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Residential Assisted Living and Your Retirement Investment Plan

Residential Assisted Living and Your Retirement Investment Plan

Have you, like so many other adults in the US, found yourself thinking more and more about establishing a solid investment plan? Let’s face it – we’re not getting any younger and smart financial planning involves calculated, thought-out decisions that will ultimately leave a lasting legacy for the generations that follow you. But where does one begin? Perhaps you’ve started on the internet and frantically began searching for “smart investments” or “how to start a retirement plan.” Perhaps you already have an idea of the types of investing you’re interested in, but are unsure where or how to start.

We hear about this often – an individual setting out to start a retirement plan meets with their bank or other money managers. They’re told something along the lines of, “you need to find an asset class that mitigates your risk.” Sound familiar? In this article, we’ll take you through the dos and don’ts of building a retirement plan and the importance of evaluating the various asset classes and unique investments, while also looking at the visible and invisible risk comparisons that come with each one. One of the first questions you want to consider when starting your retirement plan is this: where are you going to invest?

Where are You Going to Invest?

Before you make a decision on where it is you’re going to invest your money to set yourself up for retirement, you need to understand the different types of investments and if they’re going to be a good fit for you. There are a large variety of investment options and finding the right one that meets your financial needs and goals requires you to do some research so you can understand the basics to make an informed decision. With any investment, you want to know what it is you’re putting your money into and have clear expectations when it comes to returns.

Here’s a closer look at some of the different types of investments and asset classes to be aware of. Note that with each type of investment, you have a different level of risk involved. The level of risk really depends on the amount of money and the type of return you’re looking for. It’s important to consider this when making decisions about your personal investments. You really need to be aware of how much you are willing to risk and stick with that as you make your decision on investment types. Consider whether or not it’s worth risking more for a higher payout… this will help drive your decision on where and how to invest.

Different Types of Investments

Here is a quick overview of some of the major investment options to familiarize yourself with as you start considering the best options for investing.

  • Stocks

Stocks are a more common type of investment, and most people have a basic understanding of how this type of investment works even if they’ve never traded them. In the simplest terms, when someone invests in a stock, they’re hoping the value will go up and they’ll in turn, earn a profit. Of course there is risk involved with the cost of shares going down. Most large companies are publicly traded so anyone can purchase stock, or rather ownership shares in that company.

  • Bonds

Businesses and government agencies issue bonds as a type of investment and these break down into two types of bonds: corporate and municipal. When you invest in a bond, you’re lending your money to that business or agency in hopes of a return after the entity has matured. Although bonds have some risk (the company could go under, for example), bonds tend to hold lower risk and as a result, have less payout. A third type of bond is a treasury bond, which is through the U.S. Treasury, and these are considered safe investments.

  • Mutual Funds

A mutual fund is a broad investment that is made up of funds from many different investors and delegated broadly across multiple companies. Mutual funds can be invested in stocks, bonds, or both, but because the investment itself is shared, the risk is typically lower.

  • Certificate of Deposit / CD

This type of investment carries little to no risk at all. It’s a slower investment in which you designate funds into your bank for a long period of time and then earn those funds back with interest at the end of the time period. The risks are low because they are insured, but there are high penalties for early withdrawals, so you’ll want to make sure you don’t need access to the money that you’re putting in.

These are just a few of many of the different types of investments. When you begin to buckle down and decide which route to go, a financial advisor can give you lots of insight into every option and help you determine which is best for you. But as you start to think through retirement and what it looks like to set up a lasting legacy, you may be looking for something more – something that has more meaning, adds value to your life and the lives of those you love. It may be that you’re interested in something more – investing where you’re not only able to grow your wealth, but add tremendous value and make a difference. This is a common consideration for people as they start thinking about retirement, and the good news is, there are options. The type of investing that also allows you to put your money into something that is adding value (beyond the obvious value of added wealth) is called impact investing. There are a few types of impact investment options, but let’s take a look at what classifies as an impact investment first.

Impact investing is choosing to invest in a company or organization (both non and for profit businesses) with the intent of having an environmental or social impact in addition to a financial return. Common industries that receive impact investments include renewable energy, sustainable agriculture, and basic services including housing, healthcare, and education. If you take a hard look at your current investments, how many of them truly help people beyond supplying a customer with the goods or services you offer? The draw toward an impact investment is that it not only allows you to make money while selling a product, it also solves a real and existing problem. There is a natural draw to this type of investment because you’re not only building wealth, you’re also able to make a difference in the lives of others while you do it.

