All Forum Posts by: Mitch Conrad

My wife and I started RAL seven years ago and we now have 21 RAL locations and 2 larger communities all in Colorado.  We know how to run great homes but are continuously working at improving our systems as we grow.

Quote from @Alan Tagle:

Hi Mitch, how did you go about finding existing small businesses to purchase? Most internet searches typically only display the larger assisted living facilities in the area. 

Hi Alan.  Since I have purchased several businesses in the Denver metro area, the news that I'm a buyer has traveled throughout the local senior living community.  I now get calls regularly from owners interested in selling.  I'm also a real estate agent so if the property doesn't fit my portfolio, I'm able to help them list their property.  In addition, I've developed relationships with several other real estate agents who specialize in senior living and they know what fits my buy-box.  I would suggest finding a few agents that specialize in senior living properties.  If you're unable to find them, I'd try looking up public records of a few residential AL properties and see who the listing agent was or have another real estate agent help you find that type information.  Some of the larger real estate brokerages may have a senior housing specialist so that could also be a good place to start.  Finally, any real estate agent can setup auto notification emails for you using key words such as 'assisted living', 'memory care', etc.  Hope that helps!

My wife and I have acquired 25 buildings on 18 locations in Colorado over the last 6 years so we are pretty active in this space. Let me know if I can help. 

Yes. You can definitely make better returns through residential assisted living. My wife and I have 21 residential homes and one commercial community. We converted two single-family homes to start our journey but the rest of our homes had already been operating as assisted living. This is a highly regulated industry; and it should be. The reason the returns are higher is because it is a full-blown active business and there are many risks. Almost all our acquisitions were from distressed or completely closed businesses. One group of homes was also from a distressed landlord whose operator completely failed and left the landlord with vacant buildings, a poor reputation, and a need for full renovations.

There are two ways to enter this business. Either roll up your sleeves and learn every aspect of senior care or bet on someone you can trust to run the operations. In my opinion, your success will be directly tied to the operator. 

There are those who will gloss things over and tell you only the positive side. There aren't many businesses that can do such social good as assisted living but if you enter, you must have your eyes wide open. There are many great companies who take good care of seniors but there are also many that do poorly and fail.

Congrats on your new home!  I've been in the ALR business for almost three years now and I now have 7 care homes in the Denver area.  You mentioned the challenge of filling your beds, which is a great point that tends to get glossed over.  When you open your first care home you are going to face challenges.  No matter how beautiful your home is, you must have a reputation for providing superior care.  If you are opening your first home, the challenge is convincing families that you know what you're doing and that their loved one will be safe in your home.  To get started we hired an experienced house manager and began building relationships with placement agents.  It took some time to prove ourselves to the point where they were willing to refer our homes to families since their reputation in on the line as well.  This is why it is critical to partner with or hire someone with experience and a great reputation.

Another aspect that doesn't always get mentioned is the expense associated with working with placement agents.  Typical fees are 75-100% of one month's care fees.  With that kind of expense, it is even more important to accurately assess a resident's health condition because if they pass within the first couple months, you actually lose money and still need to find another new resident.  Unfortunately, families often wait too long to move their loved ones into assisted living.

One more point I'd like to make is that getting financing for your care home can be a challenge if you don't have experience in the health care industry.  Most lenders require two years of experience to even consider your project.  This was a huge hurdle for us when we started our business.

The assisted living care business is awesome, rewarding, and I'm so happy that we took on these challenges.  However, I continue to meet investors who are not prepared for some of these challenges and a many end up not making it to the finish line.  I've been approached by several investors about taking over their projects.  I took over a project for one investor but the others were not ones that fit my vision or brand. They ended up losing a lot of money and placing the home back on the market.

Education and/or partnerships are key to starting a successful ALR business.  I belong to a group in Denver that meets monthly and we share ideas with each other while bringing in speakers each month.  It's a great business but you must go into it with your eyes wide open.

@Account Closed

Hi Jack.

You bring up some very strong points and I actually agree with many of the issues you brought up. However, I am much more excited about the opportunities I see in this industry and the ability to help seniors at the same time.  My wife and I have been in the assisted living business for just over three years. We own and operate six ALR homes with 80 residents. We are almost done renovating home #7 and we are making plans for our first ground up construction project. I would like to add my experience to the thread for additional perspective for those considering assisted living.

