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Care Home Buy To Lets - Are They A Scam?

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So it seems care homes buy-to-lets (and student flats) are all the rage ...

Torygraph out lines it well here - http://www.telegraph.co.uk/finance/personalfinance/investing/11050610/Latest-buy-to-let-craze-buying-rooms-in-care-homes.html

You put down £70-80k for which you get a 10-12% yield over the next 10 years, followed by a 125% guaranteed buyback. There are other options around this theme.

This company - MBI - seems to be behind a lot of them. http://www.mbihomecare.co.uk

A lot of institutional money has gone into this, but they're also being heavily marketed at private investors.

I'm just doing some research on them now. Anyone on here had any experiences with care home buy-to-lets?

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I looked in these some time along. All the promises seem to be on the never never and you are pretty much at the whim of the company that sells you the digs. Apart from being overpriced (you are just buying the rights of rent from a room or studio flat), if the company can't keep on selling these to bigger mugs the whole system falls down. Sound like something you have heard off? They talk about guaranteed buybacks but there are no guarantees if the company goes under.

If a yield seems too good to be true, it probably is!

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"followed by a 125% guaranteed buyback"

Where does that money come from?

The greater fool thats willing to pay 25% plus ,,,,,but with an ageing population who knows,but i smell a rat or double glazing salesman

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A guarantee just turns resale risk into counterparty risk - they've got a lot of investors to pay out to in 10 years time if it goes sour and I doubt they're up to it. The resale risk is probably a better risk - particularly if you're paying in some way (you will be) to exchange it for counterparty risk.

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