Investor · Roswell, GA · Member since 2014 · 234 posts · 97 votes
Greetings all,
As I am driving on my way to share knowledge with my current place of employment (that's all it is), I came across an interesting, creative RE idea which generates additional revenue when turned into a business. Assisted Living Facilities! What?! One of those things "When I was 20, I wish I knew half of what I know now." Don't we all.
Not sure how many of you listen to The Real Estate Guys radio show, but that's where this came from. They had Gene Guarino on the show and this concept completely blindsided me.
As always, BP is the spot for further discussion. I would love to hear from everyone on this. How familiar is this venue in our industry? Is it one of those "This has been going on for years" thing and I am arriving late to the party? What are some personal experiences you've had with Assisted Living Facilities?
Lender · Lenexa, KS · Member since 2013 · 119 posts · 80 votes
11y
All, I have spent the last eight years providing equity financing for senior housing, mostly assisted living and memory care. It is an extremely HOT sector to be in. Its consistently been the # performing commercial sector for the last 10 years. My focus is completely on traditional, larger senior housing communities, and not on the conversion of houses into senior housing, which has been a trend in recent years. I have been asked often to provide financing for the conversion of homes into senior housing communities, and I have declined for three reasons: 1: I am overwhelmed with my current focus. 2. I am not convinced the economics work for smaller (6-10 bed) bed converted homes. 3. These are operating businesses, not just rental arrangements. You are investing in some way, shape or form into licensed, state registered businesses, and at present the quality of the operator for such converted homes is either non-existent, unproven, or not someone to whom I feel I can commit investor dollars. The quality of the operator is the #1 determining factor in the success of a senior housing community.
There is a growing emergence of operating companies that solely focus on providing senior housing operational management for smaller 6-10 bed converted houses. Once such services are more common and proven, it will help the converted-house senior housing sector. Until then, just be careful as you venture forth in such a segment. It is far from proven. An alternative is to focus your time and efforts more on the traditional large senior housing community sector; it will be white hot for the next many years.
Baltimore, MD · Member since 2015 · 3 posts · 0 votes
11y
Well just getting stated in the looking for a new facility? My girlfriend does it already makes decent money doing it but she does all the work. she had it staffed but the employees all most killed a resident so she fired most of them. But its a great idea she brought the same idea to me about opening more.
Rental Property Investor · Denver, CO · Member since 2014 · 5 posts · 9 votes
11y
It's a huge industry that's undergoing consolidation by public and private REITs. The institutional space is dominated by the "big three" REITs (VTR, HCP, HCN).
The product type is very similar to multi family and lodging with a healthcare component. Top line revenue is very similar to multi family but with one month leases. Expenses are booked similar to lodging with the housekeeping and dietary components. On top of that you have the healthcare. As an individual investor, your best bet is to look into high quality operators that will handle property management.
Baltimore, MD · Member since 2015 · 3 posts · 0 votes
11y
currently searching for a location my girlfriend runs the facility I'm just looking for a location. But it another area she wanted me look into she thinks its a untapped market if done properly.
Investor · Kusatsu, Shiga · Member since 2015 · 147 posts · 87 votes
11y
Hi,
I listened to this podcast as well and it seems really interesting. I was hoping to find people who do it here on BP rather than pay the high price for the course - it's hard to tell if they are ever worth it. I would love for BP to do their own podcast on the subject.
Rochester, IN · Member since 2014 · 14 posts · 6 votes
11y
Been thinking of something my father (90 and living on his own) said. It is that he would go to an apartment and only when necessary, a nursing home or hospital. Right now he works on his home for his exercise.
Thus what he needs are shared services and housekeeping, generally not medical care (of course many elderly do need and would have to go to professionals).
I see a market for assisting in many ways that do not infringe on the nursing home industry.
Insurance Agent · AZ · Member since 2013 · 306 posts · 161 votes
11y
While I agree with@Richard C.that the assisted living facilities are highly regulated and complex (I handled some of these claims when I was in claims, and have a friend in Los Angeles who is a caseworker for adult facilities), and the insurance for an assisted living, or any home health care type of facility is expensive, because you not only have the common General Liability issues, but you also have the Physical/Sexual Abuse liability issues...and other insurance issues too.
However, from a strictly property perspective, you can be the owner of the facility and simply provide the property for the facility, and those who operate it would be responsible for the insurance required to run their business from the property you own. Obviously you'd need property insurance, but the other insurance would be picked up by the tenants operating the facility.
Rochester, IN · Member since 2014 · 14 posts · 6 votes
11y
Yes, I can see how providing facilities is much different than operating. One could contract care for any assistance needed, keeping the things that do not require specialists in-house.
Maybe partner with a local nursing home and/or hospital.
Investor · Bradenton, FL · Member since 2015 · 44 posts · 22 votes
11y
There are different levels of assisted living facilities (ALF) or residential care facility for the elderly (RCFE). Do you want to provide a facility for higher functioning seniors ("walkie-talkies"as they are still able to walk & talk, with or without mild dementia, level 1) or those requiring higher level care (assistance with feeding, dressing, bathing, getting in and out of bed - those with advanced dementia and multiple medical issues, level 2-3 thus requires higher rent)? Nursing homes are a completely different setting, ALF residents usually move to a nursing home when they require more care. There are also SNF's (skilled nursing facilities) with rehabilitation centers. Then there's the Independent Living Facilities attached to ALF's. These settings are usually owned and managed by the big healthcare companies. Keep in mind that there are state inspections that you have to undergo to make sure you are providing the appropriate care. An added bonus is you may get to deal with some wonderful homehealth providers! If an ALF is something you want to pursue, best of luck to you.
