"Here's the information you requested from The Real Estate Guys Radio Show... Gene Guarino is an expert we respect in the assisted living space".
This is where the journey into Residential Assisted Living started for me. I remember it very distinctly. April 14, 2020, early into the pandemic, I was running on my treadmill, listening to an episode of The Real Estate Guys Radio Show when I heard an ad that went something like "Do you want to find out how to generate $10K of cash flow from a Single Family Residence?". Like Jim Carrey in Yes Man, I said (in my head or possibly out loud) "Yes, I do!" and sent an email to The Real Estate Guys. And that's where it all started.
A bit of backstory... I started out in Real Estate Investing in November 2014 when I bought my first SFR, followed shortly by my second one in December 2014. I bought them well, after educating myself for a few months. I am an action taker and learned just enough to feel confident in taking the first step in my investing journey. Over the next 5 years, I purchased 6 more SFRs (I have since sold 4 of the 8), left my full time 6-figure job to run a wholesaling business for 18 months, I flip 2-3 houses per year, and most recently in September 2019 bought, renovated and stabilized a 24-unit apartment complex that has proven to be a solid investment.
On the heels of the success with the 24-unit, I had initially planned to continue down the path of acquiring more apartment units. My "Why" is to be able to retire my husband in the next 3 years, and my plan was to add enough units to do so. But at the beginning of early 2020, after talking with an investor friend, I had a paradigm shift. What I really wanted was cash flow, not "units", so I decided to open my mind and continually scan the environment for cash flow opportunities, whatever form they might take. The multi-family market, as with most real estate at that time and now, is extremely competitive and while I believe deals are out there, I didn't want to restrict myself to multi-family as the only path to my goal if there were a path of less resistance.
So when I heard the ad for RALA (Residential Assisted Living Academy), I believe it was the shift in my thinking that predicated my decision that day to say "Yes, I do!" :)
After I had watched the videos that I was pointed to on the RALA site in the email I received, I asked a close investor friend if he had heard of this "residential assisted living thing". He actually had, at an event he had attended, and was immediately on board with the idea. That's where the journey (and our partnership) began.
A quick word on partnerships... I've heard the expression "partnerships are sinking ships". I'm not so cynical as to believe that's always the case, but I have had a not-so-great partnership experience in real estate, so I am naturally cautious about entering into a business partnership. In this case, my now partner @Dean R. was a friend first, and I knew his mindset, work ethic and integrity were solid (hopefully the feeling is/was mutual :)).
So away we went... first, completing the RALA online training - both of us completed it in less than 3 days - then attending the RALA virtual 3-day shortly thereafter. During this time, we began researching zoning for various Metro Atlanta counties and cities, and most of what we found was not that favorable. Most counties/cities limit the number of personal care home (as they are known in Georgia) residents to between 3 and 8, and 10 residents is really the sweet spot where the numbers make sense.
Our journey took numerous twists and turns as we tried to figure this out, but one thing we didn't do was give up. I mentioned that I'm an action taker; well, Dean is an uber action taker, so because we both saw the amazing opportunity before us if we persevered, giving up was simply not an option. Not even when we encountered naysayers (did I mention all of this was going on in the midst of a worldwide pandemic that hit the senior living industry HARD??) Both of us are Christ followers and the idea of doing something that aligns with our beliefs and values through loving and serving the senior community well AND financially blessing our respective families... THAT is what truly kept us pressing forward.
So we put in offers on all sorts of properties, some residential, some commercial. We looked on-market and off-market and got the word out to other investor friends and acquaintances about what we were doing. We were under contract 3 times, and close a few other times. We were under contract on a residential property that we thought was "THE one" when an investor friend, Justin (the same one who was the catalyst in my paradigm shift), told us about an older couple looking to sell their 2 personal care homes because they were ready for retirement. Initially I wasn't that excited about the opportunity because we were deep into "THE one" and I thought we should stay focused, but Justin kept asking if we had contacted them, so Dean reached out to them and did a property tour, took videos and photos, and that's about as far as it went at that time.
Meanwhile, we had hired a zoning coordinator to help us with the Special Use Permit (SUP) needed to convert the residential property to a personal care home. We had learned while under contract on a previous property that our DD needed to give us time to secure the zoning needed (seems obvious now but we were a bit naive in the beginning). Part of the SUP process involves the county sending a letter out to adjacent property owners to give them an opportunity to voice their opinion about the request at a public hearing.
Well, let's just say we didn't get that far. Once word got out in the neighborhood about what we were doing, it was clear that the neighbors were not happy. We found out they were planning a meeting to assumedly plan their attack against us, so my very courageous partner reached out to one of the neighbors and asked if he could attend. He did, and it was not pretty. To say he was tarred and feathered might be an exaggeration. Then again, it wasn't too far from the truth. After the meeting, he called me and said "do we really want to be in a neighborhood where they don't want us?". Um, no. So we terminated the contract the next day.
