The Property Unleashed Podcast

Build In Guaranteed Rent With Supported Living

• Mark Fitzgerald • Episode 374

Share episode

Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.

0:00 | 31:41

Send us Fan Mail

Guaranteed rent sounds like a fantasy until you understand how supported living and social housing leases are actually structured. 

Landlords and deal sourcers can plug into a real UK housing need while building more stable property income. With around 1.2 million households on waiting lists and councils spending roughly £1.7 billion a year on temporary accommodation, demand is not slowing down, and private landlords can help close the gap.

We get practical about the supported living property investment model: leasing to registered care providers on long terms, how government-backed rent flows through housing benefit and local authority payments, and why an FRI lease can remove a huge chunk of day-to-day management. I also explain the difference between social housing and supported living, what “exempt accommodation” really means, and why higher-than-market rents only happen when the property and provider are the right match.

Then we go deeper into the numbers and the risks. I share a case study where a standard rental bungalow could move from roughly £1,500 to £1,800 per month to around £4,000 per month with a specialist provider, plus why planning and a C3 to C2 change of use can affect commercial valuation and refinancing. We also talk due diligence on providers, funding length, compliance, and the property standards that matter most, from fire safety to accessibility and durable finishes.

If you’re sourcing deals, holding “dead-end” leads, or looking for a more predictable buy-to-let strategy, this is built for you. Subscribe, share this with a landlord friend, and leave a review with your biggest question about supported living leases.

VALUABLE RESOURCES:

Let me help you build your property business, Check out how I can support your investing now.


CONNECT WITH ME:

Facebook: https://www.facebook.com/mark.fitzgerald.7921
Instagram: https://www.instagram.com/markfitzgeraldentrepreneur/
Linkedin: https://www.linkedin.com/in/mark-fitzgerald-59200079/...

Big Promise And Quick Setup

SPEAKER_00

How to make money in property and guarantee it. Hello as always, and welcome to the property at least with me, your host, Mart Fitzgerald. So today I want to make sure that you're maximizing your returns in your property investing and how actually I can work with you, or you can come and work with me, not full-time, but part-time if you like and earn some serious money. You see, there's a lot of opportunities out there with property investing at the moment. And with a company that I now have and we've got up and running, and it is being a great success, we are looking for more and more investors out there that are potentially either finding deals that aren't right for themselves or are looking for specific deals for themselves that we can help you with. Let me explain to you right here, right now, how we can do that together. Because I'm going to share with you a live session I had recently with a group of investors that really opened their eyes up to all the opportunities that are out there. So I hope you enjoy

