Investment in Elderly care home business - a good idea?

Question

Hello,

If the numbers work out well is it a good idea to invest in an elderly care home? Apparently there will be two pieces to this form of investment,the tangible real estate property and taking over business ownership.Appreciate input from the experts here.I would like to better understand the risks and pifalls in this form of undertaking as well as the potential benefits.

Thanks

Jason Turgeon · Answer

If you're looking for passive income, an elder care facility is about as far from it as you can possibly get. That's a full-service, full-time business that needs a ton of specialized experience, is highly regulated, and leaves you responsible for people with a huge variety of complicated needs.

If you want to be in that business and understand what it entails, great. We need more compassionate and well-run elder care facilities in this country. But it's not what I would consider a real estate business. It's a healthcare business with a real estate play.

I wouldn't consider having anything to do with elder care except as a triple-net deal where I owned the property and rented on a long-term, renewable lease to a very experienced, reputable company with multiple other locations I could check out first.

Barry Ruby · Answer

I can offer my personal experience on this subject by saying "Don't do it" if you are not prepared to recognize and accept the absolute difference between being a property owner vs providing services to the Elderly (or anyone for that matter). Elder care can mean Independent Living, Assisted Care, Nursing and dementia. The greater the need of the resident, the greater the need for skilled staff which includes management and attendants.

My wife and I built an independent care facility with the goal being to have it operate on a fee structure that could succeed on Medicare and Medicaid payments, which would make a room in the facility available to anyone who was broke but did have access to government funding. We built a ground up state of the art facility and covered the equity requirement through the sale of Low Income Housing Tax Credits the project was awarded by the Colorado Housing and Finance Authority (CHAFA) and sold the credits at a discount to a major national bank.

We understood from the start that operating the facility required an entirely different skill set that those needed to plan and build it. We picked the wrong operator and ran into many problems getting the facility filled and functioning efficiently.

Bottomline, we will NEVER use an LIHTC award program and never do an Elderly care facility again. Real Estate development is difficult enough without voluntarily adding layers of complexity and risk to it.

Peter Morgan · Answer

@Barry Ruby

Barry and Jason than you so much for your response and it was very useful as it reiterated to me to tread very carefully in the uncharted areas of real estate.