Why Residential Assisted Living Investing May Be Profitable For You

People age. And as those people age, they will need a place to call home. Our aging population’s demand for homes may make residential assisted living investing an attractive addition to your portfolio.

As Isabelle Guarino-Smith, COO of Residential Living Academy, notes, 76 million Baby Boomers are entering the marketplace for assisted living. As a result of the Boomers' entrance into the market, Guarino-Smith argues that now is an ideal time to invest in residential assisted living.

The world is in flux, but the more things change, the more they stay the same. 

People will still get old and still need a place to stay. Consider this, the fastest growing demographic is people aged 80 and older. We have better medicine, technology, and healthcare. And it's making people live longer.

Those longer-living people may need some help with their day-to-day life or medical attention to preserve their quality of life. Our aging mothers and fathers still need a safe place to call home. 

In this article, we'll discuss the following: 

  • The truth about residential assisted living investing
  • Ways you can get involved
  • What the possible return on investment might look like for you

Residential Assisted Living Investing: Marketplace Truths

A residential assisted living is a group home that helps with the activities of daily living for the seniors who live there. 

It's not:

  • A corporate-owned nursing home
  • For the elderly who are independently living

Instead, a RAL is a residential home in a single-family home residential neighborhood. Typically, an owner or operator renovates these homes with age-appropriate furniture and furnishings, especially the rooms and bathrooms. 

Common Myths and Misconceptions

  • You'll have to work at the RAL home. That's untrue, you are an investor, but you'll have staff to take care of the day-to-day operations. 
  • Liability insurance will be expensive. Also inaccurate, you can protect yourself without breaking the bank by developing a cohesive plan
  • Finding good employees is hard. That's only true for bad owners and operators. 
  • I need medical experience. You don't have to have medical experience; you hire people with experience in the field. 
  • HOAs forbid this type of home. The Federal Fair Housing Act protects you. 
  • Seniors can't afford this care. Seniors pay for assisted living as they downsize and enter their golden years. In many cases, RAL is a more affordable and advantageous option for adult children who want to see their parents well cared for in the twilight of their life.

Ways For You To Get Involved In Residential Assisted Living Investing

There are three primary ways you can get involved in residential assisted living investing.

#1 Own The Real Estate And Lease To An Operator

You would be known as a preferred real estate provider. You would need to purchase a home, renovate it, and get it licensed and ready for the operator. 

Some advantages of going this route include the following: 

  • Twice the fair market rent
  • Long-term, low-impact tenant(s)
  • Little to no maintenance

#2 Own The Real Estate And Be The Operator

You work in the home and operate the business. Being an owner-operator means you'll help each senior with their day-to-day activities, including but not limited to: 

  • Cooking 
  • Cleaning
  • Hygiene
  • Medical needs

You can save money by doing this, but you will invest a lot of sweat equity. 

#3 Private Lending Or Partner

As a private lender, you provide the capital for an interested borrower who wants to operate a residential assisted living facility. Private lending is the most hands-off approach to breaking into the RAL market. 

Residential Assisted Living Investig: Model ROI

For these education examples, we will use an assisted living facility's average monthly cost of $4,500. For illustrative purposes, we'll use ten residents, which is typically the maximum number of residents that you can house:

  • $45,000 = monthly gross income ($4,500 x 10)
  • $30,000 = overhead ($20,000 if you're providing care yourself)
  • $5,000 = debt service or rent

________

  • $10,000 = monthly net income
  • $120,000 = annual net income

For a more detailed breakdown of how much money you have the potential to make, check out Isabelle Gaurino-Smith's in-depth discussion of different earnings models.

Key Takeaways

There is a silver tsunami upon us composed of aging Baby Boomers. More than 76 million boomers are aging and are looking for places to live that are conducive to their lifestyle. 

One possible place that boomers will call home is residential assisted living (RAL) homes. 

RAL properties have several advantages that may make you want to include them in your investment strategy: 

  • Twice the fair market rent
  • Long-term, low-impact tenant(s)
  • Little to no maintenance

The demand appears to remain strong as people live longer, so now may be an opportune time to invest in the emerging RAL marketplace. 

Do you have questions about how to get started in residential assisted living investing or real estate investing in general? 

Join our FREE Royal Investing Group Mentoring, where we meet weekly to discuss the nuances, challenges, and solutions involved with your real estate investments. 

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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