Through impact investing, individuals have a chance to design solutions as they see fit to very real problems (ones that often go unaddressed) and directly speak into shaping or changing their own communities for the better. With that in mind, we’re going to take a closer look at the housing investment opportunities, the various things to be aware of in each one, and ultimately unpack one of the greatest real estate impact investment opportunities, which is senior housing and, more specifically, residential assisted living facilities. 

Real Estate Investment Options, Risks, and Benefits

As we take a deep-dive into real estate investment options, we’ll look closely at a wide variety of different types of real estate investing, the risks and potential benefits associated with each, and we’ll uncover the residential assisted living opportunity and how this real estate impact investment stacks up against the rest.

Real Estate Investment Opportunities

Real estate is a very common avenue for impact investing, but there are a lot of ways to get involved in real estate – some with higher risks or lower returns – so it’s important to be educated on the different types of real estate and the variety of levels in which individuals can get involved. One common misconception about real estate investing is that the investor must have a great deal of real estate knowledge or have experience in housing. The truth is, anyone can get into real estate investing, but it’s essential you do your research and understand the type of involvement you’re wanting to have and have a realistic understanding of the returns you’ll likely see. Regardless of the investment, one of the biggest things all investors are looking for when it comes to real estate investment is little to no competition. This is hard to find in most real estate these days. Just think about it – the more the media hypes real estate, the more the masses will flood to it. To better understand the competition that goes with real estate investing, let’s consider the various types of real estate investments many have either taken part in or want to be a part of in the future.

Here are some to consider:

  • Fix and Flip
  • Wholesales
  • Foreclosures
  • Short Sales
  • Rental Homes
  • Apartments
  • Storage Units
  • Mobile Homes

With each example listed, there are varying levels of participation and competition, and every time a new TV show on HGTV comes out about fix and flips, there are a thousand new people in your market alone that you’re competing with. Real estate investing can get harder and harder because the competition to invest is on the rise. On the other hand, we see that real estate runs in cycles and you’ll hear lots of real estate agents and investors talk about being at the top or bottom of the market. It’s very likely we’re at the top of this current cycle than at the bottom simply because we’ve been going up for a long time. Nothing keeps climbing for ever and what goes up must eventually come down. So if you’re considering real estate investing, it’s very important to consider the cycle our current market is in and how that could potentially affect your investment. With all these real estate investment options, doing your research and making a decision can be overwhelming at the very least. It’s hard to know which is the best option and more importantly, which is right for you. And you want to be sure to choose the right fit for you and your money – especially when it comes to real estate. If you’re being pulled into impact investing for any reason at all, you’ve likely heard about residential assisted living. Chances are, you’ve done your research and perhaps that is how you stumbled on this very article. We’re going to take a closer look at residential assisted living, what it takes to own and operate a residential assisted living facility, and how this impact investment stacks up against the rest of the real estate investment options.

 Residential Assisted Living Investment Numbers
The competition for residential assisted living is growing. More and more people are learning about the residential assisted living opportunity and discovering the cash-cow that exists among these homes.

Why Choose Residential Assisted Living as an Impact Investment?

With the residential assisted living facility business opportunities, you have the chance to build a business that will inevitably be worth hundreds of thousands of dollars in the near future. This right here speaks into the wealth factor, which we’ll unpack, but another thing to consider is the real need that exists and the solution that residential assisted living offers.

Here are the facts:

  • There are 77 million Baby Boomers currently alive across the globe. 
  • There are an average of 10,000 people a day turning 65.
  • There are 4,000 people a day turning 85… this right here is the target demographic for residential assisted living homes.

We call this target demographic the Silver Tsunami, and it’s on the rise like never before, which means these aging seniors (who want to age in their own home!) are going to be looking for a safe and affordable housing option that also provides the care they need.

But what makes this opportunity so valuable?

Here’s why.

The first reason has to do with the value of the homes themselves. The competition for residential assisted living is growing.  More and more people are learning about the residential assisted living opportunity and discovering the cash-cow that exists among these homes. There are very few assisted living homes for sale simply because they are cash cows and nobody wants to sell a money-making machine. The ones that are for sale are most likely in the wrong location, so not worth the time or money. As more and more people become educated about this real estate investment (and they will, as we’ve seen the competition trends are growing), there will be an increase in competition who want to get involved, and a lot of the investors or business owners will want to purchase an already-existing home. This real estate has value just like any other real estate, but the residential assisted living facility will have separate value. The business will be able to be sold separately from the real estate, making these homes very high in value.

