Senior Housing

[Account Closed]

Has anyone ventured in the area of senior housing? I've seen a few deals but I noticed the rents are restricted and most of the mortgages are assumable. Has anyone done any of these deals? Anything to look out for?

[George Lekas]

Kyle,

       Lots of good advice here!  Let me add some.  Here in the Midwest, these facilities are usually referred to as Community-Based Residential Facilities, or CBRF"s.  The licensing requirements are strict, for obvious reasons, and they vary depending on the number of beds in your facility.  You will find a lot of folks who want to open four or eight bed facilities, as the licensing requirements for places of that size are less stringent than the larger facilities. Employee turnover is high, due primarily to the low wages prevalent in the industry.  You have to allow more in your vacancy calculations, as a CBRF is more often than not a person's final move.  And you should make a serious effort to limit the number of Medicaid residents, at least until you are experienced enough to understand the nuances of how you get paid from the government.  

       Having said all that, these facilities can be cash cows, and their future is nothing but upside!  You've heard the fact that 10,000 baby boomers reach the age of 65 each and every day, and will continue to do so for the next 10 years or so?  What's not to love about that?  The facility owner who is experienced and patient will be well positioned for the foreseeable future.  Please bear in mind that you alone decide what type of residents you wish to accept, so elderly folks who can take care of most of their own needs are obviously less maintenance.  Also, your rent can be whatever the market will bear for your private pay residents.  Additionally, although their care is more intense and staffing turnover is even higher, dementia and Alzheimer's residents pay an average of $5K per month for their bed.

       I strongly urge you to pursue these facilities as an investment.  You will be happy you did.