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My RAL (Residential Assisted Living) Care Home Journey
Hi guys I wanted to post an update regarding my RAL (assisted care home) journey and updates on to the current status. I've had quiet a few people reach out and ask about my thoughts about my experience with Gene's RAL Academy and what came of my training. Well, I'm delighted to report that I have indeed opened my very own care house and it has been steadily being filled (more on that later).
From my personal experience I started learning about the RAL model approx 2.5 years ago and I completed Gene's online course only. I never did the live Phoenix course because of time constraints, but I felt I had gotten a pretty good feel for how the model worked. If you wish, P.M. for more info on the course and I can give you more feedback - fyi I have no ties to Gene's academy or have any incentive to promote it. I initially started looking to buy care homes in my local market of Orange County, but quickly realized that everything was too pricey. Additionally, the CA state limits for care homes (known as RCFEs here - Residential Care Facilities for the Eldery) in max 6 beds, whereas Arizona is 10. The limit varies by each state and I think Texas is the most generous with 16 residents!
With a partner I located a suitable property in Scottsdale (a ranch style house with 5 beds and 4 baths but most importantly an attached 2 car garage along with an entirely enclosed 2 story RV garage.) Side note: The house also had a Bayliner boat in the garage which as a semi-joke I asked to be included in the offer. My partner and the realtor thought the idea was ridiculous...but lo and behold I ended up getting it! [Thanks Gene for the tip! In one of his videos he mentions that when placing an offer on a house be sure to ask for "all furnishings including any and all vehicles in the garage." I actually wanted all the furniture....but a boat will do LOL.]
The next phase was the extensive renovations to increase the total house capacity to 10 private bedrooms with 10 private bathrooms. This was accomplished by converting the entire garage space into beds and bathrooms( including one ADA bathroom), and converting the master bed and bath area into two Jr sized master bedrooms and baths. All parts of the house are wheelchair accessible, including the walk-in style bathrooms. Landscaping also had to be performed as prior owners had done nothing to the dirt areas in the front or back. This reno took better part of the year for a variety of reasons (but really could have been accomplished in 6 months with better planning.) Part of this problem is that I reside out of state in California and had to basically run this renovation and troubleshoot problems with little help on the ground in Scottsdale (yikes what a nightmare) to deal with.
We were finally able to obtain the license to operate as a care home in February (got delayed by some water plumbing maintenance issues). After all said and done, I had doors open, hired a good manager, furnished the place with beds, recliners, TVs, call buttons, had professional photos taken, self created the website, and prepped for the SILVER TSUNAMI FLOOD of residents that would pour into this beautiful home in DROVES!!!
....and except that never happened.
For months my house sat lonely and empty, and I continued to dump money into holding costs to run this place. I began to have a crisis, dismayed at the money, time and countless hours I had put towards this project. I was truly exhausted (esp while working full time in my medical practice.) I logged into the net cams installed in the house and prayed no one would break in to steal the furniture or start squatting. I began to panic and had discussions of selling it to other investors, or just renting out the place to other operators for them to run. The issue was not the house but that my manager that I had hired simply did not have connections with placement agents within this geographical area. She had her own house and had run several houses successfully, but none in the area that my house was located in. It quickly became apparent that I would need new management and we parted on good terms. Instead of trying to run things solo again, I decided to partner with a contact I had previously made. His team had also recently renovated and opened their own home not too far from my home and were almost fully filled. Their manager was experienced locally and was a hospice nurse, and well regarded by placement agents. We agreed to terms and we have partnered up.
Our market has been the "higher" end senior market with rents of $4500-$7000/mo. We only just opened in July but we’re already 50% occupied (had two residents pass otherwise would have been at 70% by now.) Additionally, i want to leverage my medical background to offer various medical services that would set our houses apart from the competition.This has convinced me that offering a great product with excellent staff in a caring and committed environment can certainly lead to success.
If this is something of interest certainly do your due diligence on where and what kind of facility you want to open. Get educated from a variety of sources. See what sort of rents (and occupancy rates) similar homes in your area go for (secret shop by asking that you need to see it for a family member). Find out how long licensing will take and how restrictive the target neighborhoods may be.
I'm at a point where I am definitely interested in opening more homes (hopefully with more investors joining us.) I have a good set up where I am more of a passive investor, but still have input on big decisions. My team has been wonderful, communicative, and dedicated to our residents. We don't expect to turn a profit till about 16 months in, but this has always been a long term play.
If you do decide to drink the Kool-aid I wish you the best on this exciting endeavor! I'm not on here much but will do my best to answer any questions.
Our home and more pics can be found at www.thevalenciahome.com
Thank you!
