All Forum Posts by: Dan Brewer

@Ron Kelley; @Diron Binns, 

I recommend yo contact @Bill Bradfield.  

Thanks, Dan

BTW, the average age for seniors to enter assisted living is 82.  If your mom is average, then that's 17 years of covering her rent.....

Terri, 

Its a difficult situation because of your mom being the potential tenant.  I suggest looking at the deal assuming your mom is not the tenant, and factoring the cost of her current situation.   I assume she is either living with you now, or is paying rent somewhere else, or is in a home that is essentially undesirable for her to continue to live in.   If she is living with you now, you have a potentially priceless benefit of your freedom.  If she is somewhere else paying rent, she could pay rent to you.  If she owns a home, you could sell that home and apply the proceeds at rental payment or cash payment to the home you acquired.   

You may also want to consider repairing the home, selling it, and then using the proceeds to help put mom up somewhere else.  Hope that helps.

Dan 

Hi Bill, 

If you are going to go with the the assisted living option, which is becoming more and more popular, understand this is an operating business, not simply a rental.   Compared to traditional large assisted living facilities, for which there are hundreds of experienced, qualified independent operators available, those operators largely do not exist for converted SF homes.   Perhaps those operators will materialize over time, but for now and the near future, they really don't exist.  Its your business to run.  Also, the exit strategy is very difficult.  Its very hard to acquire financing, especially if you are selling on a cap rate basis.   I get calls to finance all the time, and cannot be of assistance.  

John, the best time to figure out how to make money on a real estate investment is before you buy it.   I am sure there is a way for you to profit, and many people in this site will give you lots of thoughts to help you.  You just have put your self in an undesirable position.   

I suggest you have the current owner provide a carryback note for the $32K.  The owner will likely accept a reasonable interest rate, otherwise they will just put the money in a CD.   

I have made many posts on Bigger Pockets regarding various types of senior housing, including small, converted homes.  Just search using my name and you should be able to find them.  

Thanks, Dan

Krystan - 

I have been in the industry for 7 years and provide equity capital to operators of larger more traditional facilities.  Its a phenomenal time to get in, and also a phenomenal time to cash out, as @Katie Neason did this year.   Cap rates are at 5 year lows, and the lower the better when you are selling.  Further, the cap rates are expected to go lower in the near future.  Demand for rooms by residents and for stabilized communities by REITs and other investment companies is very high.  But its a difficult market for the common investor to penetrate, simply because of the size of cost of these communities, the regulation, and the operating expertise.  That is why I offer one of the every few funds available for non-institutional investors to take advantage of these markets.  There is a clear benefit for investors to include this in their portfolio.  

@Colin Armstrong is correct, you need to provide more information on what you are considering.  There are two basic investment strategies: larger scale communities, generally 60 beds or larger, or single home conversions, 6 to 12 beds.  I am very biased towards the larger communities, for many reasons.  Economies of scale, higher quality of operations, easier exit strategy, ample financing, your level of your involvement is much lower, etc.  Not to say there is not a market for the single home conversions, but its far from a layup.  

Thanks, Dan Brewer

Nicole, 

There is a separate conversation thread on assisted living investment that I recently commented on.  The exact title is "Assisted Living Facilities?!  .  You may be able to glean some valuable information from this.   

Dan

Damir,  for stabilized communities, your return should be generally commensurate with the market cap rates for that type of senior housing community.  That can vary considerably based on the condition and age of the  community, its location, why type of senior housing community (assisted living, skilled nursing, etc).  Depending on the amount you  are anticipating investing and how long you will invest the funds will have an impact as well.  However, everything is negotiable.  If you could provide a bit more information, I could give you more precise recommendations.  Feel free to in-mail me directly if you wish.  

Thanks, Dan Brewer

Don't confuse cap rate for ROI or IRR. Cap rate is the rate of return the market wants/is willing to pay for a cash stream. If Buyer A pays $1M for an net 60K per year cash stream, he is willing to accept a 6% cap rate. If Buyer B pays $1.2M for that same $60K per year cash stream, he is willing to accept a 5% cap rate. The lower the cap rate, the better for the seller. And vice-versa. You typically see cap rates in commercial transactions. It began being used by SF sellers about 20 years ago (in my experience), and as SF investments have begun to be commercialized, particularly by REITs and hedge funds, it has become more widely accepted.