The second thing to consider regarding the value of senior housing investments is that Baby Boomers have been driving our economy for decades. As they age and the target demographic is on the rise, the demand for senior housing and care for these seniors grows and those who choose to invest now will be in the right place at the right time. The baby boomers aren’t just in the U.S. either – this is a worldwide trend. You see, World War II ended and when those servicemen came home, the population spiked and now there’s a Silver Tsunami coming. This population is 10 years away from needing assisted living in massive demands and it’s a huge chance for any investor to do good and do well through this incredible impact investment opportunity. And that’s exactly what this is – an opportunity. It’s like seeing a stock chart ten years in advance. You know where the price is going because you know that there are tens of millions here in the U.S. – hundreds of millions worldwide – who will need assistance. It’s like a Silver Tsunami that we can’t stop, but we can put ourselves in the right position to be able to profit from it while also helping these aging seniors into honest and quality care environments.

So what about a traditional assisted living facility? Why would seniors or their adult children choose a residential home over a larger, big-box assisted living facility? And what are the differences between the two? There are a few reasons, which we’ll dive into next, but one important statistic we want to point out has to do with the actual target demographic and their personal interests and needs. 90% of seniors want to stay at home their entire life – they don’t want to go into an assisted living facility. Of those seniors, 70% are going to need care and assistance with their activities of daily living (ADL). Activities of daily living (or ADL as we’ll refer to them) are the regular activities that each of us do as we go about our day starting from the time you get out of bed in the morning to the time you go back to bed in the evening. ADL are things like brushing your teeth, cooking a meal, using the restroom, getting dressed, etc. This large number of seniors who need assistance with their ADL will have two options: they can either be put into a large, big-box assisted living facility or a residential assisted living home where they will receive the care they need as they continue living out the rest of their lives.

 Residential Assisted Living Investment versus Big Box AL
The services are similar to traditional big-box assisted facilities. However, residential assisted living provides a smaller, more intimate setting that feels like home.

The Difference Between Big Box Assisted Living Facilities and Residential Assisted Living Investment Opportunity

Harry S. Dent, New York Times best selling author, says “the opportunity of our lifetimes in real estate development and investing is likely to be nursing homes and assisted living facilities.” Why is this the case? Because we’re seeing a massive demand and need for home-care with aging seniors on the rise. With 70% of those falling into the target demographic of age 85+ needing help with their ADL, the demand for assisted living also grows. The opportunity for residential assisted living is so good because the need is a growing one and the income potential is massive, unlike any other real estate investment opportunity. But still, many wonder why seniors would choose an assisted living home over a big-box facility, and aside from capacity, many have a hard time identifying the underlying differences between the two.

Here are the basic differences between the two options and why most seniors would opt for a residential assisted living home over an assisted living facility. Big box assisted living facilities range in size from as few as 25 residents to more than 120. These large facilities are usually huge buildings surrounded by a parking lot. Typically, different levels of care are offered. Assisted living residents usually live in their own apartments or rooms and share common areas. They have access to many services, including up to three meals a day; assistance with personal care; help with medications, housekeeping, and laundry; 24-hour supervision, security, and on-site staff; and social and recreational activities. In contrast, Residential Assisted Living is a two-fold business opportunity consisting of real estate and senior care. The residential model also provides room, board, housekeeping, supervision, and personal care assistance with basic activities like personal hygiene, dressing, eating, and walking. The services are similar to traditional big-box assisted facilities. However, residential assisted living provides a smaller, more intimate setting that feels like home. As a result of the smaller, residential-style home, caregivers are able to offer better staff-to-resident ratios. Naturally, because of this environment, seniors experience fewer injuries due to life-threatening fall risks. The industry comprises real estate owners and assisted living home operators. An owner’s involvement depends on whether they want to be hands-on or hands-off.

Now let’s take a look at the difference between big assisted living facilities and residential assisted living facilities from an investment standpoint. First of all, big-box facilities require massive amounts of money and are highly unattainable for the majority of investors. But let’s just say you are able to get your hands on that kind of cash or more likely, decide to pool your funds with other investors and decide to convert an already existing facility like a vacant hotel for example, the competition is still fierce and you’re going up against big companies like Brookdale, Sunrise, Atria, etc. These companies have hundreds of millions – even billions – of dollars and they’re investing it in senior housing as we speak. You don’t want to compete against them and neither do we. Not only is it unrealistic to think you’d be able to go up against a company like this, it’s important to note that the returns are just not the same as they would be if you were to invest in residential assisted living instead. Here’s how big-box facilities do it: they raise huge amounts of money and then there’s nothing to buy… until something becomes available. At that point, the available property becomes a huge bidding war between these big-box companies and the prices go up because of the demand.

