Senior Housing Development

[Justin Brooks]

Investment Info:

Other commercial investment investment.

Purchase price: $360,000
Cash invested: $690,000

Residential Assisted Living senior care homes are earning smart investors safe, secure, and reliable returns.

Senior housing is the fastest growing opportunity in the national housing market of which the Residential Assisted Living niche provides the highest quality personal care for seniors and provides investors excellent returns.

The elder population (those over 80) represents a rapidly growing percentage of the U.S. population. This demographic requires increasing assistance at this stage in their lives.

The need for quality attentive care will be further compounded by the aging Baby Boomer generation putting increasing demands on existing resources. In addition, there is also a growing “care gap.” These “care gaps” describe the changing trend that fewer family members are available to provide primary support to their loved ones, which further accelerates the need for competitive alternatives to the “big-box” institutional style housing facility.
 
The desire for a “home-style” environment and high quality of life is driving the desire for an alternative type of care that offers the best quality care for seniors, called a “Residential Assisted Living” home. By comparison, the typical “big-box” assisted living facility often leaves the resident feeling neglected and the staff overworked with resident to caregiver ratios commonly exceeding 10:1.

Today, with the average resident age in senior housing being 84, the aging Baby Boomer generation will continue pushing capacity demands from 2025 through 2050 as they reach that milestone. With their higher overall education and income levels, many of these future residents will be able to afford the option of paying for quality care in Residential Assisted Living care homes.
A typical Residential Assisted Living home will have 8-16 residents, each paying $6,500-$7,500 per month creating a significant cash flow for the investor/operator.

Residential Assisted Living homes are cost-effective to develop, often costing on the order of $50-$100k/room versus big-box facilities averaging over $150-$300k/room. Residential Assisted Living homes are proving to be a growing and lucrative niche for the real estate and health care investor/entrepreneur.

The senior housing industry is currently estimated at over $300 billion annually and growing rapidly. PEW Institute research has shown that the average return on investment for the senior housing/assisted living asset-class, substantially outperforms all others within the real estate sector.
 
Senior housing has been a very resilient portion of the housing demand with occupancy rates trending to over 90%. Even during the recent “Great Recession,” occupancy for this sector remained above 85%, their lowest in recent records.

What made you interested in investing in this type of deal?

My goal initially was to get into apartment buildings. I did not look at apartment buildings because of the trend, but because of the things that Robert K. and his advisors taught. Long story short, I saw a much lower acquisition cost for an assisted living home, but the returns were similar to that of an apartment that was 10x the comparable cost. Not to mention being able to operate a business that helps others. My goal is to impact others through these and other types of investments.

How did you find this deal and how did you negotiate it?

Initially, the desire to create this came from my mom having a car accident and thinking, "man, what would have happened if she was not able to get around". The reality was, I didn't have an answer. I started searching for those answers that day and initially came up with an apartment building. The problem was that the acquisition cost for the part of the country I'd build in was astronomical. That's when I discovered senior housing and the rest is as they say history.

How did you finance this deal?

I syndicated funds and used SBA backed financing.

Lessons learned? Challenges?

This was a development project. A great rule of thumb is, developments will always cost more and take longer to develop.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I had a host of team members help take on this project. I worked with other syndicators, architects, engineers, contractors, lenders, insurance agents and many more team members. Development is about assembling a great team and executing on the plan. A great team is priceless.