A care home arrives on an investor’s desk as a rent, a lease term and a yield. Those three numbers describe the contract, not the asset. Whether the rent is paid for twenty years depends on what sits below the lease: licensed places, occupied places, the public fee per resident per day, the staff the law requires on each shift and how much of the building a regulator will want rebuilt before the term ends.
This is a working guide for one asset. The market around it is covered in who buys care homes across Europe and how they are let; here the question is what to measure before deciding what a specific home is worth.
Three numbers for places, and they are rarely the same
Every care home has three capacities: the places the authority has licensed, the beds installed and the residents present today. A brochure quotes the largest; a valuation starts from the smallest. The gap between licensed and installed places shows whether beds were taken out of service, usually because a double room became a single under a new standard or an inspection restricted a floor. The gap between installed and occupied is the one a lender models first.
Room mix matters as much as the count. One hundred places in fifty double rooms and one hundred single rooms earn the same rent on paper and have different futures: private residents pay a premium for a single room with its own bathroom, public payers increasingly require it, and every double room converted later removes a place. Surface per place is the shortcut; a building tight on square metres has no slack for that conversion.
The licence: who holds it, for how many, under what conditions
The licence is issued to the operator for a specific building and number of places, with conditions on admissions, staffing and inspections. The buyer needs the authorization, every amendment, the last three inspection reports and the sanctions record, because each can change the number of places the rent rests on.
In Spain, the 2022 accreditation agreement published in the BOE binds centres with publicly funded or contracted places under the dependency system, not purely private ones. Accredited centres must have at least 10, 20 or 25 per cent of their public or contracted places in single rooms with an adapted bathroom, by density of the area; centres not yet tendered or licensed are capped at 75, 90 or 120 places, in living units of no more than 15 people, with at least 65 per cent of those places in single rooms. Centres already accredited must complete the adaptation by 31 December 2029, and a home sold with a stock of double rooms carries that adaptation inside the price.
In Germany the home law belongs to each Land and sets room standards, while the staffing benchmark is federal: ยง 113c SGB XI allows homes, from 1 July 2023, to agree staffing by care grade up to a ceiling of skilled nursing staff from 0.1037 full-time equivalents per resident in care grade 2 to 0.3842 in care grade 5, a ratio per resident, not per licensed place. In England the provider registers with the Care Quality Commission; regulation 18 of the 2014 regulations requires sufficient numbers of suitably qualified, competent, skilled and experienced persons, and regulation 20A obliges it, once rated, to display its latest rating at each premises and online. In the Netherlands a resident needs a Wlz indication to enter a nursing home and the operator is paid through care packages priced yearly by the healthcare authority.
The fee: public tariff, private tariff and the mix between them
Revenue is occupied places multiplied by a daily fee, and the fee depends on who pays: a public payer sets or caps its rate per resident per day, private residents pay what the local market bears.
The public side is published. The Dutch policy rule for 2026 states that its tariffs are maxima that care offices may undercut; the daily value of a VV5 package, the common profile for somatic nursing home care, is EUR 356.70 without treatment admission and EUR 387.33 with it. The German care insurance pays a fixed monthly amount towards care, from EUR 805 in care grade 2 to EUR 2,096 in care grade 5 since 1 January 2025; board, lodging and investment costs fall on the resident. In Spain each region contracts places at a daily price it publishes. The buyer needs the current tariff and its next revision date, because a tariff frozen while wages rise is a margin already shrinking.
The private side is in the operator’s books, and United Kingdom survey data shows how far the two diverge. Knight Frank’s 2025 review of operator trading for the year to March 2025 puts the average weekly fee at GBP 1,298, but GBP 1,461 for private payers against GBP 1,096 for local authority residents. Occupancy ran the other way, 85.1 per cent in private pay settings and 90.3 per cent in local authority ones. A home full on public referrals is a different asset from one full at private prices.
From revenue to EBITDAR: staff first, everything else after
The operator’s earnings before interest, tax, depreciation, amortization and rent pay the landlord. It is built from the home’s own accounts, not the group’s.