Why The Housing Crisis Creates Demand

SPEAKER_00

this. So I'm going to talk to you a bit about supported living, social housing, and a temporary accommodation throughout this episode, if you like, or throughout this live session. So let's first and foremost get our heads around what it's all about because there's a lot of buzzwords, there's a lot of hot topic going on about supported living, social housing, and all of those different avenues. So, from my perspective and from your perspective, this is a great opportunity to jump onto, so to speak, that bandwagon and really get out there, help and support investors, but also make some good money yourself as well. So the UK is facing a housing crisis at the moment, and it's only getting worse, not better. We have about 1.2 million households on the social housing waiting list at the moment. And that is massive, massive. And there is such a shortfall, as we all know, with accommodation, that local authorities are having to spend about 1.7 billion pounds annually on temporary housing. This massive gap between supply and demand means local authorities are desperately in need of properties from private landlords or investors. This means that there's an opening for us all to tap into and to help people. Now, one of the things that I've put together is a company now that can bring together empty properties or properties where landlords or investors want social housing, supported living, temporary accommodation, and bring in the providers together as well. We put the two together. And here at Hold My Hand Sourcing, you can potentially bring those opportunities to the table, and we can all split the fee that we make there. So this is a great way if you're a deal sourcer for those leads that potentially won't stack as an HMO or don't work as a service accommodation, or the owner just wants to try the hand at something else. We normally charge a week, I'm sorry, a week, a month's rent for facilitating and putting the deals together. And we're happy to share that fee with you guys and girls as well, if you can bring us opportunities. I want to use these sessions to realistically be able to get out there and share the requirements that we're looking for. Because then if you're looking for deals and those requirements just happen to be something that you're looking at or working on and you can't find what to do with those, or you find something that specifically we are crying out for, or our providers are crying out for, we can make it a win-win for all parties. And this is something I want to do through this platform as well, because it's a platform of deal sources. And of course, if we can help people find nice properties, it would be great. Building on from the housing crisis, let's look at specific demand for supportive housing. We're not just talking about general housing, we're talking about the critical needs for specialized homes. And of course, by about 2040, we'll need over 167,000 additional supportive living units across this country. And that is a 33% increase from the current level. This is driven largely by the aging population and rising care needs. And this isn't a temporary blip, it's going to be a long-term problem that, of course, we can help people with as well. And that is why social housing supported living is really being looked at, is really being backed by the governments as we speak. The immense demand for housing, especially supported living, puts a huge strain on the public sector. And of course, as we just saw, local authorities are spending a staggering amount of money every year in temporary housing people. We would like to get people more permanently in their homes, but a lot of the times they need a stop gap as well. Now, this isn't just a financial burden, it's a human one. And over 140,000 children living in a temporary accommodation at the moment means that the public sector simply cannot solve this problem alone. So this is where landlords and investors can really come into their own. We're always looking and actively seeking properties in the private sector to partner with and to provide stable, long-term, and cost-effective housing solutions. This is where you, as a deal sourcer, as a landlord, maybe yourself, can come in. We can take this strain off the public sector. And of course, everybody's looked after as well. Why? Because, as we all know, we're going to do these deals on fully insured leases. There's guaranteed income, and they will look after the properties as if they're their own. It means that investors and landlords can get long-term stability in what they're trying to do. We can support the needs of the social housing providers, and of course, we can really help this in a real social impactful manner. The UK is facing a housing crisis like never before. And as I said before, it's just not getting any better. Shockingly, more social homes are being lost than built each year. There is an abundance of empty properties in most council areas as well that are just sitting there because people are not proactive in what they're doing. And this only adds to the fact that there's a massive gap in housing people.

