Cost of Care Relating to Real Estate

You're a real estate investor, right?

How do you determine the type of income that you are going to generate for the intended project?

Do you go into Rentometer.com? or do you base your decision on pro formas? market analysis? a variation or combination of multiple factors. 

Without this information how would you know if you have a solid investment and that type of returns is what you are expecting or anticipating rather? You wouldn't.

The same rule applies with Senior Housing. Rents are based on market depending on the given area. Now, remember I have told you that I only speak for Florida. I have been in various markets probably 15-20 minutes apart in distance with $1,000 - $2,000 price difference in Resident rents. Yes, is that different.

Just because the properties are gorgeous and offer so much "add-on value" does not mean that it is a good fit in the area.

We look for feasibility. I always like to place myself in there Residents' family shoes, and I ask myself, "Is ___________ feasible for me?" The drive, the distance, the location, the amenities, the staff, the property, the offering, etc. If the answer is "No," then how can it be mitigated?

If it can't, then somethings are more important to offer than not. 

This is some data that I collected 2 years ago for a webinar I was hosting:

I gathered the same data earlier this year...

whoa!

So even the projected rent increases are climbing faster than previously anticipated. 

For a Resident recipient of Senior housing, Assisted Living Facility specifically, their rents could be in the range (+/-) $3,500 per month. This would allow for them to live in a setting where they receive 'Assistance with their Daily Living' - whatever that may look like for them. It could be meal preparations, medication reminders, bathing assistance, or D. All of the Above.

For an Owner/Operator, Investor, or D. All of Above, it would look something like this:

# of beds per license occupancy * (+/-) $3,500 = Gross Profits - Operating Costs = NOI

8 * $3,500 = $2,800 per month - $15,000 = $13,000 NOI per month

Now these figures are hypothetical as each investment type is different in income, size, bed count, etc. 

As cost of care increases, so does the Resident monthly rents (for new incomers). Recommended to grandfather basic rent upon admittance and only account for inflation. It will not hurt you investment, if and when you have fixed rates on any/all your debt. Any variations could incur some complications down the road. 

Happy Investing!

Zurama