If you know something about investing, you likely know that when the price goes up, the return gets crushed and goes down. What does this mean? The higher the demand, the lower the profitability for you. Big money isn’t always smart money, it’s just big money. We can do it smarter and so can you. In fact, you don’t even have to use your own money! At this point, you may be asking, “How?” It’s all about starting small. First, you purchase the house, you start modestly by taking one step at a time to get that home up and running – by taking small steps to start operating as an assisted living facility. There are many details involved in doing this, but the bottom line is that residential assisted living is accessible to anyone who wants to learn the business, help others, and make huge returns on their money… the kinds of returns that the big-box companies could only dream of. Why? Because you’re approaching the assisted living opportunity from a different, yet smarter angle.

It’s more affordable, more accessible, more cost-effective for you and the resident, and produces higher returns. It’s that simple. 

Big-box facilities have a lot of money to spend and they’re only looking to make a 5% return on their investment. If you are looking at assisted living as an investment, that’s way too low of a return, which is why you’d want to tackle assisted living from the residential angle. With residential assisted living homes you can invest starting with just $100,000 and you can even do it with someone else’s money, which is something we’ll teach you through the Residential Assisted Living Academy. The fact is, there are a few different ways you can get involved, depending on the level of participation you want to have in the business. All of them offer great returns and we’ll take a closer look at those a little bit more further into the article. Before we do, we want to cover a risk/benefit comparison with residential assisted living vs. other real estate investment options to give you a better idea of how Residential Assisted Living stacks up against the rest.

 Residential Assisted Living Investment in a Growing Demographic
It’s pretty straightforward that the residential option is much more accessible and presents a variety of investment options that result in much higher returns.

Residential Assisted Living Compared to Other Real Estate Investment Options

When you consider the facts about residential assisted living facilities and the big-box companies, it’s pretty straightforward that the residential option is much more accessible and presents a variety of investment options that result in much higher returns. Residential assisted living also allows you to provide a real need to a growing demographic that’s accessible, affordable, and meets their needs as well as their desire of wanting to be home as they age. But maybe you’re wondering how residential assisted living stacks up against other real estate investment options. What about single family rentals, fix & flips, multi-housing, etc.? We’re going to do a quick rundown of some of the other real estate options and share how the residential assisted living opportunity compares.

Residential Assisted Living vs. Single-Family Rental

With both single-family rentals and residential assisted living, you’re working with single family homes. Managing the real estate itself is very similar in both cases, but probably the biggest difference is the profitability in residential assisted living. There are two reasons this is true. First, with residential assisted living you have the opportunity to charge much higher rents (think double). Second, residents are looking for long-term lease options (5 years) as opposed to shorter terms with traditional renters.  This reduces the risk of a property sitting vacant and a loss of revenue. Other benefits include little to no vacancy and the ability to pass the repair costs to the operator, if you are doing a non-operator option, which we’ll look at more closely later in the article. 

Residential Assisted Living vs. Fix & Flip

Fix & Flips are attractive to those who enjoy a good project that they can turn around quickly. There are some things to keep in mind with these risky real estate investments, however. If you’re lucky enough to find a great deal, you’re likely in for a large and costly remodel, which means the majority of individuals who do this type of investment, need to have reliable and honest connections in home repair. Additionally, there are lots of risks involved when it comes to home repairs and a lot can go wrong with fix & flip properties. All investments have risks, but if you’re rattled by surprises or feel unsettled by the idea of plans and timelines constantly changing, this is probably not the right option for you. The biggest known risk with Fix & Flips is the probability of costs you didn’t plan for.. Things can go south quickly on any property investment because of unexpected renovations that need to be made and the costs associated with them.  For example, a simple purchase and paint project can turn into a nightmare renovation when you discover the home needs a new roof, plumbing, electrical, kitchen updates, bathroom updates, etc. This can leave you feeling distraught and upside down on the home.

With a Residential Assisted Living property investment, many homes need little to no renovations; however, most business owners have an ongoing plan to stay up-to-date on renovations and regular maintenance to ensure the business can operate well for many years. When renovations are factored into the business plan, the return on investment makes sense. Another risk is the simple fact that Fix & Flips are not considered long-term investments. Think of them as a one and done kind of deal, which means that once the property is sold, you’re unemployed and looking for your next deal, assuming fix and flip is your main source of income.. The Residential Assisted Living opportunity provides long-term, lower risk income and at the same time, offers a substantial need to a growing demographic of aging seniors.