I have mentored and advised several people who are currently in various stages in their ALR businesses. We have had to persevere through many of the issues you sighted but none of them are too large to overcome.

I personally found the lending piece to be the most difficult when beginning. Banks want or expect two years of experience in the medical industry. I had 20 years of experience in real estate but not in the medical field. I went through about 50 lenders before finding one that would fund our first project. It was very discouraging but we finally got it done. We had to pay a higher rate but that was worth the price to get started.

The price of renovations and holding costs are challenging; especially when you are learning the building codes and processes to obtain a license. Our first home took much longer to open than it takes us now. There is definitely a steep learning curve.

You mentioned large facilities and the advantages they have because of amenities they are able to provide. That is true but our overwhelming advantage over them is the fact that we are a home and they are a facility. We rarely lose when competing with a large facility.

Another advantage large facilities have is that they tend to be on main streets and because they are so large people tend to be aware of them. However, once the family members begin researching options, they discover our residential homes and we almost always win them over when they check us out.

As for large turnover rates, I agree that sometimes that can be an issue. Some of the turnover rate can be controlled through proper assessments when determining if a resident is a good fit for your home.  If the resident needs too much help they are probably a better fit for a skilled nursing home.  But we find that it takes very little time to fill a room after it opens up and often we have a new resident ready to move in as soon as the room is ready. We have cultivated relationships with many placement agents and we are ramping up our online advertising efforts so I expect to increase our market share even more. You simply must build those costs into your operating numbers.

We don't have many issues with having to prepare special meals for individuals.  We take into consideration any issues a person has and are usually able to make small accommodations, but rarely does it take extreme effort.  If someone has too many dietary needs, then we don't have to accept them into our home.

Our staff is always prepared to help residents with whatever needs they have. Our night staff doesn't sleep so they are always attentive to resident needs at any time. Night staff do most of the meal preparation for the following day and they are also in charge of cleaning all common areas.

As for lawsuits, in this industry we most likely will someday be sued. So far we haven't had a suit, but when providing care for seniors, at some point it probably will happen.  We control the environment by continuously training and evaluating staff.  As for dealing with employees and payroll, that is no different from any other business.  I use a payroll company to make sure we are in full compliance.

Labor costs are the largest expense. I agree that operating smaller homes with fewer residents makes it more difficult to make the numbers work unless you are able to charge high enough rates. Most of my care homes have 12 to 16 residents. Of course the number of residents allowed in a care home will depend on local municipalities. But the larger your homes and the more homes you have, the easier it is to cover for staffing situations so I don't look at it as a vicious circle; if anything it gets easier the more employees you have.

I agree that you have to be careful where you get your education and information. Find someone you feel you can trust, but verify everything. I love learning and helping people. I'm proud to have helped several others get started and I know that my homes are impacting the care and dignity of seniors.

I'm interested in finding out more about your situation.  Feel free to reply in this thread or send me a PM.

Mitch Conrad

@Amanda McNabb I own an operate several residential assisted living homes in the Denver area.  I'd be happy to help with assisted living questions.  Of course, regulations vary by area.  What is your location?

@Luke Moore  I'm very interested in how your project is coming along.  I have several assisted living and memory care homes in the Denver area.  I'm currently working with another local municipality where we are are planning three 16-bed homes for assisted living, two 16-bed homes for memory care, and ten patio homes for independent living on a 6 acre plot of land.  My costs for the 16-bed homes are pretty close to what you posted.  Perhaps we can compare notes and learn from each other's experience.  Do you have the Facebook page you mentioned up yet?  Any update on the project you can provide?  Feel free to send a PM if you prefer.  Thanks.

I'm currently working with a local Colorado municipality to begin building an assisted living, memory care, independent living community.  I'm considering a syndication for this project.  We are planning for five 16-bed homes and ten independent living patio homes over 6 acres.  I own and operate five assisted living homes and two memory care homes in Colorado.  We have found that seniors prefer this residential model over the large complexes.  Feel free to reply or PM if interested.

@Kevin Vandenboss  I own and operate seven residential assisted living homes in the Denver area with 10 to 16 residents each.  I've heard of operators who will lease from property owners and I've had several investors ask me if I would lease from them if they converted a large home.  I haven't heard of national companies that will operate the business while leasing the property.  Is that just for larger facilities or also for residential home situations?