Adult Family Homes
Rental Property Investor · Marysville, WA · Member since 2010 · 46 posts · 40 votes
Adult Family Homes
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Michael HaasBusiness Member
Real Estate Agent · Sammamish, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 725 posts · 3k+ votes@Rey Orinion when Rich says "10CAP" he just means the CAP rate was 10%.
CAP RATE = Property Value / Net Operating Income
Net rental income takes into account your expenses, but doesn’t factor in your financing / loan payments
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42 Replies
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes14y
Are you talking about senior living homes, assisted living, etc.? Shared room space? Nursing care available? A private home, or large commercial facility? There's a huge variation of services for such homes. However, the figure you listed seem extremely high. However; my only experience has been in helping seniors looking for such housing. They do get good rents, but I'm sure the expenses are huge too.
- Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes14y
There is a great difference in this type of facility. Here in St George, Utah, my BIL has a couple variations. The smaller variation is 10 room (max on certain codes) with common eating/living room area. All meals and transportation is included. NO fulltime nurse on staff. These are known as Beehive homes and he has several.Rent is just under 4K.
There is also a complex of 36 units. These are all built as single level connected units. Each is small 2 br-1ba-kit-lr. Some have a single garage. All meals, some entertainment, courtesy van etc. Same rents. These are for more mobile elderly. Once these rented up, occupancy has been very high. Called the Beehive Cottages.
This is a perfect area for this type facility. I'm not sure how well they'd do in a large metropolitan area. I also know of normal homes with 4 or 5 residents shring facility with the owner of home on site. There would be codes the owner would have to follow. Not for a rookie, imo. Rich
- Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes14y
Having recently dealt with this for my grandmother, $8000 per room per month is at the very high end for skilled nursing in our area. I'm sure this varies from area to area. That means on-site, 24 hour nurses, CNAs, other helpers, meals - the whole works. And significant licensing requirements.
Even at $4500 you're talking about assisted living. Not the same level of care, but you do need 24 hour staffing and on-call nurses.
My daughter's friend worked at several smaller facilities - 6-8 patients. They were not skilled nursing facilities, just group homes. But they still provided food and attention on a 24 hour basis. There were typically two people on duty at all times. More when they went for outings.
You're really talking about a business that has a real estate component, rather than a pure real estate investment. I do think there is demand for this sort of facility, though. When we searched for a place for my grandma, there were only a couple of facilities that had open beds at the time we needed one.
Originally posted by Jon Holdman:
You're really talking about a business that has a real estate component, rather than a pure real estate investment. I do think there is demand for this sort of facility, though. When we searched for a place for my grandma, there were only a couple of facilities that had open beds at the time we needed one.One of my Clients actually uses one entity to build nursing homes, sells it to another one of its entities who owns it and has a third entity who operates it. They have been consistently building 3 to 4 a year. They target groups of doctors to invest in the seperate ventures. They use a similar floor plan over and over. I imagine they are making money hand over fist as they don't try to beat us up for every cent of our fee.
- 14yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
Not a limited participation investment. Heavily management intensive. One major problem is that after 20 years the facility is very dated, fees drop to reflect this competitive position, and eventually the business is not profitable. Whereas an apartment complex can almost always find profitable rents, i.e. low end once it is older, there is a minimum standard of care (and expense) associated with these facilities, and hence the fees necessary for profitability may be beyond the means of the target customers.
I have lend on a few of these facilities, and rather than cash cows the owners tend to work long hours at low pay but do so out of a need of social responsibility. The real profit is in high end area, but the major corporate groups have these tied up. Of course if you have $5 - 10 million to invest Marriot will consider building and managing the facility for you and allow you to use their brand name (at a fee that insures you won't earn a unduly high return on your invested capital).
