Buying an Assisted Living Facility- WA State (Seeking Assistance)

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Buying an Assisted Living Facility- WA State (Seeking Assistance)

Jason Polen
Investor · Vancouver, WA · Member since 2018 · 4 posts · 1 vote

Hello BP Community,

First-time post.

I'm under contract for a vacant assisted living facility (ALF)/ skilled nursing facility (SNF) in SW WA state. It was state-certified for skilled nursing and memory care for 36 certified beds. It closed in 2012 for mismanagement (complaints + high expenses + reductions in Medicare payments). The current owner (who is not in the senior living business) sat on it for a while, but recently passed away. His surviving spouse is wanting it sold quickly. When it was open, it was 90%+ full. My plan is to buy it, make a few repairs (under $10k), then attempt to lease it to an ALF/SNF operator. I'm in the midst of my due diligence and I have three issues I'd appreciate feedback on:

1. Financing. I am assuming this will have to be private/hard money since it's totally vacant. Correct me if I'm wrong. But, assuming I'm correct, does anyone have any financing referrals. I'm specifically interested in lenders that do senior living. 

2. Leasing. Does anyone have experience leasing out a facility like this (as the lessor)? If so, I'd appreciate hearing your input on possible market rents and the ease of finding a tenant. I have done some preliminary research, but would like to hear from someone who has done it. 

3. Operators. Finally, if anyone knows of any operators who may be interested in leasing this facility (or a good resource to find operators), I'd appreciate that as well. 

Thank you BP community!

Jason

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Greg Dickerson
Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
6y
Originally posted by @Jason Polen:

Hello BP Community,

First-time post.

I'm under contract for a vacant assisted living facility (ALF)/ skilled nursing facility (SNF) in SW WA state. It was state-certified for skilled nursing and memory care for 36 certified beds. It closed in 2012 for mismanagement (complaints + high expenses + reductions in Medicare payments). The current owner (who is not in the senior living business) sat on it for a while, but recently passed away. His surviving spouse is wanting it sold quickly. When it was open, it was 90%+ full. My plan is to buy it, make a few repairs (under $10k), then attempt to lease it to an ALF/SNF operator. I'm in the midst of my due diligence and I have three issues I'd appreciate feedback on:

1. Financing. I am assuming this will have to be private/hard money since it's totally vacant. Correct me if I'm wrong. But, assuming I'm correct, does anyone have any financing referrals. I'm specifically interested in lenders that do senior living. 

2. Leasing. Does anyone have experience leasing out a facility like this (as the lessor)? If so, I'd appreciate hearing your input on possible market rents and the ease of finding a tenant. I have done some preliminary research, but would like to hear from someone who has done it. 

3. Operators. Finally, if anyone knows of any operators who may be interested in leasing this facility (or a good resource to find operators), I'd appreciate that as well. 

Thank you BP community!

Jason

I am working on one of these right now. My plan is to convert to short and long term rentals not senior living. The best financing for a project like this is through local and regional banks. I am getting a loan at 4% for acquisition and construction at 75% LTC

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  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Jason Polen:

    Hello BP Community,

    First-time post.

    I'm under contract for a vacant assisted living facility (ALF)/ skilled nursing facility (SNF) in SW WA state. It was state-certified for skilled nursing and memory care for 36 certified beds. It closed in 2012 for mismanagement (complaints + high expenses + reductions in Medicare payments). The current owner (who is not in the senior living business) sat on it for a while, but recently passed away. His surviving spouse is wanting it sold quickly. When it was open, it was 90%+ full. My plan is to buy it, make a few repairs (under $10k), then attempt to lease it to an ALF/SNF operator. I'm in the midst of my due diligence and I have three issues I'd appreciate feedback on:

    1. Financing. I am assuming this will have to be private/hard money since it's totally vacant. Correct me if I'm wrong. But, assuming I'm correct, does anyone have any financing referrals. I'm specifically interested in lenders that do senior living. 

    2. Leasing. Does anyone have experience leasing out a facility like this (as the lessor)? If so, I'd appreciate hearing your input on possible market rents and the ease of finding a tenant. I have done some preliminary research, but would like to hear from someone who has done it. 

    3. Operators. Finally, if anyone knows of any operators who may be interested in leasing this facility (or a good resource to find operators), I'd appreciate that as well. 

    Thank you BP community!

