Assisted Living Residence in Scottsdale, AZ

[Dennis Trinh]

Hi BPers,

I wanted feedback for my first newbie rental. I'm under contract and COE is end of the month. I'm buying a pre-foreclosure property as-is (condition is okay when home inspector checked it out) SFR (3bd/2ba) property at $325,000. I'm partnering (not in LLC sense) with my RE agent "John" where he will be renovating the property into an assisted living home (w/ 10 beds) - ones with 24/7 care etc. He'll be partnering with his business partner "Peter" for the staffing etc. My understanding is "John" will bringing renovations (addition/permits etc.) and property management for his business partner "Peter". I'm just securing the actual real estate for the deal w/ conv financing and I'm getting a 5yr NNN Lease w/ Purchase Option for my efforts.

I'm hiring a RE attorney to draw up the lease and execute before COE since I do not know the nuances about commercial real estate. "John" has obtained the City of Scottsdale permit to start construction process once we close. Btw, he's new to this type of venture too.

I would love feedback since as a newbie this is pretty overwhelming for a first deal since it's not cookie cutter at all. I'm a bit concerned about the purchase piece of the agreement because he wants to buy the property at the end of the 5yrs for $375,000. Now, unless I'm missing something pretty significant I think the ROI over the 5yrs just from rent is good so I was advised to focus on that since I have no idea to determine future value. How do I know I'm not giving away the farm for $375k for a small ALH facility? I understand I'm not the one selling business as I will only own the building.

BP Rental Calculator

Thank you and please excuse my ignorance in advance!