Residential Assisted Living vs. Multi-housing/Multi-family Homes

With multi-housing, you’re looking at options like apartment complexes, duplexes, condos, townhouses, or any structure that’s designed to house multiple families. This industry is very competitive and very different from its real estate counterparts. Costs associated with multi-housing are also very different. Typically the renting rates are much lower than you’d find with residential assisted living homes, but purchasing prices for these facilities are much higher. Another roadblock to consider with multi-housing is that these buildings can be harder to find with lots of competition and reduced capitalization rates. 

Residential Assisted Living vs Wholesaling

In real estate wholesaling, your goal is to purchase and sell very quickly. You want to get the property under contract and then sell if off to another investor as soon as possible. In this investment type, you’re always looking for more deals. Similar to the fix & flip option mentioned above, it’s a one and done type deal and there are no long-term investments or steady income being generated. There’s certainly a higher risk involved. With the fluctuating real estate market, there really are no guarantees and there’s always the risk that your buyer will fall through or you don’t find a buyer at all while you’re under contract. Additionally, it isn’t always easy to get good deals in real estate and sometimes it takes a great deal of time and energy to find just the right property.

Residential Assisted Living vs Vacation Rentals

Vacation rentals offer a decent return on investment, but you’re definitely limited  to seasons. People are typically traveling on weekends or during peak holiday seasons, which is when vacation rentals will typically do their most business. Vacation rental owners are left trying to offset the downtime or slow seasons with lowered rates and strategic marketing tactics to drum up business when things are slow. One risk to consider with vacation rentals is the possibility of having bad tenants. There are agreements and fees associated to protect you from potential damage that could be caused with the property, but this is a very heightened risk with this type of real estate investment. With residential assisted living, you’ll have very low impact tenants. Residential Assisted Living attracts long-term residents who are looking for a place to live, settle, and are typically always low-impact.

Residential Assisted Living vs. Mobile Home

When you’re looking into the mobile home market, you’re focusing on a much lower-income demographic, which means costs – and returns – are going to be much lower. With lower-income markets, you’re also limited to location, which limits your ability to grow your investment. In residential assisted living, you can purchase a variety of homes with different price points and in different real estate markets all allowing you to charge a much broader range of price points for your tenants. The benefit of this is that you can go after different markets and it opens up your demographic to include different levels of income. 

Residential Assisted Living vs Storage 

There are a lot of obvious differences between residential assisted living and investing in storage units. On one hand, storage units have the benefit of reduced risk of being as adversely affected by a fluctuating economy due to being a lower monthly rate service compared to some other real estate investment options. It’s important to consider, however, that storage units offer much lower profits per month especially when compared to residential assisted living, and they require a demand, which can fluctuate from geographical area and season. Now that we’ve taken a closer look at how other real estate investment options stack up against residential assisted living, let’s consider the residential assisted living opportunity up close and discover why you should seriously consider getting involved in the impact investment of senior housing.

 How does the Residential Assisted Living Investment Stack Up?
You may not know this but, senior housing has outperformed all other real estate asset classes over the past ten years, including hotel, industrial, office, retail, and apartments.

The Benefits of Investing in Residential Assisted Living 

Let’s take a look at the building blocks of residential assisted living homes so we can fully understand the benefits that exist with this type of impact investing. 

1: Residential Assisted Living is a Solid Impact Investment Opportunity

The first is simple – residential assisted living is an impact investment. We touched on this earlier in the article, but an impact investment is unique in that it offers an opportunity to not only build wealth, but to give back to something greater – to provide a need to an existing problem. The existing problem is growing in that aging seniors are on the rise and there are 77 million baby boomers, with 4,000 turning 85 on a daily basis. The big-box assisted living facilities are expensive and most of these seniors want to stay in their own homes. Additionally, the family members of these seniors want to ensure that their aging parents are receiving quality care that’s accessible and affordable. A residential assisted living home allows the owner and/or operator to earn a much higher return on the property investment when they can rent to low-impact seniors in need of care and a safe place to reside. The residential assisted living business opportunity is truly one that allows you to do good for others while building wealth and a lasting legacy for generations to come. It also provides a solution to your own senior care needs for when the time comes, which also lifts the burden off of your childrens’ shoulders. 