- Rental Property Investor · Marysville, WA · Member since 2010 · 46 posts · 40 votes14y
Great feedback so far, thank you for the comments! The Seattle area has a higher cost of living, and the per room price that I have quoted came from several people paying those rents for their family members, so it all depends on the area and type of care that you are providing. Karen M. brought up a great point, I will need to research all of the different types and see which one fits best into my business plan. There are a few different places I am looking at, one in a large 162 room facility that would be a Medicad funded assisted living, and another is a standard AFH with 10 bedrooms in town.
My thoughts are to do some kind of a partnership with someone who already has their license and a system set up. I have the capital and ability to provide financing and oversee construction and maintenance . Its important to me to provide the best facility possible given the nature of the business.
Brian Hoyt I like where you're going with this. Can you give us some more info and explain where you come in and when you say "they don't try to beat us up for our fee" what service are you providing? Thanks for the comment!
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes14y
Jennifer Beadles Maybe you can find some type of consultant that could do a feasibility study, and help you hone in on the best market for growth, etc., which units would be most marketable (one bedroom/two bedroom, etc., and what amenities for the best return) With baby boomers moving into retirement age, that will have a big impact on the future market growth.
In California we have everything from small family run homes to larger places with private apartment type rooms of 1-2 bedrooms, a large congregational cafeteria where residents eat meals, a common area with various seating arrangements for visiting, organzied recreational events, shuttles to shopping, etc.
I'm sure a google search for retirement living, senior living, senior housing, etc. would give you a broad selection. I'm sure you want more of the "active senior living" where you won't need to supply
any type of medical care.We considered developing such a project in the past, with the thought of selling to investors, but unfortunately the market happened, and it didn't come to fruition. Keep us posted as to your progress! If there's any info on the development end you need, please message me, and I'll do what I can to help.
Originally posted by Jennifer Beadles:
Brian Hoyt I like where you're going with this. Can you give us some more info and explain where you come in and when you say "they don't try to beat us up for our fee" what service are you providing? Thanks for the comment!Jennifer Beadles,
My profession is geotechnical engineering. I do soil studies and provide foundation recommendations as well as any other pertinant earth design requirements for a site (retaining walls, dams, pavement, etc). I also do forensic studies on distressed structures that weren't built right in the first place.
With my clients, I try to get a general understanding of their business strategies so I can better and more cost effectively serve them. For instance, a civil engineer designing a public road will require a more expensive study than a private owner building a parking lot. However, I don't typically pry into too many details as it is not necessary for my part of the project and probably not welcome.
Many clients see what I do as a necessary evil and see my reports as an insurance policy. However, I do not provide insurance policies, but rather an engineering function in which risk is inherent. In some cases they might not even have a study done of it wasn't required by the city or such. I usually serve the owner who is very cost driven and heavily influenced by the contractor who is even worse. Our fee is usually less than 1% of the overal project cost - but it is the one thing where almost everybody wants to skimp, because they don't understand enough to see the value.
The best clients are usually more sophisticated in their understanding of building science and engineering and understand the value of what I do and don't shop me or try to beat me up for a couple hundred bucks. They also don't try to get me to change the conclustion of a study (deeper footings than they initially budgeted, remediation of previoulsy unknown existing fill material, piers instead of a slab, heavier retaining walls, etc) just so construction costs will be lower. Rather, they accept the advice they paid me to give them.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes14y
Assisted living can take on a vast degree of care from nothing to hospice type care. They are specifically zoned in many areas and regulations can vary greatly depending on the care expected and type. For those that are on the simple side (which isn't really simple) is ofetn with or through non-profit support groups, ie. Mental retardation organizations, where clients need some supervision but by assistants no really a medically trained staff. They may rent the home and the ornaization will manage.
Such homes can be very profitable, I'd say that as expected profits go up so too does the political nature of getting one approved as there could be competition in an area for services and often it simply takes political pull to get a facility approved.
This is certainly not for a beginner, as Jon and Don pointed out, there are regulations and business issues as well as the political nature of getting these facilities up and going.
- Rental Property Investor · Marysville, WA · Member since 2010 · 46 posts · 40 votes14y
comments keep getting better... thanks everyone!
