Residential Assisted Living

[Peter Albanese]

I’ve recently been researching residential assisted living whereby you purchase a large home and move elderly tenants into each room but then also provide home health aides 24 hours a day. Has anyone here had experience with this type of real estate play and was experience positive or negative as far as cash flow and return on investment. My preliminary information is showing that I could get a lot better return on cash flow monthly by renting a house in this manner rather than just to a regular tenant. Any feedback is appreciated.

[Mitch Conrad]

Yes. You can definitely make better returns through residential assisted living. My wife and I have 21 residential homes and one commercial community. We converted two single-family homes to start our journey but the rest of our homes had already been operating as assisted living. This is a highly regulated industry; and it should be. The reason the returns are higher is because it is a full-blown active business and there are many risks. Almost all our acquisitions were from distressed or completely closed businesses. One group of homes was also from a distressed landlord whose operator completely failed and left the landlord with vacant buildings, a poor reputation, and a need for full renovations.

There are two ways to enter this business. Either roll up your sleeves and learn every aspect of senior care or bet on someone you can trust to run the operations. In my opinion, your success will be directly tied to the operator. 

There are those who will gloss things over and tell you only the positive side. There aren't many businesses that can do such social good as assisted living but if you enter, you must have your eyes wide open. There are many great companies who take good care of seniors but there are also many that do poorly and fail.