All Forum Posts by: Kevin Vandenboss

In this particular one, and most others, the owner does not live at the property and they don't have to provide lodging to employees. 

Some of the smaller residential care facilities are known as "family homes" where the owner does live on site. I have also seen a few that have an apartment attached for the manager or owner to live in. I have also seen some that have a bedroom for the overnight staff. Depending on the facility and the type of residents, some are able to get away with having the overnight staff sleep there and not have to pay them nearly as much. They just have to be accessible to the residents. Can't lock themselves in there with earplugs in or anything..

I know a lot of people have been exploring the assisted living industry as a market to invest in, and I talk to a lot of people that want to learn more about it. 

I can't help out very much with the operational side of it, since I only handle the sale of them, but can help you understand how the deals come together. I figure I can post the details of a deal we closed a couple of weeks ago to offer some insight. This one is fairly standard as far as the deals we've done. 

Property/business
17 - bed adult foster care
Sold for $750k
SBA 7(a) financing plus seller note

This one is located in a rural area in Michigan and cares for seniors without any special care. It's licensed for 17, but they have been operating it as a 12 bed. The sellers operated the business, but only handled administrative tasks. Never covered any shifts. It was a good opportunity for somebody that wanted to be involved in the business, but not necessarily have to work in it. 

This particular one was getting between $3,200 - $4,000/ month per bed.The gross income on this facility was about $450k/ year. The net income, including owner's pay, was about $125k.

The buyer used SBA financing to do the deal, but also needed the seller to hold back a note on a portion. 
The buyer put $45k down, the bank financed $585k and the sellers held a note for $120k with a 5 year balloon.

We had some hangups early on with the lender the buyer wanted to use, but once we got him set up with out lender it took about 90 days to close. 

The buyer had prior experience in the business, which helped with getting approved for the loan. The sellers also agreed to stay on for a couple of months to help the transition, which was another factor in the loan approval. 

Some of the things the lender needed in order to approve the loan:
Three years tax returns for buyer and seller/business
12 months of bank statements for the business
Environmental inspection
Commercial appraisal
Business plan from the buyer
List of all furniture, fixtures and equipment with estimated values and serial numbers for anything over $5k
Life insurance policy on the buyer naming the lender as a beneficiary
Other random things the lender or SBA asks for along the way 

In Michigan, licensing isn't a simple process. You need a license to operate, but you can't apply for the license until you either own the property or have a lease. See the issue? In some situations, if the facility is at risk of going unlicensed with residents that will all have to leave, the state will issue an emergency temporary license. In most cases, the seller maintains the license for a period of time. They put the buyer on the license as the administrator while the buyer waits to get approved for their license. That's what we did in this situation. What happens if the buyer doesn't get approved? Never had it happen, but it's a risk. That's why it's important to make sure that you fit all of the eligibility requirements, or have somebody that does, before getting into the deal. 

I hope this offers some insight for anyone interested. I'll write one about a couple of seller financing deals next time. 

@Account Closed Did you own a skilled nursing facility? I ask because the $25 - $40/ hour you mentioned is very high compared to what I've seen in all of the residential assisted living homes I've worked with. I have seen a lot of people shoot themselves in the foot by hiring people for $8 - $10/ hour, though. Like you said, they end up having to cover shifts when people don't show up to work or have a bigger issue if they walk out and leave the place unattended. 

From what I've seen, for somebody to make money in this industry they either have to plan on scaling the business. Either purchase a larger facility or plan to purchase multiple small ones. This also helps with the staff coverage issues.

Converting a home to open up a new facility is a whole other ballgame. I've had several people call me to try selling their empty facility that they never even got open. Ends up being a much larger investment of time and money than they anticipated. 

@Matt Schambeau

We work all over the state. I'm in Lansing and we've done deals all the way up in the upper peninsula.

You can have up to 20 beds here. However, I have seen two adjacent 20-bed facilities connected by a hallway or two connected by a shared kitchen. There's a group that builds four facilities on a lot.

If your focus is on seniors the average bed rate is around $3,500/ month. If it's a memory care facility it's closer to $4,500 - $5,000/ month.

We've primarily been selling the real estate and business together to people who plan on operating it, but we are starting to work with a management company now that has been very succesful in their facilities.

For the developmentally disabled it's getting difficult to get more than $3,000/month since a lot of funding has been getting cut and there are a couple of huge players getting most of those referrals.

@Varinder Kumar

We just completed a deal at 10% down, and most of the ones we've done have been 20% or less with SBA. A lot of it depends on the price allocation. The more collatoralized the deal is, the better terms and lower down payment you'll get. It's when a larger portion of the sale price is in the goodwill or going concern that the lender starts to see it as a riskier loan and wants to see a higher equity injection.

@Matt Schambeau @Jack Williams

I'm a broker in Michigan and we specialize in residential assisted living (called adult foster care in Michigan)

Are you looking to get into it strictly as a real estate investment with somebody else operating the business, or get into owning/operating the business as well?

I would be happy to give you any advise that I'm able to.

@Rhonda McDaniel I'm not sure how licensing works in your state, since they're all a bit different, but we've been able to find ways to get people new to the business in and operating within a couple of months here in Michigan.

Sometimes this involves structuring the deal where the seller of a facility continues to have some level of involvement for up to a year, or utilizing current staff for licensing if it's already a well operating business.

If you become familiar with the local regulations you should be able to find a way to make it work in a reasonable timeframe.

@Luke Moore

How are you coming along on this deal?

As a broker, I've worked on several deals involving the SBA and deals never get done as quickly as the lender says they will. However, the SBA makes it possible to get some deals done that would be very hard to otherwise so we just suck it up and try to be patient.

Mitch, I just came across your reply here and don't believe I ever saw it. Anyway, some markets do have smaller properties being leased to operators. I've seen quite a few 6 and 8 beds being leased. From what I've seen, most of the operators that are leasing properties that size are non-profits.

There is one non-profit group I know of that primarily operates six-bed homes that currently own the real estate, but are starting to sell the properties to investors and leasing them back. 

Looking for another agent to join our team. We primarily work with assisted living and senior living properties. We cover the entire state of Michigan and sell more assisted living facilities than anyone else in the state. 

You don't have to currently be licensed to be considered, but you will have to get licensed before starting. 

I'm looking for people with sales skills that are good talking with people. We can teach you all you need to know about selling real estate, so we're more interested in your ability to find deals and sell them. 

We have an office in Lansing, but you can work primarily from home, or anywhere. Since we handle properties all over the state there will be some traveling across the state. 

We're a small brokerage and work pretty independently. I'll feed you plenty of leads to help you get going and earning as quickly as possible. 

Please don't send me a resume, I won't read it. They're boring and don't tell me anything I actually want to know. Just send me an email telling me your relevant experience and knowledge and why you're interested in doing this. 

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