Sendhil
Property prior to conversion
Property after conversion
Sendhil, great job. I recommend you go to some of the live RAL events. I believe there is one coming up in a few weeks, and Robert Kiyosaki will be speaking at it. The relationships you could form might be worth more than the information in the training.
Looks amazing! Thank you for sharing your journey. We are looking to do this in Northeast Tennessee and will be going to the RAL convention in a few weeks. We have a lot of questions, but it looks like a fit for us. My husband is a builder and I have some background in medical. We are both good business builders/managers. And we love real estate! We mostly do STR to higher end clients and really just wanted to do the real estate side of RAL. After watching the videos, I think we could do the business side and build something great. If our adult children wanted to join us, we would have many suitable roles they could fulfill. We would not decide to do this based on them, but they would surely help us get it going. I have a daughter in the medical field (prepping for PA school), 2 sons that are talented chefs, another daughter who would make an awesome caregiver and a few more suited to manage. One son is in landscaping and irrigation, another in logistics. They all know hospitality and customer service very well. (We are a blended family with 8 kids ages 19-26) They have all worked for us in our construction business and the short term furnished rentals. Like I said, I won't do it based on them, but we are a family that actually works well together and have built challenging projects as a team, coordinating 14 cabin builds (7 at one time) and didn't kill each other. lol
I appreciate everyone on BP sharing their experiences with RAL (and other strategies). It helps to vet the information out there and see if it has merit.
Thank you, @Sendhil Krishnan! Congratulations! It's beautiful!
Congrats on your new home! I've been in the ALR business for almost three years now and I now have 7 care homes in the Denver area. You mentioned the challenge of filling your beds, which is a great point that tends to get glossed over. When you open your first care home you are going to face challenges. No matter how beautiful your home is, you must have a reputation for providing superior care. If you are opening your first home, the challenge is convincing families that you know what you're doing and that their loved one will be safe in your home. To get started we hired an experienced house manager and began building relationships with placement agents. It took some time to prove ourselves to the point where they were willing to refer our homes to families since their reputation in on the line as well. This is why it is critical to partner with or hire someone with experience and a great reputation.
Another aspect that doesn't always get mentioned is the expense associated with working with placement agents. Typical fees are 75-100% of one month's care fees. With that kind of expense, it is even more important to accurately assess a resident's health condition because if they pass within the first couple months, you actually lose money and still need to find another new resident. Unfortunately, families often wait too long to move their loved ones into assisted living.
One more point I'd like to make is that getting financing for your care home can be a challenge if you don't have experience in the health care industry. Most lenders require two years of experience to even consider your project. This was a huge hurdle for us when we started our business.
The assisted living care business is awesome, rewarding, and I'm so happy that we took on these challenges. However, I continue to meet investors who are not prepared for some of these challenges and a many end up not making it to the finish line. I've been approached by several investors about taking over their projects. I took over a project for one investor but the others were not ones that fit my vision or brand. They ended up losing a lot of money and placing the home back on the market.
Education and/or partnerships are key to starting a successful ALR business. I belong to a group in Denver that meets monthly and we share ideas with each other while bringing in speakers each month. It's a great business but you must go into it with your eyes wide open.
Congratulations on getting to the finish line of actually opening up your first ALR! Not too many people get there! Happy to see that you have!
Congrats @Sendhil Krishnan -- Do you care to share your total all in on the home and construction costs for the conversion to make it residential assisted living home ready?
I want to expand but have waffled if I stay in the space Im in - (One facility 36 beds so I'd like 24-60 beds) or do I look at converting single family homes to RAL's but am curious about the scale and challenges it brings -- I haven't wrapped my mind around what the conversion cost are yet - granted you being in AZ there will be some differences vs KS where I live - but would give a ballpark to look at - I'd be glad to share offline experiences about our place with you as well.
I'd just like to add based on my own experience here Senior Living is not a get rich quick thing - there is a TON of risk and great barriers to entry as there should be.
I was a bit naive on some things and as I had shared with someone offline I dont know that I'd have been brave enough to take the leap to this business had my former employer at my W2 job made my life so miserable I hit rock bottom...so I have to give kudos to them for kicking me in the butt and throwing me over the cliff.
Anyways need to remember this is a PEOPLE first business - very little has to do with real estate. This is a full blown business. Reputation as you have seen is everything - When we purchased our place we knew it had a great reputation so we took over and ran with it - little did we know there were lots of operational challenges that needed to be overcome which has taken us nearly 2 yrs and counting to correct but we are doing good now. Can't stop marketing and you need to make sure your residents and team come above everything else. Do that and the rest should take care of itself. Appreciation is key. Sonic Runs - ordering food for the team, letting them eat free (after residents have been fed at mealtimes of course), letting them know you appreciate them for the little things small gifts here and there when appropriate, having an open door etc. Your staff will make or break you.
