Senior living facility

Care Facility - A care facility is a property designed to provide inpatient or day care and support for older adults or those in need of care, and can be purchased as a single care apartment under a condominium ownership structure.

What makes a nursing care property a good investment?

Nursing care properties are typically offered as nursing care apartments within a larger nursing home or senior living facility. The buyer acquires a single unit as a separate ownership unit under the Condominium Act (WEG) - comparable to a condominium, but with one key difference: The property is not rented out by the owner directly, but is leased to a professional nursing home operator via an operating agreement.

These operator agreements typically have a term of 20 to 25 years and guarantee the owner a regular rental income-regardless of whether the individual apartment is actually occupied. This rental guarantee is one of the key arguments in favor of care properties as an investment, as the vacancy risk is entirely transferred to the operator. The achievable returns generally range between 3.5 and 4.5 percent per year, depending on location, the operator’s creditworthiness, and the facility’s amenities.

Demographic change in Germany is sustaining the demand for nursing care beds. According to current forecasts, the number of people requiring care will rise from around five million to well over six million by 2040. This growing demand ensures long-term rentability and makes nursing care real estate a relatively recession-resistant asset class-because, unlike residential or office real estate, demand for nursing care beds is largely unaffected by economic cycles.

Another advantage: Under certain conditions, buyers can claim a preferential right of occupancy for themselves or their relatives in the facility or another facility operated by the same provider-a combination of capital investment and personal retirement planning that is becoming increasingly attractive, especially for the 50+ generation.

Compared to a traditional condominium, care properties involve no active management tasks: no tenant turnover, no utility bill settlements, no hiring of contractors. The operator handles day-to-day operations. The owner receives their monthly lease payment-and thus enjoys a very passive investment.

Risks and Due Diligence

The greatest risk of a nursing care property lies in dependence on the operator. If the operator runs into financial difficulties or becomes insolvent, the lease income ceases. The owner must then find a new operator-which can be difficult if the building is outdated or in an unfavorable location. We therefore recommend thoroughly reviewing the operator’s creditworthiness and experience before purchasing: How many facilities do they operate? How long have they been in the market? What do the inspection reports from the Medical Service say?

Other points to consider include the property’s location (sufficient catchment area, accessibility for family members), the construction quality, and the building’s suitability for alternative uses in the event that a change of operator becomes necessary. Buildings that are architecturally designed exclusively as care facilities and do not allow for repurposing carry a higher structural risk than versatile floor plans.

The provisions in the lease agreement regarding maintenance obligations should also be read carefully-in many contracts, the operator assumes responsibility for maintaining the individual units, while “roof and walls” remain the owner’s responsibility. This means: the roof, facade, load-bearing components, and major technical systems are the owner’s responsibility. Reserves for maintenance measures on the common property should therefore be factored into the return calculation.

In addition, prospective buyers should check the licensing status of the facility. A nursing home requires an operating license under state law (in Bavaria: the Nursing and Residential Quality Act, PfleWoqG). Revocation of the license by the home supervisory authority would have an immediate impact on the lease payment.

Practical Tip for Nuremberg and Franconia

With a population of approximately 3.6 million, the Nuremberg metropolitan region is among those experiencing particularly noticeable demographic change. In Nuremberg, Fürth, Erlangen, and the Nuremberg region, new nursing facilities are regularly being built, and existing facilities are being expanded or modernized. We are observing stable demand for nursing care beds, particularly in well-connected locations along the S-Bahn lines and in the regional centers of the surrounding area such as Schwabach, Hersbruck, or Neumarkt.

When purchasing a nursing care facility in the region, we recommend analyzing not only the operator’s creditworthiness but also the competitive landscape and demand situation at the specific location. If several nursing homes are already competing in a given town and the occupancy rate is below 85%, this is a warning sign. The nursing care statistics of the City of Nuremberg and the social reports of the surrounding counties provide reliable figures on this-and are publicly available.

Investors looking to enter the nursing care real estate market should also pay attention to entry prices: In the Nuremberg metropolitan region, nursing care apartments are often offered by national sales agencies with margins far above the local average. A comparison with the local real estate market and an independent valuation are recommended.

Frequently Asked Questions

Who is a care property suitable for as an investment?

Care properties are particularly suitable for investors seeking a long-term, predictable return with minimal administrative effort. Since the operator handles all management, typical landlord responsibilities such as tenant turnover, utility billing, or minor repairs are eliminated. Entry-level prices for a care apartment in the Nuremberg metropolitan region typically range between 120,000 and 250,000 euros, depending on size and amenities. Care properties are particularly suitable for security-oriented investors in the second half of their lives who wish to supplement their portfolio with a socially meaningful, high-yield asset class.

What happens if the operator becomes insolvent?

In the event of operator insolvency, lease income ceases immediately. The insolvency administrator may choose to continue or terminate the lease agreement. In the event of termination, a new operator must be found, which can take months depending on the location and condition of the building. During this time, the owner bears the running costs without any income. That is why choosing an experienced, financially sound operator is the most important factor when purchasing. Helpful indicators: a track record of several years in operation, broad regional presence, good ratings from the Medical Service (MDK audit report), and no public indications of staffing issues.

Can I resell a nursing care property?

Yes, nursing care properties are freely transferable as separate ownership units under the German Condominium Act (WEG). Resale typically occurs through specialized brokers or sales agencies. The property’s value appreciation depends largely on the remaining term of the operator contract, the condition of the building, and the quality of the location. An ongoing lease agreement with a reputable operator makes the sale considerably easier, as the buyer immediately takes over predictable income. Important: Since nursing care properties are not a traditional mass market, sales processes can take longer than for residential properties. Anyone who needs short-term liquidity should take this into account in their investment planning.

What tax considerations apply to nursing care properties?

Lease income from a nursing care property is taxable in the same way as rental income from a residential property-it is subject to income tax. At the same time, depreciation (AfA), maintenance costs, and financing interest can be claimed as tax deductions. For acquisition costs up to 150,000 euros, there may be options for special depreciation (check Section 7b of the Income Tax Act). We recommend consulting with a tax advisor regarding tax planning before making a purchase.

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