Lender · Lenexa, KS · Member since 2013 · 119 posts · 80 votes
11y
All, I have spent the last eight years providing equity financing for senior housing, mostly assisted living and memory care. It is an extremely HOT sector to be in. Its consistently been the # performing commercial sector for the last 10 years. My focus is completely on traditional, larger senior housing communities, and not on the conversion of houses into senior housing, which has been a trend in recent years. I have been asked often to provide financing for the conversion of homes into senior housing communities, and I have declined for three reasons: 1: I am overwhelmed with my current focus. 2. I am not convinced the economics work for smaller (6-10 bed) bed converted homes. 3. These are operating businesses, not just rental arrangements. You are investing in some way, shape or form into licensed, state registered businesses, and at present the quality of the operator for such converted homes is either non-existent, unproven, or not someone to whom I feel I can commit investor dollars. The quality of the operator is the #1 determining factor in the success of a senior housing community.
There is a growing emergence of operating companies that solely focus on providing senior housing operational management for smaller 6-10 bed converted houses. Once such services are more common and proven, it will help the converted-house senior housing sector. Until then, just be careful as you venture forth in such a segment. It is far from proven. An alternative is to focus your time and efforts more on the traditional large senior housing community sector; it will be white hot for the next many years.
Investor · Roswell, GA · Member since 2014 · 234 posts · 97 votes
11y
@Dan Brewer the pool of investors whom you lend to, are these individuals investing at a larger scale or more of people partnering in order to tackle such, what seems to be a complex and somewhat new sector for REI?
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
11y
@Damir Kamber I own shares in a reit in this sector. The business model is straight NNN. It has been decent with growth and dividends. I assume a small time operator could do the same. So you are not the actual residential health care company, just the ones who lease the real estate to a company who does that stuff. Good luck!
I have a pool of investors that provide their capital to my company, and I in turn place their capital in various 60 bed - 200 bed senior housing communities.
Investor · Roswell, GA · Member since 2014 · 234 posts · 97 votes
11y
Great information everyone, hopefully @Joshua D. will find time to do a podcast on this topic. I should probably go through #ASKBP on this one.
Seems like investing in an already established business model makes more sense rather than try to reinvent the wheel. Can anyone share what the returns are on such investment?
Lender · Lenexa, KS · Member since 2013 · 119 posts · 80 votes
11y
Damir, for stabilized communities, your return should be generally commensurate with the market cap rates for that type of senior housing community. That can vary considerably based on the condition and age of the community, its location, why type of senior housing community (assisted living, skilled nursing, etc). Depending on the amount you are anticipating investing and how long you will invest the funds will have an impact as well. However, everything is negotiable. If you could provide a bit more information, I could give you more precise recommendations. Feel free to in-mail me directly if you wish.
Dunedin, FL · Member since 2015 · 16 posts · 5 votes
11y
I knew a residential builder who did this with large homes in GA during the market crash (2006-2007) when he could not sell his large beautiful homes. He turned them into Assisted Living facilities and made a profit, more than renting them. He made a deal with the staff for minimal hourly wages, because he provided room and board to them as compensation. His un-skilled staff did not provide any medical care, just a place to live and 3 meals a day for the residents. The resident's families/insurance/etc. were responsible for their medical care. At that time the regulations in GA were very minimal, I don't know if it is still that way. I looked into doing it in FL at that time, but the regulations were much more challenging and I did not move ahead with it after some research. I do notice many of those facilities here in FL, and they are just a house in a residential neighborhood. Somebody must be making it work! Good luck.
Real Estate Broker · Cape Coral, FL · Member since 2013 · 24 posts · 3 votes
11y
I too listen to the Real Estate Guys podcast and like you @Damir Kamber I was very intrigued by this business model. In the last week I've found a few of these ALF's around Cape Coral FL even one right down the street from my house. I recently bought a "live in flip" and I'm considering doing the remodel with this business in mind. But first I'm off to google to start my research!
Real Estate Agent · Zachary, LA · Member since 2013 · 50 posts · 26 votes
11y
I've contacted Gene Guarino about the 3 day course and learned that the price point is $5000 for two participants, and you pay for your own travel and lodging.
Before signing up for the course, we plan to continue to research our local area and interview professionals who are "doing the thing" successfully. This week, my wife and I will be interviewing someone who runs a small residential assisted living facility on the west bank of New Orleans. She is a registered nurse, knows the ALF industry well, and has run her ALF successfully over the past several years. I'd rather pay that owner to consult us, before flying off to Arizona and taking a chance on a seminar. However, Gene Guarino checks out with a clear record on Ripoffreport.com. I'm always hopeful, but wary of those who are in the business of seminar style education.
On a final note, we believe that senior care investments should be done for the right reasons, and run by professionals. We are only here to provide the real estate and the framework for a certified, professional resident care manager, who will manage staffing, culinary, and resident care. In my research I've noticed many facilities have been in the news for running without licenses and with uncertified staff who keep the facilities in terrible shape. Those owners end up in jail, and this is not something to take lightly. Healthcare fraud is a federal offense.