Seeking advice on analysis or general advice on privately owned senior care facility
New investor. I only have a few single family long term rentals so this is a little out of my purview. I want to scale and this opportunity came up. I am currently doing some property maintenance and repairs on a privately owned senior care retirement facility with 100% occupancy with 12 residents. It's a single family home business run by the owners for the last 30 years. They are ready to retire and asked if I would be interested in possibly purchasing the property.The owners have suggested some numbers on what they would like to sell it for. I think it's too high for the condition. It is currently staffed, and from talking to the owner is producing good cash flow every month. From my perspective the property is poorly managed and no major repair or renovations have been done since 2003. I guess my question is where do I start, and what questions I should be asking. Any red flags I should be aware of ? From the small amount of research I have done I can't find many comps around me to begin. The only reason I'm considering this deal It's very local to me and any renovations, management I can handle myself. Any help is appreciated. Thanks
Most Popular Reply
I cannot speak for the specifics of this type of business, but you won't find comps because this is more of a business for sale not a property. Businesses like this sell on multiples of SDE, anywhere from 2-4x.
Since you are in discussion with them and they like you, you have a better chance of making it a good deal.
I would suggest asking for the financials of the last three years at a minimum. I would suggest to work with an accountant who has done this, because you will want to get the SDE of the business to see what it could cash flow, then you can have an idea of a loan payment you could make to them.
From my experience, there is the Purchase Price and the Terms, you get one. So maybe they want a higher price but you only pay them a few thousand a month, until its paid off. Then with the rest you update it, make sure the staff is tip top, and create more value to increase your monthly revenue.
Questions would be; would the management company or key employees stay, any litigation currently, current controls in place for accidents/deaths(then check local guidelines on this),
Red flags would be financials and tax returns not matching up, again the accountant should help with this, but definitely request it. If they would lie to the IRS, they WILL lie to you.
- Cliff Benner