Staff is the first cost, usually more than half of revenue. The same review records staff costs at 55.3 per cent of income, 46.3 per cent in private pay homes and 63.5 per cent in local authority ones, and an EBITDARM margin of 30.1 per cent, 39.4 per cent for private pay against 19.7 per cent for local authority. Agency staff is the warning light: the review shows it at 3.3 per cent of staff costs in personal care and 2.9 per cent in nursing; a home well above that is paying a premium for shifts it cannot fill.
Food, energy, maintenance and insurance follow; utilities accounted for around 36 per cent of property costs in the same sample. Each line is checked against the lease: a cost the operator should bear under a triple net lease but has not been bearing will arrive with the new owner.
Rent cover is EBITDAR divided by rent, computed for the home itself over three years, not the year the vendor chose. The plan behind the price rebuilds the operator’s figures from the bottom up; what a committee tests in it is set out in the business plan behind a managed asset.
Where the yield comes from, and why it is the last number
Once rent cover is known, the yield is a market comparison. A broker research note of 4 November 2026 puts the blended European care home yield at 5.20 per cent in the third quarter of 2026, stable year on year, and the broker reports cited in this series’ market overview give the national ranges around it.
Comparables say least about a single home. Two homes in the same region with the same lease trade at different yields because one has a rent cover that survives a tariff freeze and the other does not, because one has single rooms and the other a conversion ahead, because one operator has a clean inspection record and the other a pending sanction. The yield is applied after those facts are checked, the discipline described in how a European real asset is actually valued. A generous yield against the comparables is a question, not an opportunity.
The capex the buyer will pay for
A care home ages in three ways. Regulatory capex is driven by room standards: the Spanish single-room requirements and the German Land quotas turn double rooms into singles, which costs money and places at once. Accessibility capex follows the resident profile: ceiling hoists, bathrooms a wheelchair can enter, lifts that fit a bed.
Energy capex has a European timetable. Directive (EU) 2024/1275 requires new buildings owned by public bodies to be zero-emission from 1 January 2028 and all new buildings from 1 January 2030, and obliges member states to set minimum energy performance thresholds for non-residential buildings at 16 per cent of the stock from 2030 and 26 per cent from 2033. A care home is heated, lit and ventilated all year, so an older building sits near the bottom of any national stock; the budget this implies is examined in energy performance rules and the capital expenditure they imply.
The buyer prices all three over the lease term, reads who pays, and assumes a silent lease means the landlord. A rent that only works if the operator funds a conversion it has not budgeted is not a rent.
What takes the price down
Occupancy below what the trading surveys report, without an explanation the buyer can verify, is the first discount. A home can be below average because it is in lease-up, has closed a wing for works or has raised private fees; or because the local authority has stopped referring, which no brochure will say.
Outsourced care staff is the second. A home that runs its nursing through an agency pays more per hour, cannot show the regulator a stable team and depends on a contract it does not control. Subcontracted catering is ordinary; subcontracted care is a flag.
An inspection with deficiencies is the third. A records finding is a management problem; a staffing or safeguarding finding is a licence problem, because the authority can restrict admissions until it is fixed, and the rent does not pause. Dependence on a public contract that expires inside the lease term is the fourth: if most places are contracted to a region or a care office and the agreement ends in three years, the buyer underwrites a renewal it does not control. What happens to the rent when these risks mature is the subject of the care home operator lease, guarantees, insolvency and replacement.
The documents to ask for before making an offer
On the licence: the authorization and every amendment, three years of inspection reports, the sanctions record and any pending procedure, the fire certificate and the planning use. On the places: licensed, installed and occupied places month by month for three years, and the room schedule with surfaces and bathrooms.
On the money: three years of the home’s own accounts split between public and private residents, the public contracts with tariff and expiry date, the private fee schedule and its increases, the staff roster with ratios by shift and agency hours, the energy bills and the energy performance certificate. On the lease: the signed lease and annexes, the agreed capex plan, the guarantor’s accounts and the rent cover covenant as reported.
The investor who reads all of this knows what the home is worth before any yield is discussed. The one who offers on the rent roll and the yield is buying the contract and hoping the building and the licence behind it hold. They usually do, but the price of being wrong is a tenant that cannot be replaced quickly and a regulator who decides how long that takes.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.