High yields, long-term tenants and bolstered by a super-strong industry, childcare centres are becoming one of the most sought-after assets by smart investors
If you’re keen to invest, what do you need to know?
In this blog:
The basics of buying a childcare centre
There are a few options for buying a centre. You can choose:
- A business leasehold. This is purchasing the childcare business, not the property itself, and paying rent to your landlord.
- Freehold purchase. You’ll essentially be a landlord when you opt for a freehold purchase, buying the property and collecting rent from your tenant.
- Freehold going concern. Also known as ‘business and freehold’, a freehold going concern means you’ll be purchasing the business and the land the centre operates on. These are often purchased based on a percentage of the business’s net profit.
Each type of purchase has its own merits and requirements. For example, you might want to consider a business leasehold if you have experience in childcare. Freehold going concern purchases require more capital, so you’ll need to assess what your investment budget can afford with the help of a finance expert.
Some childcare businesses for sale are existing properties, or they could be a new turnkey-ready development ready to be occupied.
You can see a range of leaseholds, freeholds and freeholds going concern on our childcare business opportunities listings.
Why investing in childcare is proving to be so fruitful
The childcare sector is robust, and getting stronger, reinforced by plenty of demand, government backing and improvements in quality and technology. Here’s a snapshot of the benefits for investors looking at early childhood centres:
- The ‘deep pockets’ of the Federal Government providing millions in funding to the sector
- Growing numbers of families using childcare, as better Government subsidies make daycare more affordable
- Excellent capital growth potential for land in high density, suburban zones
- Long, stable leases with low vacancy periods, especially compared to residential vacancies
- Excellent historical returns on investment
- Depreciation benefits
- Mandated upkeep of the building for tenants to provide quality care
Getting started with buying a childcare centre
Your first steps to buying a childcare centre aren’t all that different to buying an investment property. You’ll need to meet with a financial planner and mortgage broker to assess your borrowing capacity and financial goals.
Childcare centres can cost anywhere between $200,000 and upwards of $10million, so there’s a good range of options to suit borrowing budgets.
It’s likely you’ll need to help of professionals and legal guidance when you’re purchasing a childcare centre, as there are national rules and regulations that need to be adhered to.
Consider what kind of purchase you’d like to make – leasehold, freehold, or freehold going concern – and look at online listings to assess purchase prices, locations, and upcoming centre developments.
How to choose what type of childcare to buy
The first thing that might determine what type of childcare option you buy is budget. Of course, where you buy matters: a centre in a small town in going to be priced far lower than a centre in a thriving neighbourhood near a major city.
You’ll also need to consider how much involvement you want to have in your investment, since some options are more hands-on than others.
Business leasehold: you’ll be purchasing the business, not the property itself, which involves the operation of the childcare centre and its staff. This type of investment may require more participation, but it’s a cheaper investment because you’re not buying land or buildings.
Freehold purchase: as a landlord, you’ll be purchasing the business property, but not the land itself, and collecting rent from your tenant. You’ll have many of the same obligations as a property investor towards your tenants. You’ll need more capital for a freehold childcare purchase.
Freehold going concern: requiring the most financial investment, a freehold going concern means buying the land, the building and the childcare operation. It’s the most time-intensive investment too, but also has the greatest capacity for long-term returns.
Digging into a childcare centre’s viability
There are some important factors to take into account to make sure your purchase is a profitable one.
For existing childcare centres, check:
- enrolment numbers, past and present
- the net and gross profit
- other developments in the area that may impact business
- the age and condition of the building
- facilities, equipment and any safety and security measures
- the current rent being paid and lease terms
For new builds, check:
- the surrounding demographic (particularly numbers of young families)
- proximity to schools
- location in reasonably high density housing or in commercial/retail precincts where people work
- the expected rental income (or rent to be paid)
- proximity to other childcare centres
When you’re ready to buy
If you’re ready to invest in a childcare centre, you’ll need to have your financial ducks in a row. Once you know what you can afford, and the type of purchase you want to make, you can start searching online for childcare for sale listings.
You’ll be able to inspect properties, look over proposals for developments, and do some research before you buy. We’re always available to answer questions about any listings on our network, and help you through the purchase process.
All in all, buying a childcare centre, its building or the land it’s on is an involved but straightforward process, and one that comes with plenty of potential for success.
You can view all our current listings and get in touch with us here.
Innovative, low-cost facial recognition solves childcare safety problems
Never has there been such a powerful move forward in the childcare sector than the arrival of facial recognition-based entry. Lincoln Bridge Tweet ‘The Guardian’ is a totally hands-free admission system that uses facial recognition technology to allow entry to families when they arrive at the door, with total security. Designed by T-Scan in Australia
The cost of safety
One thing that surprises many childcare operators is the cost of The Guardian entry system.
Coppin says to keep expenses down for childcare centres and their families, they don’t charge any upfront cost at all for The Guardian.
“We look after everything for the centre, including centre contact lists and setup,” he says. “We install at any centre, anywhere across Australia. The Guardian is for everyone.”
T-Scan is currently offering a 20% discount on The Guardian for centres enquiring through Childcare4sale. To find out more about The Guardian, and secure a 20% discount, click here for more information.