Social Housing Vs Supported Living

SPEAKER_00

So, what exactly is supportive living? It's a critical sort of, well, it's critical for the for the social sector where people need care homes. So people say social housing, supportive living. Social housing is a lot more of a temporary gap. It's a lot more where people are sort of on LHA rates, maybe unemployed, maybe just got out of prison, maybe trying to get back on their feet, maybe asylum seekers, those sorts of things. Supportive living is more for people who need care. And that's why with supportive living, you'll normally get higher rates and higher rents. A lot of the time you might know that they want to change the properties to a different usage class. So through planning, obviously C3 is your normal usage class when it comes to properties. And a lot of care providers like the properties to be converted to C2 class because then it's more of a care home or nursing home and things like that. Now, what we try and do is help the owners of the properties put the right providers in their houses. We never try and shoehorn any different care providers, social housing supportive living. If there's specific type of clientele that an owner of a property wouldn't like in their properties, then we're more than happy to help them with those needs. But there are lots of different charities out there, providers, charities out there that obviously cater for the people that they're looking after. And that can come with people with autism, uh learning disabilities, physical disabilities, mental needs and things. And of course, there is never a one property fits all. Sometimes, if you've got somebody with potentially mental needs that might shout and scream a little bit, you know what I mean? Because they don't actually mean to, but that's what they do. They're looking for detached houses, detached properties and things. But the need for these properties is massive. So, building on what supported living is, let's dive into how the model works for you as a landlord and as an investor. Now, this is something that you can, of course, take out there and you can go to your investors, your landlords, you can speak to them about these things. And it's an easy sale, particularly now. There are more and more people with the renters right bill coming in place that would rather have a long-term lease on their property if it's the right property, if it's got the right mortgage conditions and everything on it, to do so. You don't lease to individual tenants, of course. Instead, you lease to properties and to a registered care provider or social housing association. These leases are long-term. Typically, they can be three, five, six, ten, twenty-five years, providing incredible stability and income to the owners. Your rent is government-backed, funded by housing benefit or local authority payments, meaning no voids, no arrears for you. Plus, the care provider usually manages the property and the tenancies as well, making this a truly passive income stream. This model is further enhanced by the specific status called exempt accommodation. So, building on supported living models, a key component is understanding exempt accommodation status. This isn't just a bureaucratical term, it's fundamental to the financial viability of supported living itself. You see, properties that qualify as exempt accommodation when they are provided by a nonprofit organization include care and support and meet specific departments of works and pension requirements for vulnerable individuals. Now, this is critical and can also benefit the owner here when these properties are exempt from standard housing benefit caps. Now, what does this all mean? In simple layman terms, it means you can get higher than market rents because you're putting in somebody with specific needs. So we are catering to the specific needs of a provider, in which case, then you might have heard it before that you can get above market rents. A lot of people get giddy on this and they think as soon as they're going to do supportive housing or anything like that, that they're going to get all of these thousands and thousands of pounds. Well, the fact of the matter is, if you've got the right property, and I'll give you a case study, we had a landlord who had a three-bed detached bungalow. Now, three-bed detached bungalows are like gold dust. If you've ever come across those, reach out to us. We can get those filled all day long. Happy to split the fees with you. Okay, as I keep saying. But three-bed detached bungalow, they've got to do a bit of work to it. They are going to have to spend some money, and then they're going to change the planning on that three-bed detached bungalow from C3 to C2. There's certain things that they need to do to it, they need to spend some money on it as well. But the rental income on that property as a standard C3 bungalow is around £1,500 to $1,800 per calendar month. Because we've got a specialist provider that's going to go in there, they're going to take care. I think some kids are going in there as well that are very, very young and they're very, very disabled as well. Don't know the ins and outs of it, but I do know that they need little cranes and all sorts to help them out, bless them. That the provider, because it's going to be special care, will pay around £4,000 per calendar month. Now putting it on a C2 as well also makes that property commercial rather than residential. So you can take the mortgage, or should I say, the value of the property will be based on a commercial valuation. So where you're looking at a property deal that might be on a bricks and mortar, if you actually could put a care provider in like this, you can actually go on a commercial valuation. That's potentially a no money down deal for an investor. But equally to that, and

