Thinking of Buying a Child Care Investment Property? Here's What You Need to Know

Child care freehold investment properties have become one of Australia’s most sought after and fastest growing real estate investment sectors, due in part to the current low-interest rates, the typically higher return on investment than conventional investment properties, and the excellent lease conditions being offered.

In addition to the previously mentioned factors, other reasons that have contributed to the popularity of child care investment properties include:

• Strong government funding for child care operators
• The excellent return on investment
• Long Leases
• Exponential rental growth, which is surpassing that of all other property sectors 
• Urban growth creating growing demand for child care centres
• Centres that must be maintained to a high standard to comply with government regulations
• Tenants invest heavily in their businesses which leads to fewer relocations and a higher level of rental security for the landlord
• The quality and high level of service required by parents these days have led to strong competition between child care operators.

As in buying any business, it is always beneficial for you to talk to your financial institution to ascertain how much they would be willing to lend and what their lending criteria are. This will assist you in knowing the price range you can afford and will prevent any misuse of your time looking at properties that may not be within your budget.

Once you know your price range you can start looking at properties. As you begin looking for child care investment properties, you’ll notice that there are four different types of child care investment properties: 

1. Converted child care centres -residential properties that have been converted into child care centres
2. Converted and part purpose built centres – these are residential properties that have been extended to include a purpose built component
3. Older style purpose-built child care centres – these are older centres that were specifically designed to operate a child care centre.
4. State of the art purpose-built child care centres – these centres are designed to the highest standards and will typically be less than 10 years old. 

It will depend on your preference and budget as to what type of property will suit you.

Prices of child care investment properties will vary depending on market demand, the location, size of the property, the lease terms (in particular the current rent), and the condition of the property. Yields may also vary.

As with any other investment property ensure that you do your homework and pay particular attention to the age and condition of the property, the current rent, lease term and further options, annual and market increases and ask questions about the tenant and their business. The more information you have the better informed you will be to make a decision.