    Jason

    I am working on one of these right now. My plan is to convert to short and long term rentals not senior living. The best financing for a project like this is through local and regional banks. I am getting a loan at 4% for acquisition and construction at 75% LTC

    4Reply
  • Katie Neason
    Flipper/Rehabber · Bryan, TX · Member since 2014 · 258 posts · 170 votes
    6y

    In my previous life I was the Real Estate Development Officer for a Boutique Assisted Living Start Up company for residents with ALZ in Texas. The laws and licensing is state specific. It was a really hot market for a while as investor money flooded into the market.  We sold in 2015 which we felt like was the peak of the market. Since then lots of homes have continued to open, small and large, saturating the market. Occupancy has been a struggle with so much new inventory coming on the market and rates have come down. Our structure was we had a private investor who financed the real estate (effectively a built to suit) and then did a long term lease to us as the operator. We sold it (both the real estate and operating company) to an out of state non-profit that runs various senior livings. The new owner put a management company in place that runs it. You might reach out to the management companies and see if any of their investors are looking to expand. The asset is the real estate, so not sure if they will want to expand into a lease space, but maybe. The management companies will be easy to find by going to all of the websites of existing entities. You should be able to tell pretty quick which ones are owner run and which are management run. I would also call the regulatory agency (in Texas it is Department of Aging and Disability Services or DADS) and talk with them to find out as much as you can about players in town, who is expanding, etc. There are also DADS consultants that go into facilities and help them either build to code or bring the facility up to code. They would be a great source of who the market players are. If you are interested I can put you in touch with the consultant we used. Not sure if he does work in your state but it is a small world, I am sure he could put you in touch with someone. Message me if you are interested. Good Luck!

    4Reply
  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    6y

    I think this is a huge project. As someone who has clients who lease, it was not an easy transaction to complete. It took scale, track record and $50k in legal fees to get both parties comfortable. Being vacant without a tenant in mind is just a huge risk.

    3Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y

    I think you really need to go to a PROFESSIONAL manager for these type of facilities, it makes all the diff.  I had one in OR, guy bought and replaced mgmt and the numbers took off.

    It'll also depend on if your clients are Medicare or Private Insurance - Makes a big diff in pricing.  Since it is Medicare, go over your budget 26 times with the operator and make sure you're not over-paying.

    1Reply
  • Anjali LeBoeuf
    Portland, OR · Member since 2020 · 11 posts · 9 votes
    6y

    I've developed and managed a number of 6-bed homes in LA.  Currently involved long term residential rental along with short-term rentals. For Sr Care, income per bed is fixed. Expenses can be variable, so generally a tight profit. Yes make sure you know your expenses to upgrade to current state regulations. I like suggestions of not running it yourself, but leasing to management company and possible short term rentals if you have the market for it, like major tourist attractions good walkscore?  Or lease to students if a college nearby.  All the best! Anjali LeBoeuf, OR/WA residential broker. 

    1Reply
  • John Mocker
    Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
    6y
    Jason, As the building owner Lessee you will need to insure the Building and your Liability. Even though you are not running the facility, you may find the number of companies willing to write this is limited. I would get quotes early on to figure it into your budget. Because of the nature of your Tenant, you should also have discussions with a qualified Attorney and Insurance agent (ones that have some experience in this industry). Discuss with them what to require contractually of your tenant and how to structure the requirements to protect yourself. Somethings they may suggest are Additional Insured Status, Waiver of Subrogation, Primary & Non-contributory basis, and Indemnity & Hold Harmless Clauses.
    0Reply
  • Jason Polen
    OP
    Investor · Vancouver, WA · Member since 2018 · 4 posts · 1 vote
    6y

    Thank you to everyone who has chimed in.

    0Reply
  • Ryan XuPro Member
    Real Estate Broker · Bellevue, WA · Member since 2020 · 95 posts · 65 votes
    6y

    I couldn't give you any advice on operating.

    Just some business idea:
    1. Loan should not be hard if the property's history can prove the vacancy rate was acceptable before. Or any other proof that can show the local demand for such property. A good local loan officer can help a lot.

    2. A foreseen trend, COVID changed people's views about ALF/SNF more or less. Future demand is questionable. With increasing facility numbers and the age-demographic status, it might not be wise to invest such property in long term.

    [email protected]
    1Reply
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