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How to Invest in Assisted Living Facilities

 

People have been talking about investing in assisted living facilities for quite some time. The need for assisted living is increasing as baby boomers age. The question is, how do you invest in assisted living facilities?

Is assisted living a good investment?

Assisted living investments are a great option for real estate investors, but you should have a good investing strategy and reasonable expectations. Owning an assisted living facility is a lot different than any other investment property or a home health care business.

Assisted living facilities are more than just renting space to residents. A certain level of care must be given. In most cases, an assisted living home must be staffed 24/7. Assisted living care facilities must provide meals and personal care. This includes help with bathing, giving medications, cleaning, and laundry.

There are different types of assisted living, and the rules vary between states. Most facilities require licensing for the property and the operator. There are requirements a person has to meet to become licensed to operate an assisted living home.

Investing in an assisted living home can be very profitable if you can meet the requirements. Residents pay a fairly high amount per month. Even after the expenses, the profit is quite high.

Ways to invest in assisted living homes

Running an assisted living facility isn’t as easy as a real estate investment. There are a few ways to start investing in assisted living homes. The way you choose depends on your goals.

Being an operator

One option for investing in a senior living facility is to become an operator and manage the business yourself. Being an operator has many requirements, but it can be the most profitable. The requirements for owning an assisted living facility depend on the state you plan to invest in. The National Center for Assisted Living gives the requirements for each state in their assisted living state regulatory review.

Being a landlord

Another option is to find and operator and lease them the property. This makes your assisted living investment similar to a rental property.

There are two common ways to lease a facility to an operator. Many leases are set up like any other commercial real estate lease. The assisted living operator makes a fixed monthly rent payment to the investor.

Another method has each resident pay rent right to the property owner.  They also pay the operator for their care. The income depends on how full the facility is with this method.

Rent payments provide a good income when the place is full. The income suffers when there aren’t many residents. This method has a lot of upside potential, but less consistency. Your income depends on how well the operator runs the business.

Hire an assisted living management company

Hiring a management company would allow you to own the property while somebody else hands the requirements and runs the business. You would find an assisted living management company to run the business in this case. They would be responsible for handling staffing, schedules, finding residents, and all other business operations.

All expenses, including staff salaries, come off the top. The management company and investor split the profits after that. You may expect the management company to take 20%, or more, of the profits. But a good assisted living manager will increase profits enough to make the split worthwhile.

How to start investing in assisted living facilities

There are three options to start invest in an assisted living facility.

Opening an assisted living facility

You can start your own assisted living operation. You can build or purchase a building and start from scratch with finding staff and residents.

Buy an existing assisted living facility

Purchasing an operating facility will give you an assisted living business that already has staff and residents. This allows you to start receiving income right away.

Invest in an assisted living fund

You can partner with an experienced investor if you don’t want to be an operator or a landlord. This will give you equity in the property and a percentage of the profits from the business. Funds own different asset classes like long term care and senior housing investments.

Invest in a real estate investment trust (REIT)

You can buy shares in a REIT that owns assisted living and senior housing properties. This option pays a portion of the profits to shareholders every quarter.

How much does it cost to invest in assisted living?

Various size assisted living investments are available. Assisted living facilities can be as small as a few beds, and others can have hundreds of beds. It may be wise to buy a smaller facility if you’re new to the business. Then purchase a larger facility once you learn more about it.

The cost of an assisted living facility depends a lot on the type of residents and how much they pay each month. Some high end homes get high fees and cost a lot more. Lower end facilities may barely get enough income to pay the bills.

The price you pay depends on how much money the facility makes.

There is an investment option for almost any budget.

Types of assisted living facilities to invest in

There are many types of assisted living facilities to invest in. The main difference is the types of residents. Different types of residents require different levels of care, so the residents will be paying different rates.

Some of the more common types of assisted living facilities are:

  • Senior housing
  • Memory care
  • Developmentally disabled
  • Mentally ill
  • Traumatic brain injury
  • Skilled nursing facilities
  • nursing homes

The bottom line

Investing in an assisted living facility can be very profitable if you choose the best option for you. Do your homework and find an investment that fits your goals. However you decide to invest in assisted living facilities, it can be the best investment you ever make.