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Residential Assisted Living Home Deal Deep Dive
1 week ago, we (@Charlie Cameron and @Luke Frizzell) closed on our latest Residential Assisted Living home, and it was one wild ride! We are so excited to add another RAL to our portfolio and truly believe it is the best asset class in real estate now and for decades to come.
Check out the deal deep dive below!
Arizona Residential Assisted Living Home Deal AnalysisLocation: Urban market in a submarket of Phoenix, Arizona
8 bedrooms, 4 baths
Recently renovated and operating residential assisted living home
Purchase Process:- Direct Mail Sent: 648 letters to RAL property owners in Phoenix
Seller Responses: 45 interested sellers via email, phone, or website
Deal Source: Initial email, followed by a phone call
Negotiations: Seller desired cash flow to retire, accepted seller financing
Financing & Expenses:- Offer Price: $740,000 (includes RAL business)
Seller Financing: Terms: 10-year balloon, 30-year amortization, 6% interest rate
Down Payment: $45,000 (6%)- Principal & Interest Payment: $4,226.83/month
Other Costs:
Property Taxes: $2,701/year
Operator Placement Lease Fee: $14,220 (3%)
Legal Fees: $4,334
LLC Formation: $164
Closing Costs/Inspection/Sewer Hydrojet: $4,058
Repairs Budget: $10,000
Reserves Fund: $12,500
Investor Payment: $416.67/month (10% interest on $50,000)
Insurance: $192/month- Utilities: $0 (paid by the operator)
HOA: N/A
Home Warranty: $750/year
Repairs/Capital Expenditures: $395/month (5%)
Total All-in Expenses: $91,300
Total Monthly Expenses: $5,230.50 (including saving for repairs)
Income:
Commercial Lease: The operator handles day-to-day care, placement of residents, utilities, maintenance, lawn care, etc.-
Lease Term: 5 years
Lease Amount: Month 1: Free
Month 2: $3,950 (50% off)
Months 3–12: $7,900/month
Months 13–24: $8,137/month (3% annual increase)
Months 25–36: $8,381/month (3% annual increase)
Months 37–48: $8,632/month (3% annual increase)
Months 49–60: $8,890/month (3% annual increase)
Cash Flow Analysis:-
Monthly Net Operating Income: $7,067- Average Monthly Income: ($0 + $3,950 + $79,000) / 12 = $6,912.50
Average Monthly Cash Flow: $6,912.50 - $5,230.50 = $1,682
Year 1 Annual Cash Flow: $1,682 x 12 = $20,184
Year 5 Monthly Cash Flow: $8,890 - $5,230.50 = $3,659.50
Year 5 Annual Cash Flow: $3,659.50 x 12 = $43,914
Cash on Cash Return: 77.51% annually
Let me know your thoughts and come ride the Silver Tsunami with us!
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Let's go!!! Stoked about finally finding our perfect niche, assisted living. :)
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This is awesome Alexander. I've been looking into RAL's as an investment for my sister and I.
Really appreciate you outlining the numbers so clearly. For your direct mail, did you find the owners by skip tracing or driving/combo of both?
- 425-501-5115
- [email protected]
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@Charlie Cameron Could not do it without amazing partners like you!
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@Jackson Harris We did a lot of digging online to try and find Mom and Pop owners to send letters to!