2: Residential Assisted Living Investing Produces High ROIs

With any investment, most investors – especially those entering into retirement – are looking for an excellent return on their investment, or high ROI. We know this can fluctuate depending on the length of the investment and the risk associated with it. One of the major benefits of residential assisted living facilities is the high ROI they offer, which is why so many are drawn to the opportunity – even those with no experience in real estate, senior housing, or the medical profession. Right now in the United States, an average assisted living home costs a resident $3,600 per month for each individual. So if you have a home that’s licensed for 10 individuals, the potential gross income is $36,000/month. Of course there are expenses you’ll need to take into consideration – food, utilities, rent, licensing, caregivers, manager, and more. The costs inevitably add up to a lot each month, but the amounts will vary depending on whether you’re acting as the manager or just an owner of the business. We’ll talk about the different ways to get involved a little later, but for now, it’s important to weigh the options of how much involvement you potentially would want to have in the day-to-day operations of the business to best estimate your monthly expenses.

We believe the best way to operate a residential assisted living home is with the right team, in the right location and the Residential Assisted Living Academy provides in-depth training on how to properly resource yourself and hire the right team to run a successful senior home. This is very important and hiring a manager and a good team of caregivers frees you up so you’re not having to do all the legwork, and instead are able to focus on running a profitable and successful business built to do good and do well. If this is the case, on average, typical expenses are roughly $21,000/month – and that’s when the home is full and operating at capacity. The last piece to add to the equation is the debt service/rent. Even if you have $5,000 marked as rent for this property, you’re still generating $10,000 in monthly revenue. Also consider that these numbers are based on an average home. Operating a larger above-average home, with more rooms at a higher rate per bed can yield even higher returns.

3. Residential Assisted Living Profitability is Based on a Concrete Foundation

There are so many real estate and investment plays out there, but there are few opportunities with such a concrete foundation. In this case, the foundation is based not on market fluctuations, but on verifiable numbers regarding population demographics in this country. In their book, Investing in Senior Housing, seasoned business and investment experts Gene and Jim Guarino talk about their journey toward residential assisted living and what led them to shift their entire professional focus toward educating and equipping others to invest in this relatively untapped opportunity. In it, they explain “The number of seniors in our country is expected to double to more than 72 million by 2030. And by 2050? That number will hit 83 million. However, the senior housing story isn’t just about numbers. It’s about understanding how powerful demographics translate into meaningful trends and changes in our society, our culture, and the economy. As you know, we’re living longer, families are working more, and the number of loved ones available to care for our aging population is dropping at a record pace. But the real message here is that this demographic shift is creating both tremendous wants and needs – and unparalleled opportunity.” What is the cause of this demographic shift?

With the explosion of birthrates in the 50’s and 60’s, Baby Boomers are now entering into the ages where they will need assistance, and so far, this country has not sufficiently accounted for that dramatic shift in the senior population. People are going to continue to age and as they do, society will need to find ways to care for them. You may not know this but, senior housing has outperformed all other real estate asset classes over the past ten years, including hotel, industrial, office, retail, and apartments. “Senior housing has the potential to stabilize your portfolio while keeping it safe as well. In other words, it has a proven track record of weathering the down times.” You can pick up a copy of Gene and Jim’s book here. Now that we’ve covered a few of the benefits of investing in residential assisted living, you may be wondering about some of the risks, setbacks, or even negatives associated with Residential Assisted Living. There are a lot of misconceptions floating around about the residential assisted living business opportunity. Now don’t get us wrong – as with any investment type, there is always some level of risk involved, but more often than not, the concerns a lot of people have about the Residential Assisted Living opportunity before investing are not based on facts.

The Primary Resistance to Real Estate Investing

As we take a look at the primary reasons people are initially inclined to resist this type of investment, we need to start with naming the myths.

Myth #1: People can’t afford residential assisted living

How do people afford it? One big difference in our model of Residential Assisted Living is that it doesn’t focus on Medicare and Medicaid, but rather private-pay. Sometimes this looks like long-term care insurance or an individual’s income stream from their pension, social security, or liquidating assets — like their own home or other assets and investments — that they use to pay for their assisted living. If a senior doesn’t have access to those assets, it usually falls on their kids to take care of the costs. So, how do people afford it? Frankly, they take care of it any way they can because they love mom and dad. The seniors we serve have families who make sure their parents have the very best care.