I've learned how important it is to have a great manager and a great nurse on staff - we had only 50% of that for quite a while and no matter how great the other part of the team is - if you dont hit on all cylinders it makes it hard.
Thank you all for the kind words and encouragement. @Shane H. and @Mitch Conrad congrats on your accomplishments. Both of you are completely correct that Reputation is vitally important and it cannot be bought or produced with a shiny new product (house). Having a great manager/staff who can listen to the family's needs and show natural compassion for residents will be the best marketing your house can have (and possibly the only marketing you will need). Shane, I like your idea of scaling up and I wouldn't hesitate if I could raise the capital or find a suitable property to do so. The economies of scale really will pay off long term by having more residents in the same building.
@Wendy Fate it sounds like you already have an amazing family in place with all the key components to bring this project to fruition. I would certainly reach out to your health department in TN and find out what the maximum number of beds feasible is and then go create it. Im not talking about what is feasible in a neighborhood, but basically creating a mini commercial ALF in a residential care home setting so you can maximize the number of residents from the beginning. If you hire the right manager in your intended geographical area, they will be able to fill up your place within 6 months.
@Victor Menasce thank you as well. Are you currently involved in care homes in Ottawa? Yes, there is the RAL NAT CON event occurring but unfortunately i did not have plans to attend but will see if my team on the ground will be there. I certainly agree that it would have been an excellent networking opportunity.
Thank you
I'm currently building an 80 bed planned care community in Louisiana. It marries the economies of scale of a big box facility with the sensibilities and intimacy of the residential model. My partners include some of the core members of the RAL Academy. I was a guest on Robert Kiyosaki's "Rich Dad Radio Show" about a month ago talking about assisted living if you want to learn more.
@Sendhil Krishnan Congrats! Sounds like hard work is starting to pay off. Do you mind sharing to rehab costs? I just heard about this so doing some research atm and considering if this is something I would want to get into.
Also, I know there is a business model of leasing a house out to a RAL company, instead of you running it, is that something you considered doing?
@Victor Menasce i congratulate you on what you are accomplishing - truly amazing! I will check out your episode on the podcast for sure.
@Nik Moushon As for rehab costs it will vary widely depending on what house you end up choosing. At the very least you will want to modify any existing bathrooms to make sure they are accessible and have walk-in showers. Finding ways to add bedrooms is key as it will pay off long term (either adding space or by converting garages). Our rehab costs were about 190K and an additional 30K for landscaping (added a lot of turf). However it was a fairly large and extensive renovation with a complete 10 bed/ 10 bath house. In retrospect i would not have added as many bathrooms to save costs, however each room now commands a premium compared to other houses with only private bedrooms. If there is demand in your area it is best to find a property that has the maximum ability to have the most number of bedrooms available. Sometimes you will need to knock down a few walls or remove closets to add in that extra bedroom, but again, it will pay dividends long term.
Yes I did briefly consider leasing my house and had multiple people interested. However, my goal had always been to be part of this business and possibly keep it forever. I'm glad I decided to find the right partners rather than give up all control. I see the joy of the faces of my residents and I'm happy to be part of this team and family.
Hello Sendhil,
I did get a chance to see the home with Jeff as you were in between making your decision to partner up. The home is terrific and you did a great job. Congratulations! Gene
@Sendhil Krishnan thank you for sharing your experience.
To all the Senior Care Operators, would renovating a typical 3 Bedroom home to assisted living facility be worth the investment or would I need a more bedrooms to cover the cost?
@Gene Guarino
Thank you Gene! Looking forward to meeting with Manny tomorrow and hopefully will have bigger news to post soon! :)
@Sendhil Krishnan Wow that is truly an awesome journey and congratulations!
It sounds like you have really gone through the highs and the lows of this and as someone who primarily has a real estate investing background not a senior care background. How much would you say you are working in the business rather than no the business?
If you were to go back and do it again, how would you have approached the project or hiring of the manager?
Congrats again Sendhil!
@Calvin Chin
Thank you for the kind words Calvin. Definitely a roller coaster. Based on my experience I put together a post that I think others would definitely benefit from. check it out.
https://www.biggerpockets.com/topics/799444
Oh, wow! @Sendhil Krishnan, you have done great; it's impressive!! All the best!!!
@T. Fejiro K.
thank you so much!
our updated site is MDseniorliving.com