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Americans, particularly the baby boomers who are now aging out of their place in the workforce, often desire long-term care facilities that not only provide medical care but also offer a sense of community, independence, and quality of life. And that is why residential assisted living investing is an appealing option for investors. 

Currently, over half of the senior living sector, specifically more than 50%, is controlled by small owners or operators. This indicates a decentralized long-term care landscape where local businesses and individual proprietors play a significant role. As this sector experiences rapid growth, there will be a myriad of opportunities for investment, innovation, and improvement in elderly care. 

A residential assisted living facility, or just “assisted living facility,” is a housing option designed for individuals who require assistance with everyday activities but do not need the intensive care provided by a nursing home. These facilities offer a semi-independent living environment, bridging the gap between independent living and more comprehensive care settings.

A happy resident in a facility that has recently seen renovations, thanks to residential assisted living investing.
Residential assisted living facilities often resemble regular homes and provide a more intimate and familiar environment for residents.

Assisted living facilities are characterized by:

  • Home-like environments: Unlike larger institutional settings, residential assisted living facilities often resemble regular homes, providing a more intimate and familiar environment for residents.
  • Personalized care: With a smaller resident-to-caregiver ratio, residential assisted living can offer more personalized care, ensuring that each resident’s unique needs are met.
  • Community engagement: Residential assisted living emphasizes community involvement, with activities, events, and programs designed to keep residents engaged and socially active.
  • Flexibility: Residential assisted living is adaptable, catering to a diverse range of needs, from temporary respite care to long-term stays.

Residential assisted living investing has never been more lucrative. According to the World Health Organization, one in six people will be 60 years or older by 2030. In fact, in the US, more than one in six Americans are already 65 or older, with the number only expected to increase. 

Historically, elderly care was primarily the responsibility of families. However, as nuclear families became the norm and mobility increased, the traditional family support system began to wane. This led to the emergence of a range of long-term care facilities, from nursing homes to retirement communities.

Today, residential assisted living is viewed as a middle ground. It offers America’s seniors the independence and freedom they cherish while still providing care and assistance with Activities of Daily Living (ADLs) as they age.  

Why the popularity of assisted living? 

Seniors are no longer just looking for a place to live; they’re seeking communities that offer engagement, activities, and a sense of belonging. The modern elderly individual is more informed, more active, and has higher expectations for their post-retirement life. This shift in mindset has driven the evolution of residential assisted living facilities, which now prioritize holistic well-being, community engagement, and a higher quality of life.

The reasons to consider residential assisted living investing include: 

  • Demographic trends: With a larger percentage of people entering their senior years, the demand for assisted living facilities is set to skyrocket. And advances in healthcare mean people are living longer, further increasing the need for specialized senior care services.
  • Financial incentives: Long-term residents ensure a consistent and predictable income for investors. And with the right management and location, residential assisted living investing can offer attractive returns on investment, especially when compared to other real estate ventures.
  • Social impact: Residential assisted living investing isn’t just about profits. It’s about addressing a critical societal challenge. This is because these senior care facilities are more than just care centers; they’re vibrant communities where seniors can thrive, engage, and connect.
  • Diversification: The healthcare sector, especially elderly care, tends to be more resilient to economic downturns than other industries. Residential assisted living investing can be a stable asset in an investor’s portfolio.

For those considering owning a residential assisted living facility as a form of investment, what are some of the pros and cons they should expect? We will discuss that in the next section. 

The Pros and Cons of Owning an Assisted Living Facility

So what are some of the pros and cons of owning an assisted living facility? Let’s first start with the pros of residential assisted living investing

Pros: 

  • Support from government bodies and charity organizations: This backing can make the venture more profitable and sustainable in the long run.
  • Recession proof: The constant demand for such facilities means that they continue to operate and generate revenue even during challenging economic times.
  • Opportunity to specialize in a niche: Whether it’s continuing care retirement communities or independent living facilities, there’s an opportunity to dominate a particular market segment.
  • Less competitive: Due to the capital-intensive nature of starting and the inherent challenges of caring for the elderly, the industry has a high barrier to entry. This can be an advantage for those looking to establish a strong foothold.
  • Favorable market trend: The U.S. is witnessing an increase in its aging population. This trend, coupled with states recognizing the importance of offering Medicaid dollars to senior citizens in assisted living facilities, indicates a promising future for the industry.

