A recent U.S. News article highlighted the investing opportunities in assisted living real estate. The article highlighted the fact that investment in assisted living is not just attractive for large senior living companies, but can also prove quite lucrative for individual investors. It is no secret that the baby boomer population is aging, with the first children of the generation having turned 65 in 2011. The Pew Research Center reported that baby boomers account for 26% of the United States population. The report estimated that approximately 10,000 baby boomers will turn 65 per day from 2011 until 2030. Individual investors have options as to how to capitalize on this country’s aging population. Those who wish to invest in the larger institutional business models can passively participate through purchasing shares in real estate investment trusts focused on senior living and healthcare property investments. A second and perhaps lower-cost option for the average real estate investor is to invest in assisted living facilities.
Real Estate Investor Gene Guarino, President of the Assisted Living Facility Training Academy in Phoenix, specializes in the smaller space of assisted living facilities, and he wants investors to understand that they do not have to wait for the baby boomer population to age in order to invest. In fact, it may be prudent to invest in assisted living now and prepare for the spike in assisted living demand down the road. The assisted living facility model is essentially purchasing a single family home for assisted living purposes. To Guarino, this business model is much more appealing than investing in single-family home rentals. This is due to the fact that the investor will simultaneously collect rent from multiple residents in the same property, and it meets the housing needs of an aging population. “Most people would say, ‘I’m going to buy a nursing home.’ That’s a $20 million project. Most people can’t even picture themselves getting into this. But when you bring it down to the single-family home level, everybody can picture doing that. It’s about location, but it’s also about cash flow.”
As far as what to look for location-wise in an assisted living facility investment, Guarino prefers to purchase homes in more affluent neighborhoods. He looks for large square footage, and prefers homes with multiple bathrooms, as it is much easier to convert rooms into living space than construct plumbing. Guarino is generally not as concerned about the purchase price of the home, if he can house multiple tenants to generate additional cash flow. Depending on the state, regulations can limit the number of bedrooms allowed in an assisted living facility. “State regulations make the parameters of the property search tougher for investors looking to get into the assisted living space,” said Rick Sharga, executive vice president at Auction.com. “Fortunately, there are numerous sources of information online to help investors locate properties available through traditional sales and at auction across the country, along with property characteristics, market trends and other important [things] investors need to make an informed buying decision.”
An investor can be as involved or passive in the day to day business operations of the facility as they prefer. Other considerations include whether to own the property and lease it to the assisted living facility operator for a greater profit, own and operate the facility and lease real estate, or own both the real estate and the business operation. It is estimated that on average, the cost of living in an assisted living facility is $45,000 per year.
Contact Cambridge Realty Capital
If you are considering investing in an assisted living facility, or an REIT, the experts at Cambridge Realty Capital can help. For any questions regarding finance and capital for your senior living initiative, contact us today.