If you, like many other investors, want to capitalise on one of Australia’s strongest industries – the childcare sector – what do you need to look for to maximise your profit? Here’s seven crucial qualities to look for.
Childcare centres are celebrated for being an excellent investment – typically better than rental properties – because of the high demand for care, strong rental income and long tenancy agreements. Growing government subsidies are also helping more parents afford care than ever.
So, while you’re already investing in a historically profitable industry, you can boost your profits and overall success by ticking a few essential boxes for your childcare centre.
In this blog:
1. The right basics: location and competition
Firstly, just like buying a house, location is everything. Is the location convenient for parents? How far away are your competitors? How easy is the centre to access, and is there adequate parking for peak drop-off and pick-up hours?
Check that the demographic of the neighbourhood wants your service and can supply enough enrolments to keep you at capacity. Being close to schools and major employment hubs can be a bonus for busy parents.
You’ll also want to look at other daycare centres in the area. Check how many enrolments they have, if there’s waiting lists, their prices, and maximum capacities. It’ll also give you a good idea of what parents will expect from your centre.
2. First impressions of the building
When parents arrive for their first inspection of your centre, their first impression will be the front of the building. If the building looks old, rundown or unkept, visitors could equate that to the quality of care that’ll be given to their children.
Look for a centre that feels modern, quaint or even fun or quirky (depending on the demographic you’re appealing to). If you have the budget, you could consider buying an older property and renovating, which would also boost your equity.
Greenery, signage and easy directions for parents to follow go a long way to making a good first impression, too.
3. Safety and security
Beyond the necessary safety procedures that have to be in place inside the centre, today’s parents also want high level security measures to ensure their children are safe in someone else’s care.
That could look like no-touch facial recognition systems for entering or leaving the building, enhanced camera security, and child-safe locking systems on doors where necessary. Technology is evolving, and centres that onboard new systems are creating a desirable point of difference.
4. Affordability
Earlier we mentioned looking at competitors in the local area. If your centre seems overpriced compared to others nearby, you might have a harder time filling spaces. Before you buy a centre, check the maximum capacity, the typical fees for other centres, and make sure the numbers work.
Of course, if your centre offers better facilities and care than your competitors, you can consider charging a higher fee, but always keep it within the means of your demographic. Parents are generally willing to pay a little extra if a centre represents above-average care, extra features and a convenient location.
5. Natural, enriching environments, indoors and outdoors
One thing parents learnt from two years of pandemic-related lockdowns is the importance of fresh air and free play for their children. Today, there’s more emphasis than ever on organic, outdoor play environments with plenty of nature for the children to explore.
Inside, the centre should have vibrant, spacious play areas that feel clean and organised. The inside of the centre is the biggest selling point for parents (possibly only second to their impressions of the staff), so it’s an essential component of a profitable childcare centre.
You may need to invest into renovating the interior, to provide a better care experience for the children and keep enrolments high.
6. Offer lucrative extras
There are plenty of creative ways to increase revenue for your centre without raising fees. For instance, you could consider offering:
- Before and after school care
- Family portraits
- Extracurricular programs for children in care
- Hiring out the centre on weekends to church groups, mummy-and-me yoga classes or as a birthday party venue
You can also find ways to make the property itself more profitable by considering an onsite café, which allows parents to drop off and catch up in the same place.
7. Put long lease agreements in place
If you choose to be a freehold owner of a childcare centre, you’ll own the property which can be rented out to a childcare provider. One of the most compelling selling points for investors are the childcare centre lease terms, which outgun any other commercial real estate for profit and longevity.
Typically, a lease term for a childcare centre is ten years or more, drastically reducing your vacancy times. As an added bonus, childcare centres have to uphold high standards of cleanliness, so you’ll save on repairs and restoration costs.
Finding the right childcare centre
If you’re looking to invest in childcare, it’s as simple as looking at what’s on offer online. From there, you can inspect the properties, do your due diligence, and make sure you tick the top seven boxes for profitability.
