Whether you plan on selling your assisted living facility soon, later or never, it’s beneficial to have a good idea of what the value of your property and business is worth. Knowing the value of your assisted living facility can help you plan for the future, decide what you want to do with your business, and what retirement options you have.
What your assisted living property is worth boils down to the answers of two different questions; what are other operators willing to pay for it, and how much is a bank willing to lend on it. To answer these questions, we look at other transactions that have happened in our market recently and how those properties were valued.
A residential care facility typically has two values; a real estate only value, and “going concern” value. The real estate only value is what the property is worth based on the property being vacant with the business no longer operating. The “going concern” value is based off of the current condition of the operating business and its current income. With a “going concern” value, it’s assumed that the property and business will be sold together, with the current residents and staff in place, along with all furniture, fixtures and equipment.
For real estate only values, the market has been valuing assisted living homes in Michigan at around $30,000 per licensed bed, for facilities with private rooms.
We have been seeing the “going concern” value based on a capitalization rate. The net operating income (NOI) is calculated based on the historical performance of the business with an assumed vacancy rate based on the number of beds, and a reasonable manager’s salary. That NOI is then used to calculate a value based on a 10% – 12% cap rate.
Of course, every property is different and each situation is unique. If you want to get a better idea of what your assisted living property may be worth in today’s market, please feel free to contact Vandenboss Commercial to discuss your unique property.