If by Adult Family Home you mean a non-medical "assisted living facility" (ALF), these can be quite profitable. I am representing a few right now and having taken a close look at the financials, I can confidently say that these can be a very smart investment. Operators of very small homes are taking home strong 6-figure incomes.
It's essentially recession-proof as the supply of aging baby boom seniors needing care will be in place for the foreseeable future.
Residents of an ALF are generally in need of assistance with "Activities of Daily Living", called ADL. That means that they need help with dressing, bathing, using the bathroom, etc. But they do NOT need medical care. If they do, they go to a higher level of care such as a nursing home (higher level of assistance with ADLs) or a Skilled Nursing Facility (called a SNIFF, where medical care is provided).
The ALFs I'm working with are all running at 100% capacity and have waiting lists, because there are simply not enough beds.
A sharp operator will find an unused municipal building - especially a school - and work with the town building department, code enforcement and fire inspector to get it up to code. These buildings typically have large rooms, wide corridors and high ceilings, making them ideal for an ALF. If the building is unused and the town recognizes the need for an ALF, you might be able to negotiate an extremely favorable deal. I've seen it happen.
A home run scenario would be to acquire or build several buildings that would cover the continuum of elderly care. Senior living > assisted living > nursing home > skilled nursing facility. Maintain the absolute highest standards of appearance, cleanliness and service and families will be beating your door down.
Build in a more affluent area and focus on private-pay residents where monthly fees run $6,500 - $10,000+. Medicaid typically pays about $3,000 - $4,500 per month.
Run it for 5-10 years and cash out at an enormous profit. I met with an operator of two small ALFs. When I sell these two facilities, he is going to pay off his very high-end home, plus all of his other debts and put a ton of cash in the bank. He will then decide what, if anything, he wants to do for work. Or he might just retire and spend a lot more time with his young kids. In his early 40s.
If I were 30 years younger, that's exactly what I'd do!
I've looked into it. More trouble than its worth unless you partner with an operator that specializes in it and can provide the expertise, nursing contacts, etc. Better off buying and renting out the bedrooms.
fyi - financing an AFH is not as easy as financing a " regular " investment property .....commerical or special ADH loan program will be needed and terms will be higher
@Daniel Alhadeff The property was in the Seattle area but I decided to not go through with it because my backup was to rent it out as a room rental if the AFH didn't work out but the property would be hard to run as a room rental.
@Gene Guarino That totally makes sense. I was looking at one point to also rent to operators since I still have my W-2 to focus on.
@Ryan Lehman Did you ever end up renting to an operator? If so, any contacts or tips on the process, contracts, etc.? I'm in a similar situation and am seeking an AFH operator to rent a home in Lynnwood. If it doesn't workout then single family rental is the next option.
@Gene Guarino Is there any knowledge you can share on how to find operators looking to expand their business? I'm sure there are differences between AZ and WA, but the approach is the same.
I've never heard the term adult family home. Could someone expand on what this means? ie, special needs people? Senior citizens? recovering drug addicts?
@Glenn Pena We don't have an operator per say but our road map is to have a virtual assistant that acts as our manager. They would run our guest relations and manage our cleaning / handyman crew when requests come through. Most of the house we have used technology to automate our processes which allows us to out source our entire system.
@John Teachout I've seen "adult family home" be used in a lot of different contexts but the most common is for senior citizens.
Q: I was wondering if any others have experience with owning a rental property that is an adult family home by renting out the rooms?
A: I bought my Afh business with the house in Renton, WA 2018 and I sold it a year later. I arranged a rent to own program for them. Rent was $4000/month. The buyer paid $25k down for the $100k business and I owner financed the rest. They finally purchased the home FHA loan June 2022. They also live in that home. Vwry good house hack for them.
Let me know if your interested in these kinds of investments. Let's connect!
If by Adult Family Home you mean a non-medical "assisted living facility" (ALF), these can be quite profitable. I am representing a few right now and having taken a close look at the financials, I can confidently say that these can be a very smart investment. Operators of very small homes are taking home strong 6-figure incomes.
It's essentially recession-proof as the supply of aging baby boom seniors needing care will be in place for the foreseeable future.
Residents of an ALF are generally in need of assistance with "Activities of Daily Living", called ADL. That means that they need help with dressing, bathing, using the bathroom, etc. But they do NOT need medical care. If they do, they go to a higher level of care such as a nursing home (higher level of assistance with ADLs) or a Skilled Nursing Facility (called a SNIFF, where medical care is provided).
The ALFs I'm working with are all running at 100% capacity and have waiting lists, because there are simply not enough beds.
A sharp operator will find an unused municipal building - especially a school - and work with the town building department, code enforcement and fire inspector to get it up to code. These buildings typically have large rooms, wide corridors and high ceilings, making them ideal for an ALF. If the building is unused and the town recognizes the need for an ALF, you might be able to negotiate an extremely favorable deal. I've seen it happen.
A home run scenario would be to acquire or build several buildings that would cover the continuum of elderly care. Senior living > assisted living > nursing home > skilled nursing facility. Maintain the absolute highest standards of appearance, cleanliness and service and families will be beating your door down.
Build in a more affluent area and focus on private-pay residents where monthly fees run $6,500 - $10,000+. Medicaid typically pays about $3,000 - $4,500 per month.
Run it for 5-10 years and cash out at an enormous profit. I met with an operator of two small ALFs. When I sell these two facilities, he is going to pay off his very high-end home, plus all of his other debts and put a ton of cash in the bank. He will then decide what, if anything, he wants to do for work. Or he might just retire and spend a lot more time with his young kids. In his early 40s.
If I were 30 years younger, that's exactly what I'd do!
Q: I was wondering if any others have experience with owning a rental property that is an adult family home by renting out the rooms?
A: I bought my Afh business with the house in Renton, WA 2018 and I sold it a year later. I arranged a rent to own program for them. Rent was $4000/month. The buyer paid $25k down for the $100k business and I owner financed the rest. They finally purchased the home FHA loan June 2022. They also live in that home. Vwry good house hack for them.
Let me know if your interested in these kinds of investments. Let's connect!