The Lease Model And Guaranteed Rent

SPEAKER_00

just as important, it is a property that somebody can take on, a care provider can take on, and they can try at their best to give the individuals a better care and a better life and a more comfortable surroundings to be in. And that, I have to say, is very, very rewarding when you can do stuff like that and really, really help people that are less fortunate than ourselves. So not only will the property owner get paid, get their monthly fees, everything's looked after, the care providers can take on good properties, put their clients, if you like, their people in there, and it works really, really well. And this is something that I'm very, very passionate about at the moment. And I've got a team where we work very, very hard on requirements to try and house the vulnerable people, the charities, the people that need a bit of help, but also working with investors and landlords to get the results as well. And this is what I say I can, I've got a pretty good reach. I'll be quite honest with you. I've got a quite a good network in and across the whole of the UK, and that's where we operate. But we still need more boots on the ground, we still need more help, we still need more assistance. And that is where, you know, this community and people like yourselves can come in here, and I'll gladly run clinics where I tell you all the requirements that we're looking in, the areas that we're looking. And if you guys and girls can go out there and actually find these opportunities and we can piece them all together, we can work together and we can make sure that it works for everybody. Okay. So obviously, the benefits of this, the care providers are, you know, so to speak, a linchpin in all of this because they take care of their tenants, obviously, the people that are living there, they take care of the maintenance on FRI, fully insuring leases. So everything in the property is covered. Sometimes they can take care of a lot more, but predominantly, what I would say to you is if you took a house and you shook it upside down, everything that falls out, they will fix, they will replace, and they will maintain. It's really only the structure of the property, the boiler, the electrics, the gas, and everything that has to work, but they will get it serviced and everything. They will make sure that the property stays compliant throughout the term that they've got it as well. So the true appeal of supported living, of course, is understanding that the challenges that we face as landlords with our normal buy-to-lets, you know, the landscape's always shifting, as we know with the renter's right bill and everything and all of those great stuff, you know, no fault evictions are removing. And of course, the increased risk that landlords are facing over the next few years with the different things that are going through, EPC regulations, renters' rights, you know, the exit driver as well when it comes to tenant disputes, of course, the burden of driving all of those sorts of different things and people going in not paying or just coming in, moving into your property and moving on within a month or so. And of course, mortgage rates as well. We've got mortgage rates when there's problems in the Far East and things. Wouldn't it be nice to sort of get a nice long lease on a property, get a nice long mortgage locked in and out and know exactly what you're going to be making each and every month? And as you say, the more you say it, the more it actually sounds better for the agents, landlords, and everybody that's out there. So, as I say, it can range from five to 25 years. 25 years is a particularly long one, but if you've got a block of flats, you know, we're looking for units where it could be 50, 60 units in a block of flats. So if you've come across anything like that, reach out to us. We might have a provider that not only wants to take that on, sometimes they even want to try and buy the flats as well, get a percentage of that deal. FRI terms, which is fully repairing and insuring lease. Of course, that means that the care provider covers all the maintenance costs, and of course, they guarantee the rent as well. Now, some people say, well, if it's a five-year rent or a 25-year rent, what about it rent increases? Well, you have a proper lease agreement, and of course, in that lease agreement, you might agree that the rents increase every 12 months, every other year, or every three years. Okay, some providers like to do it every three years, some will do it every year. It depends on the provider, it depends what's going on. But the guarantee of that rent and the guarantee of that security is great. Now, the one great thing about supported living is obviously that you've got your rent, you know what's coming in, very much like rent to rent itself, but this isn't just a promise because it's backed by government funding. You know, the payments come from the Department for Work and Pensions and local authorities. So they're often directly to the housing providers themselves. This is funding, of course, these specialized care. So they are government-backed. What we do is as a company ourselves is we check the providers because anybody can potentially go and do the exams, get the qualifications, and become an and call themselves a provider. But we only work with registered providers that have been around a while. We do our background checks on those providers as well, and we normally see how long they are funded for. Because not all of them. We had one where a landlord was going to have a 10-year lease, but we actually saw that they only had six more years worth of funding. So we said, don't do anything more than six years. Chances are they'll get funding again, but they've got to obviously get out there, propose that, and go through the right channels. But why risk it? You know, those four years, if they didn't get the government funding, where would that stand? So it's about doing your due diligence as well. And that's what we come in and help people with. So we make sure that not only the leases and the contracts are done between the landlord or the homeowner, are done properly with the providers, but we also make sure that there's a level of due diligence done on the providers themselves. Why? Because we all want to sleep at night. But if you get with the right providers, they've got the right government funding, cancel backed as well. That is great. And of course, that also helps you all to sleep at night. What else have we got for you then? So traditional management, obviously, you can have frequent tenant phone calls if you're managing it yourself. You can have ongoing maintenance issues, which you will always have as a buy to let landlord. Of course, there's risks of voids and arrears and stuff like that, and high management fees. Obviously, you have no management fees with any supported living provider because they will take care of it for themselves. They handle all of the maintenance as well. You have no void periods or no rent arrears because it's all there, it's all guaranteed, and it's truly a passive income for the people who own the properties. And that's why more and more investors and landlords want to get in with providers, but it's becoming more and more difficult now to actually get in there with the right providers. There are still some providers it's quite easy to get in with, they're not always the best, but that's where social spaces, which is my company, bridges that gap, and that's where we can help people who are finding great opportunities. We can't find providers and charities for every property, but a lot of the time we can we can

