Lender · Houston, TX · Member since 2026 · 120 posts · 22 votes
Residential assisted living is one of the hardest small properties to finance. DSCR lenders see an operating business and pass. Commercial desks see a $400,000 house and pass.
There are now 30-year fixed programs with no balloon built for 1-4 unit assisted living homes, with a 10-year interest-only option. Sizes run about $75,000 to $2,000,000, up to 75% LTV on purchases (70% for first-time investors), with no minimum credit score. Experienced operators in major metros can go larger at lower leverage. The home has to be operating already, not mid-conversion.
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For RAL operators here: how did you finance your first home, and did the lender underwrite the real estate or the business?
This is an interesting financing option, especially for investors looking to enter the assisted living space. Having financing structured around the property and its operating income could make a real difference.
Not an operator myself, but you've put your finger on a real gap. The first homes I've seen get done were usually financed as plain real estate. The operator buys the house in one LLC and leases it to their care company in another, and a few DSCR lenders will size the loan off that lease and the borrower's credit instead of the care revenue. The lease has to look like what an ordinary tenant would pay, or the appraiser and underwriter won't use it. The other route is a local bank lending on the business, which commonly wants a year or two of operating history and often comes as a 5 year ARM or balloon. Does your program size off the operator's P&L or a market rent on the house?
Scarlett, thanks. Noah, good question, and sorry for the slow reply to both of you.
The program I wrote about requires the home to already be operating, and my read is that's the tell: it's looking at the home's own operating track record, not a market rent on the house. That's also why it doesn't work for a conversion. There's nothing to underwrite yet.
The two-entity setup you describe, one LLC owning the house and leasing it to the care company at a market rent, is the better route for a brand-new home with no history, as long as the lease would hold up for an ordinary tenant. The tradeoff is size. A market rent on a single-family house usually supports a smaller loan than the care income would once the home has a year or two behind it, so some operators start on the lease structure and refinance onto the operating income later.
For the operators here: on the lease structure, did your lender still ask for the care company's financials?