Assisted Living House?

Question

We have the opportunity to purchase an estate house in an upscale area. The home is over 100 years old but in pretty good shape. There are 4 full baths and 5 rooms that could be used as bedrooms. We could get 6 to 8 living in the home under Michigan regulations for assisted living.

Right now we manage 21 units across 5 properties. Just wondering if anyone has experience with assisted living and might have some advice.

Right now we manage 21 units across 5 properties.   Just wondering if anyone has experience with assisted living and might have some advice.

Justice Jacobs · Answer

@Steve Ehrman

Hello Steve, I apologize for being a bit late to your post. You are currently managing 21 units/5 properties that are traditional rentals, and you are looking to buy this one to use as a residential assisted living (RAL)? As long as you've checked the Michigan rules and regulations as well as down to the city/county, then it is worth exploring further. Do you have any experience with a like-kind investment?

Did you intend to self-manage? Hire a staffing agency for the caregivers? Have you decided if this facility would be ideal for your target clientele? I'm always open to share what I have learned managing RAL's.

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Account Closed · Answer

You had better do some serious research for the pros and cons for assisted living homes. I owner a 20-unit home in the 1970's in a very upscale neighborhood, was getting $10,000 per month per person and the state regulations, regulations, multi-agent inspections, food handling, employee problems, insurance, 24/7 care, dealing with angry relatives and lawsuits can be like living in hell. Not all money is good money it earning it puts you in an early grave. Research the average number of lawsuits against assisted living homes and it is amazing. I am a contractor, work for several assisted living home owners and they are always broke. You might get excited to think you can charge $3,000 to rent each room, but you may also find out it costs you $10,000 per person per month for all your expenses.

Steve Ehrman · Answer

@John Mocker Thanks for the heads up.  We have connected with several AL house operators.  Seems like a mixed bag.  One has 7 houses and is very profitable, but took a few years to get there.

For an senior independent living house, with assistance for everyday tasks, there is no licensing or state inspections.

John Mocker · Answer

Steve,

I've had clients look into it in the past.  Some  of the thingd they checked on were:

1. Does the Americans with Disabilities Act (ADA) require any modifications to existing structure to make it accessable.  If you have to put in an elevator that could be a big cost

2. Are their local or state fire codes that would require changes or upgrades (fire alarms, fire excapes, sprinklers, etc.)

If you do go ahead with this use, when you get the Property Insurance be sure to check into the ordinances for rebuilding.  What may be acceptable now (grandfathered) may not be in a rebuild.  If you will have to rebuild differently you can insure that additional cost under "Oridinance & Law" coverage.

Justice Jacobs · Answer

@Steve Ehrman That's great! I would love to stay on top of your progress with this project. It's a great thing you are doing. Best of luck.

Steve Ehrman · Answer

@Justice Jacobs. Yes there is a shortage of senior housing, especially in residential settings.  We can do an assisted living home without being licensed.  This would be for independent living seniors who want the convenience of meal prep, cleaning, laundry, etc.  This doesn't get the high price that adult foster care facilities get but doesn't require 24 hour care.  We also have homes for the aged that are also licensed.

Justice Jacobs · Answer

@Steve Ehrman

There is a shortage of quality senior housing in this area? You say "adult foster care", are these nursing homes that are accepting various insurance programs and government sponsored programs, or are they private pay at $4,800?

Steve Ehrman · Answer

@Justice Jacobs. That us the interesting part.  We won't be able to get the $4800 that a licensed adult foster care house for senors can get, but $3000 seems to be where the market is it right now.  Still would need to get food service done, but it looks like due to a lack of availability it can be profitable.

Justice Jacobs · Answer

@Steve Ehrman That makes sense given your intention. Given that you would be unlicensed, you would be willing to only accept residents able to afford services out of pocket?

Steve Ehrman · Answer

@Justice Jacobs in Michigan we don't need to be licensed if we are only offering housekeeping, meal service, etc.  We are not planning on offering any medical care.

The city has no special requirements for this type of assisted living, as long as there are no more than 6 people in the building.   Right new we are talking to other assisted living facilities in our area to see if we can get a partner or mentor.

We had an inspection done.  The house is over 100 years old, and has structural issues.  We will be getting our contractor to look at the report and five us his best estimate.  We will go from there.

Assisted Living House?

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