to do

Before making any decision around letting to a care group or specialist supported living provider, we’d encourage landlords to do their research into the company. Just like a lender carries out due diligence before issuing a mortgage or finance, you should make sure you trust the company in question before you sign a lease. 

We’d generally advise that you only work with a company that is limited and registered with Companies House. Check their accounts and online reputation. Before you agree to work together, make sure you have any questions answered and have clearly outlined which responsibilities will sit with the company and which will remain with you as a landlord. 

Though many care groups make it sound like once the lease starts, a landlord can simply sit back and generate passive income from the arrangement, you will still have some key duties. Again this depends on the group itself and agreed terms, but will usually include:

• Ensuring your energy performance certificates (EPC) are up to date (lots of groups will expect you to hit a minimum standard of at least C in order to lease from you)
• Check you have a valid gas and electrical safety certificate
• If your property was built before 2000, you’ll also need an asbestos survey
• If your property has any stored water/header tanks you’ll also need a legionella certificate 
• Depending on how the arrangement is made, you might be responsible for repairs and maintenance either internally, externally or both. 

Most crucially, however, is your responsibility to ensure any finance you have covers this type of letting and that any insurance remains valid. You’ll need to reach out and check with your insurer and lender to be certain – don’t assume they cover this type of leasing as it’s a completely different model to standard residential lets. 

Finance for commercial lets to care and supported living groups

Standard buy-to-let mortgages don’t allow for long-term leases. They are designed for assured shorthold tenancies (ASTs) and lenders build their terms, conditions and even risk profiles based on this type of tenancy. If you want to let to a care provider on a long-term basis, you’ll need consent from your lender and a mortgage product that includes conditions supporting this type of use. 

Finding lenders who will support this type of property leasing requires a deep understanding of the lender’s market and attitudes towards risk. Where standard high street banks may reject your application, independent providers are more likely to support you with the finance you need. 

Rangewell can help you find the right lenders and negotiate the terms on your behalf. We’ll not only find lenders who can support you with finance for more unique property investment opportunities like this one but also negotiate superior rates and LTVs to support your goals. 

Finance to renovate or convert property for specialist supported living

If you need to make major modifications to your property in order to attract long-term commercial tenants, you’ll need finance to fund the conversion. 

Compared to more traditional mortgages, which are secured against the property’s value with repayments spread over a long timeframe, finance for construction projects is usually issued with stricter timeframes and repayment schedules. 

As a landlord considering development, you’ll need to secure a construction plan that gives estimated costs which you can present to a lender. They’ll then assess overall risk and make a decision based on either the completed gross development value or, more favourably for the borrower, the business value it brings. 

Rangewell can help you negotiate the latter and secure a loan against your potential business value rather than the bricks and mortar, which is usually lower. Speak to us if you’d like to learn more or read about development finance here. 

Get specialist finance from Rangewell

You can’t simply rent your property to a care provider and assume your mortgage provider won’t find out. Most specialist providers are audited externally by large regulatory bodies (such as Ofsted for children’s care) – who often check lender conditions as part of their audits. If you’re found to be in breach of your mortgage conditions, the consequences can be severe. 

Don’t take the risk – get more appropriate finance to support yourself as a landlord looking to rent to supported living and care providers. Speak to Rangewell today and we’ll help you find the best lender and deal for your needs.