Seeking advice on analysis or general advice on privately owned senior care facility

Ann Arbor, Michigan
Buying & Selling Small Businesses
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Seeking advice on analysis or general advice on privately owned senior care facility

Zhenya KilleenPro Member
Rental Property Investor · Rives Junction · Member since 2022 · 1 post · 4 votes

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

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Cliff BennerBusiness Member
Accountant · Denver, CO · Member since 2020 · 394 posts · 183 votes
11mo

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. 

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  • Cliff BennerBusiness Member
    Accountant · Denver, CO · Member since 2020 · 394 posts · 183 votes
    11mo

    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. 

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  • Trey Freeman
    Member since 2023 · 4 posts · 0 votes
    10mo

    I've actually been looking a lot at residential assisted living. Instead of buying a existing business, I'm looking at housing hacking a home and building the business myself. The value of the business should be an easy calculation once you know how much they are charging the residents and how valuable the land is. You have rentals so you can estimate the cost of repairs. use a 3% yearly increase on resident fees. I would ask some residents directly (or their families) how much they pay. Also, is your area growing? Will you have enough clients to fill it 10 years in the future? Assisted living is exploding right now so it should be very profitable in most areas. Look up what other residential assisted living facilities are doing on their websites. Compare. You don't want to get stuck in a really bad property that's going to cost a lot to maintain. I'd love to hear how thing turn out! 

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  • Charlie CameronBusiness Member
    Investor · Niceville, FL · Member since 2017 · 451 posts · 366 votes
    10mo

    @Zhenya Killeen That's a really good question. It sounds like you may know what you're getting in to, but I just wanted to make sure you're really aware of the work involved. Residential assisted living is more like three businesses: the real estate side, the operations (care/staffing), and marketing (sourcing new residents). It's much much much more active than standard rentals. But it can be much more impactful and generate a lot more cash flow than a traditional rental as well. Small, boutique care homes are the future of great senior care. 

    If purchased right, this could be a great opportunity for you. You definitely need the latest financials, rent roll, and staff profile to start analyzing it. You may also have a partial seller carryback opportunity which could make it even better for you. Personally, we prefer opportunities that can cash flow an average of 10K+ per month WITH a manager in place full time (so that you aren't in the day to day operations). So we work backwards from there to determine the price you could pay (which is also largely dependent on the loan type and terms). 

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