House Hacking + Assisted Living???

Question

I'm in project management where I work from home and I have been thinking of ways I can add another revenue stream while continuing to work from home. What I'm considering: buying or building a new home (5,000-7000 sqft) and getting it licensed as a residential assisted living facility where I would be the home manager. It would be a Boutique Class A home for between 6-8 people in one of the top 3 metros for assisted living. I'd charge around 6k per resident which is only 400 more than the current average for the area. I'm just getting into running the numbers and the problem I'm running into is that I don't want to have any responsibilities during the day while I'm working my day job and the wages expense for caregiver staff is MASSIVE in my area (+$18/h). Normally, to do what I want to do, you would need to have about 20% down (150k), but because I'm going to live in the property I only have to come with 3.5% to the table for the property. There is also SBA loan money available for the business start up costs.

The reasons why I really want to get into this: it feels like something that would fit my work from home lifestyle that I have established (I'm never going back to the office and even if this job ends I can get other remote project management that will also be work from home); I get paid 4 ways (W-2, appreciation, tax write offs, ownership distributions). Reasons why I shouldn't do this: I have no experience running a residential care facility, I have never done a house hack, I already work a very time intensive day job...do I really have the bandwidth for this? I'm thinking about brining on a family friend as a business partner to split the work and bring additional capital, but I don't necessarily need them...

This is obviously a big ask on a first time house hack, but would love to hear if anyone has ever heard of people successfully executing this strategy? Other thoughts welcome too! Is this insane? Tell me I'm crazy, lol!

Shiloh Lundahl · Answer

I think it is great that you are brainstorming. Keep that up. As someone who owns an assisted living I would tell you it is much more intestine than you may think. It is a business and will require a lot of learning in multiple areas to become successful. Areas such as aging, medical issues that come with aging like diabetes, dementia, and Alzheimers, networking and marketing, leadership and staff management as well as working with insurance companies on collection of payments if you accept insurance, and how to be compliant with state rules and laws with regards to residential assisted living.

In order to be successful with assisted living, this wouldn't be just another thing you do, but it would become the primary thing you do. At least until your skill set is where it needs to be to be successful. I would say that you would need to dedicate 5 years to become really good at it.  Also, filling the beds of an assisted living facility is not easy. It requires a lot of consistent networking and marketing and if you slack at this you may not fill the beds and then you would be losing money because your fixed costs with staff.  To give you some context, we have owned our ALF for the last 11 months. It is a 27 bed facility and we make money at 20 residents.  Our average over the past 10 months has been about 19 residents and our most at one time has been 21 residents. And this isn't from a lack of trying. So it isn't easy to fill the beds. Also, there can be problems and drama with staff so you will either need to get your manager's license or you will need to have a good network to be able to get another manager quickly if your manager quits or if you need to fire the manager. And based on how your manager manages the RAL or ALF you may get complaints to go to the state which could shut you down.

So I don't mean to dissuade you from this path, I just want to have a proper understanding of what it would require to make it work successfully.

Good luck to you and if you do wish to pursue this path, I would strongly recommend you connect with other owners of assisted livings so that you can have proper expectations of what it would be like before you start the build of your own assisted living.