Myth #2: I have to use my own money to invest

This is simply not true. We show our students how to do Residential Assisted Living with their own money or how to use other people’s money. When you think about it, borrowing from a bank is borrowing other people’s money. When you bring in outside lenders, investors, or private individuals those are all options utilizing other people’s money. A lot of times people will think, “Oh, I have to have skin in the game,” and they believe they have to have their own money in. That’s not how we think about it. If you’re putting in the time, the effort, you have the plan, and you’re willing to do the work, you’re putting a lot of skin in the game. Others have the money and are looking for something or somebody to invest in. That can be you! But you need to know what you’re doing. That’s where education comes into play.

Myth #3: It’s difficult to staff Residential Assisted Living homes

The trick you need to consider is training new and aspiring residential assisted living managers and operators on the secrets to safeguarding dedicated employees. Staffing and employee retention is something that all employers and managers must take seriously in today’s economy. This approach starts with specialized training. The RALAcademy provides a specific section of coursework centered on hiring and retaining the right staff. Knowing how to find the right staff, hire and train them is key to any successful residential assisted living business. The RAL National Association also has resources that answer these issues. These resources are equipping residential assisted living owners to build stable teams nationwide.

Myth #4: The target demographic for assisted living is the sick and disabled senior

Assisted living communities have residents that range in health. It’s very common to have a home that specializes in certain services such as memory care for Alzheimer’s or dementia symptoms. On the other hand, you may have residents who only need help with their activities of daily living (ADL), which are basic daily needs such as bathing and grooming. Many seniors are perfectly healthy, but benefit from having their housekeeping, meals and transportation needs professionally met, which is why a residential assisted living home can be a huge draw for some. Residential assisted living homes provide seniors with the level of care they need while also freeing up their time and resources to enjoy new activities and interests, as well as social interactions with other seniors. There are many myths surrounding the residential assisted living business, but much like any investment opportunity, it’s important to do your research, learn and understand the facts, and get the training you need to set you up for success. We believe the residential assisted living investment is the number one real estate impact investment opportunity where the earning possibilities are endless and the level of involvement varies. Anyone can learn the business and do well in residential assisted living. In fact, there are a few different ways to invest in varying levels of involvement, and that all depends on you.

Three Ways To Participate in The Residential Assisted Living Investment Opportunity

The first way you can invest in residential assisted living is to own the real estate and then lease it to an operator. If you take this approach, your main priority should be to find the right operator. When you come to our training, there are people right there you can network with – people who want to operate and are trying to find the money to buy the house. We have a huge network of individuals looking to get into this business in a variety of ways and together, we can do big things. Finding the right operator is a matter of you putting yourself in the right position that will allow you to establish a network and partner with the right people to help you reach your goals. The reason this is such a great angle to take is because it opens the door for you to get paid up to twice the market rent. Whatever the house normally rents for, raise it. The reason someone would pay twice the market rent is because they don’t know what you know – how you came up with the capital, what you spent on the house, etc. Additionally, they are making a lot of income already and will be willing to pay more in rent because they will still be profiting tremendously at the end of the day. Another benefit of this option is that you are more likely to get long term, low impact tenants. Anybody who wants to rent a home to run a residential assisted living facility isn’t going to want a one-year lease. They’re going to want a five-year lease with five-year renewals. 

Now you have a property with the opportunity to make twice the rent and sign a five-year lease, and playing the part of the real estate owner who leases to an operator is going to allow you to make big returns and significant residual income. The second way to get involved is by owning the real estate and operating the business. This is where we get into the $10,000 per month on an average home. We go into all the specifics of how to make this happen in our Certified Online Residential Assisted Living online training course, but the main thing to keep in mind with this option is that this is for individuals who want to both own the real estate AND operate the business. Sure, you’ll hire a property manager to run the day-to-day, as well as a care staff, but you’ll have your hands in the business operations. If that’s something you’re interested in, you just raised the bar on your profitability options.

The third way is by being a private lender or a joint venture partner. Some of you just want to write a check and invest. You don’t want to purchase the home, get the business going, or even be hands on in the business, but rather just write a check. This is an excellent way to get involved if you’ve got money to invest. There are literally tens of thousands of individuals around your area who are looking at their stocks and investments who feel worried. The stock market could go down at any time – anything could happen around the world that could affect their investments and it can feel uncertain at best. They don’t want to invest in real estate because the real estate market is at the top right now and they’re wondering what to do with their money. If that money is sitting in the bank, it’s making very little or maybe even nothing. Right now, the average CD is only making 1%. These people are dying for this type of investment opportunity. Honestly, the money is the easy part because there are a lot of people out there looking for this type of investment. If you’re at the point in your business that you’re ready to pitch to an investor, we invite you to check out this article on our blog, The Residential Assisted Living Business Plan: Your Key to Success, which will unpack the elements of putting together a successful business plan and how you can get the money you need from the right investor! 