Exempt Status And A Real Case Study

SPEAKER_00

do it for the right properties in the right areas. And that's why I like to put out there our requirements and what we're looking for and things. Of course, the other property standards is you know enhanced fire safety, accessibility, and of course, durability when it comes to property standards. And you need to make sure that your properties are set up for success and have the right specifications and standards for the providers. So it's not just as easy sometimes of just giving us a property. Sometimes you can do it. We've just done a deal on a block of flats where basically they're handing us the properties, the provider's willing to actually even furnish the properties as well. So they just want to use those for what they want to use those for, and they generally pay market rates. But if you're gonna go for a higher standard or you're gonna go for a C2 class and you're really gonna try and get those great rents because the care providers really want that property and it suits their needs, then we need to make sure that we've got a grade A fire alarm system in there. We've got fire doors, the property is accessible, and of course, it might need a wet room, it might even need wider door frames, and of course, access to different floors may need stair lifts. Now, a lot of the time, if it goes beyond above and beyond what the basic safety criteria are, the providers will sort it out themselves and they will also make right the property when they give it back. But you want to make sure if you're setting your properties up and you're gonna be doing something like this, that you make your property as durable as possible as well. Don't go cheap on it. Go with stuff that's gonna be hard wearing, that's durable. Yes, it will be fixed, it will be replaced and things, but it's all about making it nice, safe accommodation because obviously we want to make sure that we are doing our bit and not just trying to make as much money out of these people as possible. Because for me, it's all about the standard of. Accommodation that we're getting there. So it's all about making sure that it works for everybody. Now, of course, a traditional buy to let can gross yield you about four or six percent. Uh, you know, a net yield could be about three or four percent, but you have the risk of those voids, you you know, you fully manage burden, whether you're going to manage it yourself or not. And of course, supported living can give you those better numbers. But we saw you know, traditional buy-to-lets are really struggling out there now. And a standard buy-to-let property, which typically yields you know, three or four percent net after all costs, compare that to a supported living where net yields often reach six to nine percent. And of course, imagine a five-bed property, maybe as an HMO, might bring in £2,200 a month, but configured for supported living, that same property could generate between £3,000 or £4,000 a month. And this comes with zero void periods, reduced management or no management fees whatsoever, a government-backed rent, and of course, the difference in income over 10 years is going to be an amazing opportunity for those investors. And that's why packaging these up potentially as deals to sell as well is great for you. Why? Because it helps the charities to get the accommodation they want, but also delivers a fantastic package to the investors as well. There's obviously lots of different things out there, you know, there's lots of different ways that you can and financial advantages to this, but in supported living, landlords are generally part of the solution to a natural crisis, and local authorities must house vulnerable adults, but they do lack sustainable properties. They need private landlords, they need them to provide and help with the speed of really sorting out what is a major problem at the moment. And of course, traditional valuations over commercial valuations. I'm not going to go into that too much here, but if you do go from C3 to C2 class, then it can be massive. You know, if you have a property that generates £48,000 a year and is on a 10-year lease, a commercial valuation could place that value at a potentially £480,000 to £600,000 as well. That's significant uplift, which might, you know, change a whole deal that you're looking at. So that commercial valuation on a property that's normally a bricks and mortar could be massive. It does need to be the right property. You can't do that on everything, but we have again planners and we have a team in place that can look at property opportunities and say whether or not we can find the charity and the provider that'll take that property on and go from there. We've got one in Liverpool at the moment, which is just a two-bed terraced house. The house itself isn't that expensive, it's only about £130,000. We have a charity and a provider that want to take that property on, they're willing to pay a premium. We are going to convert that property to potentially a C2 class. We've already had it provisionally accepted. So as long as the works are done, it's going to cost the owner of the property £12,000. They can then refinance that property on a commercial valuation that could be around 200,000, 240,000 pounds. So all of a sudden, they can pull their money plus more if they want to out of that deal. So it is a great way of doing things, but don't stack every deal thinking that you can do that. If we can get it all to align and we can find the right charities and social housing providers to go in there, then we can make that work very, very well. So it's all about getting out there, identifying the assets that are there, having a strategic plan in place to make sure that it's going to work for you. And of course, if there are any large blocks as well, we can also look at those where we have a lot of providers that want to take those on. Multiple units in one is always a good thing. And of course, capital recycling is always what a lot of investors are looking for and buy and reconfigure. So again, you might look at a conventional property. You might think that doesn't really stack or I can't get the numbers to work. Well, potentially we can help you with that. There may be a few little reconfigurations that need to happen on that property, but it could all of a sudden transfer a three-bed property into a four-bed property that works for supportive living. And as I say, we can uh look at the benefits of it all, which are refinancing potentially with an uplift, secured lease over the long term. Now you will have to be on the right mortgages and the right financial products for this. And that obviously is always going to cost a bit more because they always want their much as well. But if you can manage this right, you can get those uplifts, you can pull that money out, you can repeat the operation, and you can just build your portfolio up using the supported

