Investing in Assisted Living

[Zen Ouano]

Hi, can anyone share their experience with purchasing a vacant facility or land for the purpose of building a facility?  We are only in the planning stages, but seems a lot more complicated than just buying regular RE.  How much % downpayment does the bank require and what kind of loan ie commercial RE, business or construction loan? We are looking into either selling a rental property to help purchase a vacant facility, or we have a land that we could potentially build a facility (after rezoning).  Do you think we are better off building new rather than fixing up a 1960-1970's facility?  We are looking into either building a 15+ bed or purchasing an old 20-50 bed.  Thank you for your time.  And advices on what not to do are also welcome :)

[Jason Brenizer]

Hi @Zen Ouano, Texas is a great state for this business. Depending on the number of beds in a facility and the type of service, you will need to different levels of state requirements. 

The simplest differentiator in the state of TX is the number 16. If you have 16 or fewer residents, you fall into a small Type B facility and can be located in a residential setting. You would be buying a big house, converting it to meet TAS2012 (Texas Accessibility Standards), including a fire suppression sprinkler system, and would hire staff to care for up to 16 residents 24/7. You will need to apply for a state license to operate.

If you go higher than 16, you will be considered a Large Type facility (there's A, B, and possibly C). You'll be zoned commercial, and have to meet an additional set of requirements to get a state license to operate.

The costs of renovation either way are definitely higher compared to a standard fix-and-flip. And depending on the municipality, you might have a rough time navigating the city permitting process. I'm in the thick of my first residential assisted living remodel down in Austin.

Considering a $500K 1800 square foot house that needs work in Austin rents might rent for $2500 if in a desirable neighborhood (more like $2000 otherwise), it makes a lot of sense to find another model to make a property have positive cashflow.

Other states have lower caps on residential small type B facilities: Arizona 10, California 6, Colorado 10. And DFW, like Austin, is still growing. It's a great time to consider this business!