New REI looking to buy property to service older seniors who need assisted living. How do I know if the area will have an abundant population of tenants and how do I know if the area will be a good location to buy. Im looking to "hack" the rooms first and build up the clients to service over time.
I am see this strategy a lot in my market, a lot of research required. The short list of what I am seeing - very capital intensive - the repairs to the property needed to meet all code and health requirements typically require a construction budget that far exceed the value of the property.
Difficult to finance - because the basis is typically higher than the value of the property and the value is in the business not ht property. for instance an 8 room house designed for a senior home is only at its best value when being used as a senior home collecting the monthly fees. where alternatively a house is a house rented or not.
Be sure to understand local and federal requirements for said strategy.
Thanks Travis. Ill look into it. I know a couple people who run/work as a CNA and dont know the ins and outs of the requirements involved. Ill look into them. That being said, yes. The goal is to charge 4k per month per bed to cover the cost of the business.
Im not sure what you mean in your last sentence. Please clarify.
Again thanks a ton for your indite.
Having a CNA in no way qualifies someone to build a assisted living center or to renovate an existing building to become one. You need an architect who's familiar with medical facilities.
Figuring out if there is demand is pretty easy. Start calling assisted living facilities in your area and ask if they have any beds available right now. I have, unfortunately, had to do this twice in the not-to-distant past. I don't know about your area, but here we have a magazine put out with listings of these facilities. Try googling for "senior resources" or similar terms and maybe there's something in your area, too. These do vary in size from facilities with 100 or more beds down to small ones with only a few.
@Travis Sperr (Hi Travis!) is pointing out this sort of facility is highly regulated. Its not as if you're just going to renovate a building and put up an "assisted living" sign. You will need to be licensed by the state and maybe other entities. You will need a staff with a range of different skills. Nursing and CNA's, but also administrators and many others. This is a far cry from a rooming house where you could get away with just fixing up a property and rent the rooms individually. You don't really "build up the clients". You are the one with an open bed when someone needs one, then move in and then they might move out. Or they may die in one of your beds. This isn't like opening and running a hospital, but its a lot closer to that than a rooming house. This is a business which has a small real estate component.
I specialize in the assisted living market, and have focused on it for the last five years. I completely concur with both @Travis Sperr and @Jon Holdman on their points. Within assisted living, I focus on investments in traditional larger facilities, for a number of reasons. First, I promote passive income to my investors, and this is truly passive, not semi-passive or any other variation of that term. 2nd, as Jon pointed out, once you establish an assisted living operation in your property, its an ongong business with its own regulations and requirements. It's not for the everyday real estate investor. Without repeating everything Jon and Travis stated, there are too many moving parts, too many exposure points for me to recommend this to my investors.
The most important aspect that defines the success of an assisted living facility is the operator. If they are very experienced, and have a track record of success, then the likeliood of success for any deal they are managing is very high. The oppositie is true too - if they are not all that experienced, then the liklihood of failure is much higher. The only way I would promote such an investment for my investors is if the owner of the property/business would engage an independent 3rd party operator with tremendous experience in the assisted living industry to manage the operations. There is movement in the single family assisted living community by 3rd party operators to provide such services, but it appears to be in its infancy and not available on a widespread basis.
I can direct yo to others who are active in the single family assisted living facility market if you wish.
Good luck in your endeavors.
Jon and Dan. Thank you. Dan I would really appreciate if you refer me to contacts you know in the Single-Family assisted living area. I think is hve a ton of potential and people are tired of the large facility.
Here in Wisconsin we have MCOs that work with the State in placing individuals into Assisted Living. You have to have a contract with an MCO for them to give you clients. So for me it was as easy as calling these MCOs and finding out what types of facilities they are looking for now.
Similar to you, I was looking into starting with an Adult Family Home (single family residential) until I found out that most MCOs in my area are not really looking for AFHs, which by definition are for 3-4 clients. They are looking for at least a CBRF (community based residential facility) which houses 5-8 and it must be wheel chair accessible. The terms AFH and CBRF only differ in the number of people they can handle and not the type of housing structure. What I mean is that you can use a single family residential house for a CBRF as long as it can hold at least 5 people.
Look over the regulations in your state. They will tell you how big a bedroom needs to be to be able to handle more than one client. So if you have only 4 bedrooms but 2 of them are large enough to handle 2 people each, then you can apply for a CBRF because you can handle 6 clients. But also remember that clients and/or client's family will want to see the facility and I have found that most do not want to share a room.
Do a serious analysis on whether a Single Family assisted living facility is financially viable. And remember, you need someone at the home 24 hours a day and in most cases you will need at least 2 for most of the day.
Hope this helps.
@Dan Brewer , Hi, I to would like the contacts you have offered.
@Dan Brewer Excellent! Thank you.
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