Due Diligence And Property Standards

SPEAKER_00

living providers and also recycling your cash to go again. Achieving the uplifts means that your portfolio not only runs efficiently, it's looked after, you've got the guaranteed income, but also if you were to do this and you were to build a massive big portfolio and you ever wanted a big injection of cash, you wanted to sell that portfolio. There are a lot of equity firms out there that will look at buying a big portfolio. Doesn't necessarily just have to be yours, maybe you can group up with other people. But I'm getting a bit ahead of myself there as well. But there's a lot that you can do with these things. So commercial to ready re is great. Of course, those are other opportunities you can look at. We're looking at one right here, right now. We've got a deal we're putting forward to some of my investors that I've got, which is a commercial factory at the moment. It's done very much in a in a in a warehouse, not a conventional warehouse, it looks more like a normal house. And we're going to convert that into flats, and we've got a provider then that wants to take that on on a 15-year lease. So again, that can work really, really well and be quite strong for us. So if if you do want to have a little look at this, if you want and have any questions, then do feel free to reach out to me or um check out uh or reach out to us at info at socialspaces.uk or mark at social spaces.uk. And we're more than happy to have a little look. As I say, my company Social Spaces can help you structure the lease. It can help negotiations. We don't mind talking to you know the landlords and things. But if you're out there and you're looking for rent-to-rent deals or you're looking at opportunities that you want to package up and sell on, have a little chat with the landlords, with the agents and everything. And I'm going to do more sessions in my live sessions about this, where I'll I'll tell you exactly how to approach landlords and agents, what to say to them, how to help you to structure these deals and how to get these deals over the line, if that's something that you're interested in. So whether you're a landlord, you've got some properties, or whether you're out there trying to find your own rent-to-rent deals, you're doing service accommodation, you've got HMOs, you've got blocks of flats. It doesn't really matter. We can make it all work. If it's in the right areas and it's where our providers, which are all across the UK, are looking, we can help pair that up. And our fees are very, very simple. We do charge a fee for every property that we put together, as I spoke about before, and that's the landlord that will pay that, but we will make sure that we make it worth the landlord's time and resources and, of course, money as well. So do check out if you want to check out my website, which is www.socialspaces.uk. You can find out more information there. Likewise, you can send us an email, reach out to us, more than happy to have a chat with you. If you want to be one of our preferred partners, who can go out there and find providers? It's an easy sale at the moment to get out there, work with state agents, work with different landlords, and of course, put those missing pieces together. We can then help people that obviously need our help, that are vulnerable people, that are people with disabilities, have a really nice place to live. And as I've said before, it's a passion of mine to help others that are less fortunate than ourselves at the moment. It's a bit of a mission for us and my team. Yes, we have to charge for it because obviously it does take time, it does take effort, it does take resources to do these things, but we make sure it's a win-win for all parties, as I always say. So whether you've got properties, do feel free to reach out to us, let us know where they are. Or whether you're a deal sourcer or you're just an investor that finds the odd leads and doesn't always know need, doesn't always know what they want to do with any dead-end leads. Well, those potential dead-end leads could be just what we're looking for. And we're more than happy to work with you to share the fee with you. So as I say, check it all out. If you need any help with education or getting into this, I have some serviced accommodation training, HMO training, supported living training, back-to-back leasing training, rent-to-rent training, assisted sales, all in education to action, my community. So check out the propertyunleash.com for more information on that and how you can get started. You can learn all the tools and you can get out there and start making and building a successful property business for yourself. I hope you've enjoyed this episode. As always, I've really enjoyed having you join me here, and I look forward to you joining me in the next episode very soon. Take care, go out there and smash it, and bye for now.