Assisted Living Facilities in SFHs

[Michele G.]

While I have been looking for properties I have come across several SFHs that have Assisted Living Facilities operating out of them. I had didn't realize this was a trend. Some of the listings say the ALF is a tenant and has a multi year lease. Others specifically state the business is being sold with the property. I have no interest in running an ALF business. I have done some research and the state does allow these businesses in residential homes. 

My goal/focus is to find a passive income, cash flowing property. Should I steer clear of these properties or could this be a good investment if the numbers work out?  Are there risks involved if I am merely the property owner and not the business owner? The businesses are already established in the homes and the one I looked up has had regular state inspections each year.  What additional due diligence should I be doing? I am thinking this deal would be a hybrid of a commercial and residential purchase. Things I am thinking of....

• Verify the city allows this business to operate in a residential neighborhood
• Verify the house is up to code for the type of business 
• Would I need a different type of insurance or higher limits
• Who would be responsible for any upgrades to the property if code changes for their business
• Is this any different than a commercial building leasing space to an ALF?
• Are the properties altered significantly so that if the business decides to leave at the end of their lease it would be expensive to convert it back into a SFH?
• How big of a concern is there if people were to die in the house? I know that has to be disclosed upon sale, but what, if any, would my responsibility be to know that information? How much could that potentially affect resale value?