Assisted Living Facility Questions

[JT T.]

Hello all, we are looking at building an assisted living facility, but we are not sure what way to take this. I am looking for anyone who is knowledgable in this arena. If you would PM me that would be great. We have 23 acres that is undeveloped and in a great area. We are just not sure if we want a ALF, a rehab center attached, senior apartments, or something else. Any help would be great.

JT

[Darryl Dahlen]

A properly run ALF can indeed be a cash cow. As Rich mentioned, some private pay/memory care beds can bring in over 3g/month. I've seen a few that earn upwards of 5G/month, but those were in posh facilities that are often owned by large corporations.

Personally, I like hotel conversions as way to create an ALF. There are a lot of failed hotels on the market these days that already have a lot of the amenities (pool, gym, restaurant, etc.) that make for a good ALF. It's not to hard to find a failed hotel in a prime location that can be had for a steep discount.

That said, there are a couple topics I feel worthy of mention.

ALF properties are expensive to run. It is important to make sure you have a good understanding of what those costs are. They are labor intensive properties, and as a result, come with high operating costs. Not only is there a fair amount of staff requird in order to keep the staff to patient ratio comparable to other facilities, but you also have to pay a kitchen staff. Then there are costs associated with providing activities, food, a vehicle, management company, etc. It adds up fast.

Lastly, it's also important to understand that ALF properties often have long lease up periods. It isn't all that uncommon for a new ALF to take 6 months to over a year to fill up. Even a small one. As such, the carrying costs need to be considered.

This is why it is critical to have a good grasp of the local market. How many beds are available, how many are coming online, is there a need for a particular service, etc. Another issue is that it is important for an ALF to be in close proximity to a hospital. This means your competition isn't that far away.

Not trying to talk anyone out of what can be a great business venture. Just passing along some along what I consider to be important information that is easy to overlook.