Cons: 

An investor analyzing some of the pros and cons of owning an assisted living facility.
The trend of increasing numbers of US seniors indicates a promising future for the industry.
  • The necessity of hard work: Establishing an assisted living facility is no small feat. It demands meticulous planning, obtaining the necessary permits, and ensuring that all health and safety standards are met.
  • High startup and running costs: The business is capital-intensive. From renting or purchasing a facility to hiring staff, furnishing the premises, purchasing long-term care software, and covering operational costs, the financial demands can be substantial.
  • Difficulty in hiring and retaining staff: Care-giving is physically demanding, which means there is always the risk of high staff turnover. That makes it challenging to maintain a consistent and experienced team.
  • Challenges in securing licenses and certifications: Each state has its own set of regulations when it comes to licenses and certifications for assisted living facilities. Navigating these requirements can be a significant hurdle for many operators.
  • Multiple levels of regulations and compliance: The legal landscape for assisted living facilities is fragmented and predominantly state-specific. This can lead to complexities in ensuring compliance across the board.

Contact us here if you would like to test drive our user-friendly long-term care software.

3 Methods for Assisted Living Investors

Thus far, we have defined what residential assisted living is, and we have also looked at some of the pros and cons that assisted living investors should be aware of as they consider residential assisted living investing. Before we conclude on this topic of how to make money with a residential assisted living facility, it is worth discussing three of the ways potential investors can engage in residential assisted living investing

1. Own the real estate and lease it to an operator

One of the most straightforward ways to invest in residential assisted living is to purchase the property and then lease it out to an experienced operator. This approach comes with several advantages:

  • Twice the fair market rent: Given the specialized nature of assisted living facilities, you can often command rents that are double the standard market rates.
  • Long-term tenants: Assisted living facilities are not transient businesses. Once established, they tend to stay put, ensuring that you have a stable, long-term tenant.
  • Minimal maintenance: Since the operator will be responsible for the day-to-day management of the facility, you won’t have to worry about frequent maintenance issues.

2. Own the real estate and operate the business

If you’re looking for a more hands-on investment, consider both owning the property and managing the assisted living facility. This approach can be highly profitable, especially when you consider the numbers. 

The average cost of care in a facility is around $4,500 per month. Multiply that by the number of residents, and you can see the potential for significant monthly revenue. However, before doing so, one must study the pros and cons of owning an assisted living facility in further detail.

3. Act as a private lender or partner

Not everyone wants to be directly involved in the day-to-day operations of their assisted living investments. If you don’t, consider acting as a private lender or partner. By investing in someone who will take on the ownership and operational responsibilities, you can benefit from the industry’s growth without getting involved in the running of the senior care facility.

Residential Assisted Living Investing: Large vs. Small Facilities 

A happy senior couple in an assisted living facility where the assisted living investors have prioritized the construction of small, homely environments.
Smaller homes prioritize the safety, independence, comfort, and respect of each individual.

By now it is clear that residential assisted living investing presents a golden opportunity to diversify one’s portfolio and invest in an economically resilient industry. Of course, it’s important to first understand the nuances and differences between large and small facilities and which one is preferred by seniors. 

When trying to find a new place to call home, many seniors gravitate towards smaller, residential-style homes. But why is this? The answer lies in the personalized care and homely environment these establishments offer.

Unlike large facilities, which can feel cold and impersonal, smaller homes prioritize the safety, independence, comfort, and respect of each individual. They ensure that seniors don’t just live but maintain their quality of life, feeling valued and cared for every step of the way.

So if you are considering residential assisted living investing, consider investing in small, personalized assisted living facilities that make seniors feel like they are at home. By doing so, you can guarantee the happiness of your residents, which in turn ensures your investment is worthwhile.

For more on recent trends in long-term care, read our blog and subscribe to the LTC Heroes podcast.

Elijah Oling Wanga