Most of my businesses are built on leverage with others that are experts or specialists in the specific area that we are investing in - or I am the specialist and they are the funding partner ect ect so long as we are valuable to each other.
I do like to understand as much of the business as possible so I can make informed investment decisions.
I see a huge benefit in talking with people that actually own an adult family home to get an insider's perspective.
- Montello, WI · Member since 2012 · 7 posts · 9 votes14y
Hi, Jennifer,
If you do your homework, you'll love this as an investment. I own two assisted-living facilities in Wisconsin, and manage two more. The laws vary greatly from state to state, but you'd still be playing the same ball game- just in a different park. I can give you more details, such as how you CAN do this as strictly an investor, and some financials if you'd like to PM me. Remember, starting January 1st, 2012, and continuing for the next eightenn years, ten thousand baby boomers reach retirement age EVERY SINGLE DAY- many of them are going to need a place to go.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes14y
Originally posted by Jennifer Beadles:
I see a huge benefit in talking with people that actually own an adult family home to get an insider's perspective.Jennifer, first I'd suggest you get out of the habbit of calling assisted-living facilities "an adult home", all the homes in the country have adults living in them.
If you approach owners (or anyone in the business) and call their property an adult home, what does that say about your knowledge or interest in their business? Just saying, those of us on BP are more pronce to assist and ignore terms used incorrectly, but when you get out in public or around experts, terms matter in RE. Good luck with your due diligence on the matter.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes14y
Originally posted by George Lekas:
Hi, Jennifer,If you do your homework, you'll love this as an investment. I own two assisted-living facilities in Wisconsin, and manage two more. The laws vary greatly from state to state, but you'd still be playing the same ball game- just in a different park. I can give you more details, such as how you CAN do this as strictly an investor, and some financials if you'd like to PM me. Remember, starting January 1st, 2012, and continuing for the next eightenn years, ten thousand baby boomers reach retirement age EVERY SINGLE DAY- many of them are going to need a place to go.
George, what level of care is given in your properties? What kind are they?
- Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes14y
I have looked into it some, but I quickly realized that it is really taking you from being a real estate investor into a business owner/operator that just happens to own the house. I think it is no different than buying a building and renting it to a restaurant vs. buying a building and running a restaurant out of it.
It is like my buddies and I always say when one of us come up with a new business idea, "how do ya wanna make your money today?" - Rental Property Investor · Marysville, WA · Member since 2010 · 46 posts · 40 votes14y
Bill Gulley Thanks for the feedback. Actually, Adult Family Home is the term used on the DSHS website and even has this definition : These are residential homes licensed to care for up to six non-related residents. They provide room, board, laundry, necessary supervision, and necessary help with activities of daily living, personal care, and social services. RCW 70.128.010.
Rob Gillespie Thanks Rob. That's where I am at also. I always want to make sure the new business ventures will keep me in the investor seat and I have no interest in creating a new J-O-B for myself. I've figured a way to leverage so many other businesses so that I am just an investor, but am not finding a way that it works in this type of business. There has to be people out there that have done it and are doing it well... just probably not sharing with the rest of us. I've heard that in order to make it a business where you do not have to run it you need to have more than 8 rooms to turn a profit, be in a high rent area and have the right people working for you.
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes14y
Jennifer Beadles Actually, the way that I can see where you'd be able to financially participate, without being a part of the business venture, would be to develop the real estate, and then lease it to a company that would run a retirement home. Basically a build to suit for a retirement residence company.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes14y
Ya got me lady, LOL, that's not what we call'em here as I've been involved with only three, from zoning thrugh the housing authority and non-profit management, we all called them assisted-living....
Just trying to help ya out but looks like I learned something...LOL, thanks!
- Real Estate Broker · Seattle, WA · Member since 2012 · 2 posts · 1 vote14y
Jennifer,
I'm here in Seattle, and know a good deal about AFH's as I was close to opening one.
Private pay residents in this area range from around $4,000-$7,000/month with no requirement of RN's on staff.
