Aged care facility commercial loans allow professional commercial investors to get their foot into the multi-billion dollar aged care industry.

The number of over 65s in Australia is expected to triple by 2050 so the grey dollar is a large and relatively stable business to be in.

Have you ever considered buying an aged care home? Discover why they’re a popular commercial investment and how to get approved for a loan.

How to get approved for aged care facility commercial loans

Banks and lenders have a strong appetite for nursing homes but not all aged care facility commercial loans are the same.

There can be massive differences in how any one bank values a care home and what they’re willing to offer borrowers in terms of interest rate discounts and borrowing limits.

How much can I borrow?

  • Freehold purchase: Borrow up to 65% of the property value.
  • Leasehold purchase: Borrow up to 65% of the business value (going concern).
  • Construction: Up to 75% of the cost and 70% of the net amount of uncollected accommodation bonds.
  • Maximum loan term for principal and interest repayment: 5 years (minimum 50% amortisation required)
  • Maximum loan term for interest only: 3 years (subject to review).
  • Borrow the amount you need (depending on the strength of your financial situation).
  • Low doc options aren’t generally available.
  • Interest rate discounts vary depending on the strength of your application.

We can help you borrow the amount you need!

We’re experts in aged care facility commercial loans and we know how to build a strong case with the right lender.

Call us on 1300 889 743 or complete our online enquiry form to speak with one of our mortgage brokers.

How do banks value nursing homes?

There are generally two methods employed by commercial valuers:

  • The earning before tax, depreciation and amortisation (EBITDA).
  • Value of Residential Accommodation Deposits (RADs) as per the occupancy level of the care home.

Do I need security for the loan?

You can generally use a registered mortgage over the aged care home as well as fixed and floating charge (over all assets including rights and licences) and Directors’ Guarantees.

For construction, a Tripartite Agreement between the bank can also be used as security for aged care facility commercial loans.

How do I get approved?

A specialist bank valuer will look at the going concern component of the property but you’ll also need to provide evidence that the aged care facility is an approved provider.

Specifically, the provider will need to be accredited and hold all relevant licences as per the Aged Care Act 1997.

This includes operation permits from the Department of Health and Ageing (DoHA).

Because it is also a legal requirement, the bank will need to see evidence that the operator has in place an appropriate Liquidity Management Strategy (LMS) to cover working capital requirements.

You may also need sufficient funding to cover this requirement.

From a business requirement, you’ll usually need to provide a schedule of current accommodation bonds and/or resident agreements.

Can the bank lend against the business alone?

Yes! Unlike some other types of commercial properties in which the freehold and business is required to be valued, you can borrow against the business alone.


The reason is that banks recognise the demand for aged care homes and bank appetite is good.

These specialised properties are purpose-built to meet the needs of the elderly so as long the property meets those requirements, is accredited and is in a good financial position, you should be in with a good chance of getting approved for aged care facility commercial loans.

Complete our free assessment form to discover if you qualify for aged care facility commercial loans.

What do I need to do?

  • You need to show that you have considerable experience in the aged care from a managerial role.
  • You usually need to provide a business plan and forecasting including competition in the area. The bank will usually run a SWOT (strengths, weaknesses, opportunities and strengths analysis) of the operator.
  • Good security.

Some banks like to see as much information as possible whereas with others it is best to provide the bare minimum.

Most of our mortgage brokers have actually worked in a bank’s credit department, approving and declining applications for aged care facility commercial loans.

Discover more general commercial lending requirements on the commercial property loan page.

How can I get a great deal with a mortgage broker?

Some lenders will limit the amount you can borrow while other lenders will allow you to borrow up to the maximum Loan to Value Ratio (LVR) so you can buy the aged care home you have your heart set on.

Do you want a heavily reduced interest rate as well?

Banks don’t advertise their commercial interest rates to the general public but we’re strong negotiators that know how to build a strong case with the right lender.

Call us on 1300 889 743 or fill in our free assessment form and speak to an expert in aged care facility commercial loans.

Tips on buying an aged care facility

Aged care homes are one of the few commercial property investments that allow you to contribute to social housing in Australia.

Giving back to a burdened Australian government and the elderly is one thing but how do you know what to look for in a facility?

Why would I invest in an aged care facility?

You don’t have to be a professional commercial property investor to know that Australia has an ageing population.

It’s estimated that it will cost the government billions of dollars to set up aged care homes across the country over the next few decades.

The need for private investment and operators is crucial so providers are supported with government funding.

Government spending on aged care in the form of accommodation and other supplements is projected to increase from $9 billion annually to $66 billion in 2050.

Around two thirds of the operating revenue for private aged care homes comes from the government but RADs from patients are also a consistent revenue stream.

Overall, long term return on investment (ROI) and cashflow certainty is promising in the aged care space.

However, strong management and patient funding is the key to success in a space that has the majority of its market share in the hands of a few large (some multinational) operators.

Who are these large operators?

They include:

  • Japara
  • BUPA
  • Invocare
  • Regis Healthcare
  • Estia Health

What should I look for in a provider?

Strong cashflow is generated from strong occupancy: a good operator will always have more than 95% occupancy pretty much all year round.

At the corporate level, banks like to see larger operators with three or more centres that show good revenue or EBITDA.

