Investment apartments in retirement homes

[Ret45]

I have noticed a couple of investment schemes where apartments are for sale in retirement homes.

An example of the scheme would be a developer builds an 80 bed nursing home and also builds 50 apartments beside the nursing home. The apartments are rented to elderly people who might avail of the facilities and medical care at the nursing home.

The apartment costs EUR 350 k and the total cost is eligible for tax relief on other rental income and on PAYE income over 15 years. So the investor gets tax relief on EUR 23 k PAYE income per year for 15 years. There is also guaranteed rental income of EUR 11 k for three years.

So let's say you buy with 50 k cash and the rest by way of a repayment mortgage of 300 k taken over 25 years. Your annual mortgage repayments will be approx 21 k. The rental income is 11 k plus your net tax break is worth around 10 k pa, assuming you are paying tax at 41%.

So you are just breaking even and will eventually have a nice stream of income. On the downside you are unlikely to see any capital appreciation and could take a hit when you try to sell.

I'd be interested in hearing views on this. Has anyone invested in these schemes?

 

[doberden]

You need to take account the money you are putting into the scheme. If you put in 100,000 you would more than break even but you'd be 100,000 down.

Are there other expenses e.g. maintenance, solicitor fees, stamp duty(if any), all of these should be taken into account also.

Are you certain you're going to be a paye working paying on the top rate of tax over the next 11 years.