How a care home is valued
A care home is valued as a trading business, not just as a building. Understanding how a healthcare valuer arrives at a figure helps you price a purchase and judge how much a lender will advance.
A care home is valued mainly on a going-concern basis: a specialist healthcare valuer takes the home's sustainable annual earnings, usually measured as EBITDARM, and applies a market multiple reflecting the home's quality, location and covenant. This trading value is compared against the bricks-and-mortar value of the bare property. Lenders typically advance up to about 70% of the going-concern value. The sector commonly distinguishes a fully operational existing-trade basis from a more cautious basis assuming limited or no trade.
At a glance
- Primary basisGoing concern (trading)
- Earnings measureEBITDARM
- MethodEarnings multiple
- ComparisonBricks-and-mortar value
- Who values itSpecialist healthcare RICS valuer
- Lending against valueUp to about 70%
Going concern versus bricks and mortar
There are two ways to think about what a care home is worth. The going-concern value treats the home as an operating business: it reflects the income the home generates, the goodwill of an established registered home and the property combined. The bricks-and-mortar value is the bare property with no trade, which is usually lower for a well-trading home and may be higher for a poorly trading one. Specialist valuers report both, and lenders care about the relationship between them.
This is a guide to how a care home is valued for buying, selling and lending purposes. It is not about the fees a resident pays.
RICS market value bases and the MV1, MV2, MV3 distinction
Trade-related property such as a care home is valued under RICS guidance on market value, with assumptions stated about the level of trade assumed. In the care sector valuers and lenders often refer to a spectrum that the market loosely labels MV1, MV2 and MV3. These are shorthand, not formal RICS terms, but they are widely used in lending discussions.
| Sector shorthand | What it assumes |
|---|---|
| MV1, fully operational | Market value as a fully operational entity, having regard to existing trade, with the benefit of the existing registration, staff and goodwill in place |
| MV2, limited trade | Market value assuming the property is adequately equipped and capable of trading, but trade and goodwill are reduced or unproven |
| MV3, no trade | Market value assuming the business has ceased, registration may be at risk and the property is closed, closest to bricks-and-mortar |
A lender deciding how much to advance will look hard at the gap between the fully operational figure and the no-trade figure. The wider that gap, the more of the value depends on the business continuing to trade well, which the lender treats as risk.
EBITDARM and the multiple
The engine of a going-concern valuation is sustainable earnings. For care homes the standard measure is EBITDARM: earnings before interest, tax, depreciation, amortisation, rent and management. Stripping out rent and management makes homes comparable regardless of whether they are owner-occupied or leased and regardless of head-office structure. The valuer normalises the accounts to a maintainable level, then applies a multiple.
Care home EBITDA and EBITDARM transaction multiples are commonly in the mid-single digits to low double digits, depending on the covenant strength, the CQC rating, the quality of the property and the location. A prime, purpose-built home let to a strong operator attracts a higher multiple than a tired legacy home with a weak rating. We treat these as indicative ranges, not precise figures, because every home is different.
As context for the margins behind those multiples, Knight Frank reported an average EBITDARM margin of 30.1% of income for FY2024/25, with nursing at 31.1% and personal or residential care at 29.2%.
The value drivers
| Driver | Effect on value |
|---|---|
| CQC rating | Outstanding or Good supports a higher multiple; Requires Improvement or Inadequate depresses it |
| Occupancy | Higher and more stable occupancy lifts maintainable earnings |
| Fee mix | A higher private-pay share usually means stronger, more durable fees |
| Property quality | Purpose-built, en-suite, single rooms command more than shared, legacy layouts |
| Staffing and agency | Low agency reliance and a stable team protect margin |
| Location and catchment | Affluent self-funder catchments support higher fees and value |
| Registration and beds | Registered bed numbers and the regulated activities set the income ceiling |
Red flags a valuer and lender watch for
- A declining or volatile CQC rating, or open enforcement action
- Falling occupancy or heavy reliance on short-stay or respite to fill beds
- High and rising agency staffing, which signals recruitment problems and margin pressure
- A large gap between the fully operational value and the no-trade value
- Heavy dependence on a single local authority for fee income
- Shared rooms and dated facilities that limit future fee growth
Why a specialist valuer matters
A care home should be valued by a RICS valuer who specialises in healthcare, because a generalist commercial valuer will not properly normalise the trading accounts, judge the registration risk or benchmark the multiple. Lenders insist on it, and we always recommend it. The same firms that research the market, including Knight Frank, Christie & Co, Savills, JLL and CBRE, also provide the valuation expertise lenders rely on.
How a care home is valued: common questions
How do you value a care home?
Mainly on a going-concern basis. A specialist healthcare valuer normalises the home's sustainable earnings, usually EBITDARM, and applies a market multiple that reflects the rating, occupancy, fee mix, property quality and location. That trading value is compared with the bricks-and-mortar value of the bare property.
What is the difference between going-concern and bricks-and-mortar value?
Going-concern value treats the home as a working business and includes its income and goodwill. Bricks-and-mortar value is the bare property with no trade. For a well-trading home the going-concern value is usually higher; lenders watch the gap between the two as a measure of risk.
What multiple do care homes sell for?
Care home EBITDARM and EBITDA multiples are commonly mid-single digits to low double digits, depending on covenant, CQC rating, property quality and location. Prime, well-rated, purpose-built homes attract higher multiples than legacy stock. These are indicative ranges, not fixed figures.
What are the red flags when valuing a care home?
A declining CQC rating or enforcement action, falling or unstable occupancy, high agency staffing, heavy dependence on a single local authority, shared rooms and dated facilities, and a wide gap between the fully operational and no-trade values.
Why use a specialist healthcare valuer?
Because a care home is a trade-related property. A specialist normalises the trading accounts, judges registration risk and benchmarks the multiple correctly. Lenders require a specialist valuation before they will lend.
Funding a care home?
Send us the home and the operator and we will come back with a view on fundability and likely terms within one working day.