With no other options in the pipeline, we turned our sights back to the 2 personal care homes - a 15 bed and a 20 bed. Located on 10 acres in a county with tons of growth, both homes were only at 50% occupancy, in part due to the pandemic but also due to the way they were being managed. The homes were older, in need of renovations, and most residents were Medicaid waiver recipients, which, in the assisted living space, translates to about the lowest rates you can command and additional layers of government red tape and oversight.
Our vision of a luxury, boutique style home like Gene had described in the RALA training was far from the reality of what we saw in these two homes. But thankfully, with our backgrounds in renovating distressed properties, we were able to see past the current scenario to what could be.
Since the owners had no debt on the property, we saw an opportunity to create a win-win scenario with owner financing. We presented a two-option offer, one bank-financed (the lowest of the 2 options) and one owner-financed, that would get the owners the purchase price and monthly payments they desired, but with terms that were very favorable to our stabilization plan. After some back and forth, we reached an agreement on the owner-financed option and were under contract!
Then the real work of due diligence began...
We hired a consultant who worked with us through closing. She helped us assemble our due diligence documents request and review the documents, spent time in the homes to understand operations and help us understand the challenges we would face. She assisted in the process of hiring an Executive Director. This was a critical piece of the due diligence puzzle, as there were many things we wouldn't have know to ask had it not been for her. Ultimately we also hired another consultant who came in after closing and assisted our Executive Director in developing policies and procedures (this is critical, as it is what the state looks at when they do their surveys/inspections).
Due diligence lasted 3 months and it was a LOT of work. We tried to leave no stone unturned when it came to making sure we were setting ourselves up for success. We worked closely with the owners throughout DD - they were beyond helpful in getting us the information we needed and answering our questions.
We closed on both homes on Feb. 1 2021, and with that closing, Watermark Senior Living opened its doors. At closing, we inherited a full staff and 22 residents. We hired our awesome Executive Director Jan. 25, one week prior to closing, and couldn't be happier with her performance. She is a critical member of our team.
Shortly after closing, we made the decision to close the 20-bed home down completely to renovate it, moving some residents from that home to the other home where it made sense to do so, and sadly discharging others who, for one reason of another, were really not appropriate for this type of home. That was tough, and my partner Dean took on much of this part of the process, along with our ED, and did a masterful job of finding new homes that were a better fit for these sweet folks. The first 45-ish days were HARD work.
Fast forward to today, and here is what we have accomplished:
- The meals, which previously were meager and mostly served out of cans/boxes have improved immensely. Since we moved to having a dedicated cook during the week and have placed a strong emphasis on using fresh ingredients, with many of our recipes scratch-made, we draw rave reviews from the residents.
- We have done significant repairs on the 15-bed (now a 16-bed, as we were recently approved by the state for 1 additional bed), and are slowly and steadily performing a facelift on this home.
- We are in the process of implementing an activities calendar that will keep our residents active and engaged physically, mentally, socially and spiritually.
- We have begun renovations on the 20-bed home, which will be that luxury/boutique home from our initial vision. Our plan is to keep the 16-bed home as a more affordable option, leaving off the bells and whistles that the 20-bed will have while still maintaining a high quality of service and care.
- We looked long and hard at the staff we inherited and retained only those rock-stars that met our standard of excellence. We have made a few hires of our own since taking ownership and each hire has brought the overall quality of our staff to a high level.
- We have absolutely fallen in love with our residents. There is just no other way to put it. And that can be hard, especially when one reaches the end of her journey, which happened this past weekend.
The intangible piece of this is how absolutely cup-filling and rewarding it is. We love our caregivers. We love our residents. We have fun with them and delight in seeing their smiles and hearing their laughter. This is a serious business and there is great responsibility in caring for all of another person's needs. There is a ton of government oversight. Staffing is hard, as there is always a caregiver with a sick child, or a death in the family, or they themselves are ill. But the blessings and rewards outweigh the challenges and obstacles we face. We care so deeply for these folks and have truly grown to love them over the last 4 months.
So what comes next?
We have 2 vacant beds in Watermark I (our 15-bed home) that we are in the process of filling. Renovations are underway on Watermark II, our 20-bed home. Our renovation will cost around $500K, including furnishings. We are in the process of raising private money needed for the renovation, which is scheduled to be completed August 1. Our goal is to have Watermark II fully leased up by year-end 2021. In 2022, we will begin planning/construction of our next building(s), which will either be memory care or independent living cottages.
This has been an incredible journey so far, and Dean and I have learned SO much, yet we have so much more to learn. We believe this is a God-given opportunity and it is our heart's desire to honor Him by loving our staff and our residents as He loves us.
We completed our mission statement a couple of weeks ago, and with it have defined the framework that guides our every decision:
"At Watermark Senior Living, our mission is to show the love of Christ to our resident family by instilling in each individual a sense of purpose through physical activity, social engagement, mental stimulation and spiritual growth".
We are so excited about the future of Watermark, and will post updates along the way.
Julie, Dean and Jordan at our Watermark Easter Celebration
Dean with two of our sweet residents, Ms. Charlotte and Ms. Betty Lee