 Operate a successful Residential Assisted Living investment
Finding and staffing the right team is essential to a successful senior housing investment.

Common Questions to Answer Before Investing in Residential Assisted Living

Do I need experience in the medical field?

The short answer is NO. Residential assisted living is not a nursing home, requiring nurses.You’re probably wondering if you have any business investing in the residential assisted living facility business opportunity without any experience in the medical field. The truth is, you don’t need any but your business may benefit from that expertise if you do. As an owner or operator, you are going to be hiring the staff and caregivers who have the training, or will acquire the training, needed and this includes staff with medical experience.

Can I use my own home as a residential assisted living facility?

Another common question is if you can turn your current home into a residential assisted living facility. Sometimes yes, sometimes no – it depends on a variety of factors, but the biggest factor is location. The biggest and most important piece of this puzzle is location, location, location. Is it near the right people? Is it surrounded by the right demographics? If it’s near a college campus where the average age is 30-years-old and these 30-year-olds have parents in their 50s and 60s who are not in assisted living, that’s not an ideal location. However, if your home is in an area where the average age is 50-60 years old and their parents are 80 and 90 years old, that’s more likely the right neighborhood. After considering location, you’ll want to assess the economics. Do the residents in the area have an income that is in the middle and below or the middle and above? A successful residential assisted living property will want residents in the upper middle income, making location critical. You don’t need to worry about the home structure itself. We can remodel, or if needed, scrape it away and build it new; it’s the location that is essential for determining if your home is a fit. Location is everything in residential assisted living and having the right location for your home is essential to running a successful and lucrative business.

How do I find Caregivers for my assisted living home?

Finding and staffing the right team is essential to a successful senior housing investment. There is a precise skill set that you need to learn in order to identify, hire, train, grow, and retain caregivers that your residents will love and who you will find indispensable. This skill set is exactly what we teach through the Residential Assisted Living Academy training. Strong leadership is also essential to build your staff around. There are certainly no guarantees, but positive, supportive, and present leaders increase the chances of employee retention and foster healthy teams – including your caregivers. With this in mind, when hiring and training Residential Assisted Living management, remember that this position is the primary piece of the puzzle for employee satisfaction. Leadership is also responsible for hiring new staff, and it is important to know the industry when doing so. Staff turnover comes at a high price for Residential Assisted Living homeowners, so nurturing happy employees is a great start to avoid staffing issues.

For more resources on raising staff retention and building healthy teams, check out this article here.

What is the difference between the manager and the owner?

As we mentioned earlier, as an investor, you have a few ways to be involved in the day-to-day operations of your residential assisted living business. Typically, as an investor, you are the business and/or real estate owner. We don’t recommend that the business owner also manage the property itself, although that is one way of doing it. But before making that call, you should have a good understanding of what’s involved for the managers of a residential senior home. The number one job for the manager is to make sure that everything runs smoothly. The home manager is there, day-to-day, making sure the caregivers are there, making sure the residents are in place, the home is full, and the family is being taken care of. The day-to-day for a manager really isn’t one day, it’s more of a 24/7, all-encompassing role — they’re ready to go at any time and their schedules can look very different from day-to-day. The manager is a key person in your business and hiring a good one is very important if you want a healthy investment.

 Do Good and Do Well in Your Residential Assisted Living Investment
We believe those who invest in residential assisted living are doing just that by providing a solution to a real and growing need while also building wealth at the same time!

Are You Ready To Take The Next Step With Your Investment?

We’ve covered a great deal of information in this article. The fact is, wherever you find yourself, you’re probably starting to think about retirement and what you need to do to get your plan together–– not just a good plan, but one that’s right for you and your family. And if you, like many others, are drawn to impact investing and/or real estate investing, you’ve likely heard about the benefits of residential assisted living homes and the rising need for quality, senior care. At the Residential Assisted Living Academy, our motto is “Do Good and Do Well” and we stand behind it. We believe those who invest in residential assisted living are doing just that by providing a solution to a real and growing need while also building wealth at the same time! So what’s your next step? Are you ready to make an investment that will impact the lives of others and set up a lasting legacy for generations to come? This is a business and investment formula that anyone can learn, and it’s an opportunity for YOU to succeed no matter what your experience level. We’ve helped investors, entrepreneurs, and every-day normal people with a variety of different backgrounds be able to succeed in their residential assisted living investment and if you’re ready, we want to help you do the same!

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