YOU will be required as an owner to have 1,000 hours of caregiving experience in a licensed setting in the last 5 years.
AFH's in Washington are not passive investments, and as an owner you are 100% responsible for your residents, this means that you will be held personally liable for any mistakes made by your staff. These are licensed by DSHS and they will have no problem taking away your license.
You can only have 6 residents in Washington.
There's great opportunity in AFH's but you need to be able to dedicate 100% of your time and effort to making it work, there are a lot of detailed requirements for the house you choose to use including window height, closets, room sizes, etc.
Another thing, you can't count on state paid residents to make you a profit, they cap out at somewhere under $2,000 a month for a high needs resident, after paying for your rent/mortgage, utlities, and 24 hour caregivers, you'd be losing big money every month, even with a full house.
Hope this helps, I just wanted to give you some of the "headlines", any other questions you have I'd be happy to answer!
Y - Rental Property Investor · Marysville, WA · Member since 2010 · 46 posts · 40 votes14y
Karen M. You read my mind! This is exactly what I was hoping to do. Not sure if its possible in our state though.
George Trejo Thank you so much for the info! I read about the requirements you speak of on the DSHS site, guess I was hoping you could do what Karen had talked about but it doesn't sound like there is any way around being an owner/operator. You mentioned you were close to opening one... is this the reason you didn't? I'm wondering if you could partner with someone who already has the licensing and experience.
I've broken down the difference between different facilities:
AFH: Must be licensed with the requirements you mentioned. No more than 6 residents
Assisted living: same as above but 7+ residents
Retirement community: staff does not take on general responsibility for the safety and well-being of resident. Medical care can be provided by visiting nurses or home health aide. No licensing requirements.
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes14y
@Jennifer Beadles There will be 10,000 baby boomers retiring EACH DAY for the next 19 YEARS! It's definitely a good market to be in.
There are a host of options available, there must be some way you can get into that niche if you dig deep enough. The size ranges from residential homes to larger retirement communities. I would think the licensing requirements you mentioned would be for those that are the facilities that offer assisted living services/medical care.
Retirement communities, that are basically congregational housing arrangements (see link attached) are more for active seniors that still live independently, but want the convenience of having meals cooked, rooms cleaned, etc. In addition, these type of facilites offer recreational opportunities, shopping excursions, etc. The one below is one I looked at for someone, but there are more that offer more amenities, pools, etc., depending on the financial makeup of the retirees.
Shasta County, CA: http://www.riveroaksretirement.com/
- Real Estate Broker · Seattle, WA · Member since 2012 · 2 posts · 1 vote14y
Jennifer,
as far as partnering with someone it would have to be somewhat behind the scenes/under the table. The state doesn't allow anyone not listed as an owner to get any compensation from the business. Ex. Landlords can't be paid a percentage of revenue, and even spouses that are owners need to have the experience and be licensed or stay 100% out of the business.
These heavy regulations are a direct result of an exposé the Seattle Times did on the industry a couple of years ago. I was planning on opening one just before that because I had what I thought was the perfect building for it in Eastern Washington.
Eventually I decided against it, because while the building was perfect, the location was not and would most likely end up being filled with state clients instead of private payers.
My mother is actually now most likely going to open a house up, she's an attorney looking for a new career and is beginning her 1,000 hours of experience now so she plans on having a house opened hopefully by February of 2013.
I also had access to a great house in Oregon, but unfortunately their requirements are even more stringent than our own.
- Spokane, WA · Member since 2013 · 1 post · 0 votes13y
I own and run an afh in Spokane. You really need to market private pay. The best way to help with the expense of staffing is to have a residential manager live in the home in exchange for room and board - typically a 12 hour shift from 9PM to 9AM. All other hours are paid hourly.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes13y
Originally posted by Brian Hoyt:
Originally posted by Jon Holdman:
They target groups of doctors to invest in the seperate ventures. They use a similar floor plan over and over. I imagine they are making money hand over fist as they don't try to beat us up for every cent of our fee.There is honor among thieves!
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