The likes of BUPA and Japara already have their own funding but there are second-tier players that sell aged care facilities that are worth your time.

For larger operators like this, a minimum of 60 single room beds is a minimum requirement for funding.

At the business bank level (for purchasing a private operator), the operator will generally need to show two times interest coverage ratio (ICR), ability to service the debt, good occupancy and as much security as possible.

The facility will likely be a lot smaller than those found in larger operations but, as a minimum, the bank will need to see at least 30 beds.

What about location?

R2 low density residential zones are designed by council to protect a locality’s single dwelling character and landscape setting.

Although, you won’t find large care homes here, centres located in these zones may be worth looking at purely for the high-paying patients you’re likely to attract.

Also, consider the centres location to base hospitals as well as its distance to the main town.

Most elderly people like the freedom to travel on public transport to enjoy their autumn years shopping and eating out restaurants and cafes.

How do you make money?

All residents are charged on accommodation bonds or RADs, which is part of the sale proceeds from the patient’s former principal place of residence (PPR).

The aged care provider gets the interest generated from the bond from which they deduct a regulated amount each year (currently $4,000 annually) as well as funds to cover working capital for the business.

The bond is then returned to the patient’s estate when they pass away.

They great thing is that due to the demand for aged care facilities, RADs that are paid out with bonds money deposited by new residents.

How much should you charge for the bond?

As a general rule, the bond charged is relative to local house prices given most residents sell their homes to raise the bond.

Generally, you charge what you feel the market can bear.

In the past, bonds were not expected to exceed $100,00 but this figure has already hits close to the $300,000 mark and predicted to go higher based on current house price trends.

Since July 2014, residents have been able to choose between paying an accommodation bond or an equivalent daily rate, or a combination of the two.

Despite the increase to bonds in the last couple of years, experts believe that residents will still choose to pay the higher cost to keep their assets down so they can hang onto their pension.

What licences do I need?

Under the Aged Care Act 1997, the nursing home is required to provide high quality care and accommodation to the elderly.

An approved provider is one that has been approved by the Department of Social Services (DSS).

Aged care facilities themselves need bed licences to provide Commonwealth-funded aged care services to their residents.

Without the bed licences, the aged care facility would receive no funding from the Government and would not be able to operate.

Another requirement are liquidity arrangements to protect against business failure.

These arrangements require approved the Commonwealth Department of Health and Aged Care annually.

You can find out more about your licensing obligation on the Australian Government’s Guide to Aged Care Law page.

It’s essential you ask the vendors/owners for these documents prior to signing the contract of sale.

If they’re not up-to-date, you could be waiting weeks before you’re ready to operate, costing you thousands in mortgage repayments and other costs.

Aged care facility commercial loans FAQs

Do you have more questions about how aged care facility commercial loans work?

We have the answers!

Is aged care the same as an over 55s village?

No. Over 55s villages or retirement villages are housing communities that have been promoted by the state government, particularly in NSW under State Environmental Planning Policy Number 5 (Sepp 5) zoning.

Although these types of properties are difficult to finance, they’re still residential, not commercial properties.

If you’d like to invest in a SEPP 5 property instead, check out the Over 55s Village Mortgage page.

How much do nursing homes cost?

A nursing home can be expensive.

Much of this has to do with supply and demand. There just wasn’t much construction going on during the global financial crisis (GFC): it was about increasing the capacity of existing facilities.

Today, industry estimates put the core price for a relatively new aged care facility with single ensuite rooms upwards of $190,000 per bed minus RADs.

As a rough estimate, you could be looking at around $15-20 million for a 100-bed facility in a metro location on the east coast.

Can I get funding to convert a residential property?

Banks are generally very strict about lending to someone wanting to convert a residential property they own into a nursing home.

They need to meet all of the requirements under DoHA’s accreditation not to mention development application approvals.

Due to tragic natural disasters in the past few years, you’d be hard-pressed to build in areas deemed to be bushfire or flood prone.

On top of this, bank appetite is for strong operators who already have a proven track record.

The only rare exception to this is if you have significant equity and have a proven operator hired to trade up the facility.

Do you need an aged care facility commercial loan?

With strong relationships with the commercial arms of almost 40 lenders including the major banks, Home Loan Experts are specialists at aged care facility commercial loans.

Call us on 1300 889 743 or simply tell us about your investment plans in our free assessment form and we’ll tell you how we can help.

  • Dann

    Can I borrow 70% to construct an aged care facility?

  • Yes, you should be able to borrow up to 75% of the construction cost and 70% of the net amount of uncollected accommodation bonds.

  • Stan

    So do you guys also do applications on Sepp 5 zoned properties?

  • Hi Stan,
    We can usually help you borrow up to 80% of the property value, or in rare cases even up to 90%, of a Sepp 5 zoned property. However, we’re not currently accepting applications for this type of loan and apoligise for the inconvenience. Please check out the over 55s village mortgage page for more info, which is linked below. We will update the page when we’ll be accepting these applications again.

  • Quentin

    What are the advantages and the disadvantages of getting a guarantor for this kind of loan?

  • Hey Quentin,
    You can check out the commercial property guarantor loan page to check out the pros and cons of going guarantor as well as much more additional info that you may find helpful. Here’s the link to the page: