Senior Housing – Assisted Care Investment

Most Investors say” I’m going to buy a Nursing Home!” This is a 20 million dollar deal! Single Family Home-meeting the needs of Seniors while collecting rents from multiple tenants

Market Overview-Nationally

  • USA has the LARGEST generation of aging population-BABY BOOMERS-(defined as post-World War II babies born between 1946 and 1964). 79 million according to latest reports
  • The PEW Research Center estimates as of January 2011, about 10,000 boomers would be turning 65 every day for the next 19 years
  • Guess we have demand?

Additional-CDC Statistics

  • There were 733,300 residents living in 31,100 residential care communities in 2010. Half of all communities were small, with 4–10 beds. The rest were medium-sized (16%), large (28%), and extra-large communities (7%).
  • More than half of all residents (52%) lived in large communities, and 29% lived in extra-large communities. Only 10% of all residents lived in small communities; 9% lived in medium-sized communities.

Additional-by Region, Location and Years in operation

  • The majority of all residential care communities (81%) were located in metropolitan statistical areas. This pattern was more common in the West (91%) and less common in the Midwest (64%).
  • Eighty-two percent of all communities were owned by private, for-profit organizations. A lower percentage of communities in the Northeast and Midwest were for-profit (63% and 64%, respectively) than in the South and West (86% and 93%, respectively).
  • Overall, 38% of all communities were owned by chains, with ownership highest in the Midwest. Almost half of all communities in the Midwest were owned by chains; in the Northeast and the West, chains owned about a third of residential care communities.
  • Seventy-six percent of communities in the Northeast had been operating for 10 or more years, which was higher than in other regions. The West had the lowest percentage of communities (49%) that had been operating for 10 or more years.

Assisted Care as an Investment?

  • It’s about Location
  • It’s about Cash Flow
  • Acquisition Cost is not as important as Cash Flow
  • Average Tenant pays $45K per year to live
  • Different Levels of Care

Costs of Assisted Care in AZ

  • The average cost of Assisted Living in Arizona is $3,418. Assisted Living costs range from $1,400 to $7,072 depending on location and other factors
  • Government assistance in paying for assisted living costs in Arizona is limited at both the state and federal levels. Residents or their families often shoulder the cost of assisted living using personal financial resources such as savings, health insurance or long-term care insurance.

AZ Population Demographic

  • Persons 65+ constituted approximately 15% or more of the total population in 11 states in 2014
  • Of the entire Persons 65+ in the United States
  • Arizona has (37%)
  • More than a third of our State Population is over 65!
  • AND GROWING

Licensing

  • Facilities that specifically provide assisted living services, such as bathing, grooming or supervision, for adults 60 years or older are classified as assisted living homes or assisted living centers.
  • As a result of legislation passed in 2011, the Arizona Board if Examiners if Nursing Care Institution Administrators and Assisted Living Facility Managers assumed regulatory oversight of assisting living facility manager and caregiver training programs.
  • Curriculum elements of the Assisted Living Facility Manager training program include learning of resident rights and responsibilities; preventing abuse, neglect, and exploration of the resident; and managing residents with Alzheimer’s or memory care needs
  • Each manager is required to receive at least 40 hours of instruction and must attain at least 75 percent on each examination or a comprehensive examination.
  • Caregivers participating in an approved Assisted Living Facility Caregiver training program receive training in a variety of topics including at six hours of infection control, at least five hours of fire, safety, and emergency procedures, and 12 hours of basic caregiver skills, which include observing and reporting pain, applying clean bandages, and providing assisted living services such as bathing, and toileting.

Average Rates and Length of Stay

  • Do not take Government Insurance. There is not enough paid to be able to supply the correct services
  • Private Pay and Private Insurance-the families, Trusts and Residents will pay
  • Length of Stay is never guaranteed
  • Average lifespan of a Resident is 5 years
  • Your Management Company will take care of most of the following:
  • Average Monthly Rates are $5,000 for a nice Facility
  • You will need to either run a Credit Check or receive some form of verification of the ability to pay
  • You should get a Security Deposit and Pet Deposit

Day to Day Operations-Owning the Investment

  • As Investors-you will need a management company
  • Insure that they know what they are doing
  • Be sure that THEY employ the employees
  • Be sure that you cross name each other on Insurances
  • Cleanliness is next to Godliness
  • Food Plans
  • Recreation Plans
  • Medical Plans
  • Facility Maintenance
  • Friendly and knowledgeable Staff Marketing

Placement Services-How to connect

  • As with any Tenanted Properties, you NEED Tenants
  • In this Industry these services are called Placement Companies
  • Hospital Social Services
  • Other Facilities
  • Open Houses for the Placement Services, Hospital Staff, Clergy, Doctors and Potential Family Members
  • You will need location, signs and website These Placement Services usually charge equal to one month’s rent

Different Levels of Care and how they work

  • Adult Foster Care Homes are personal residences in which up to four adults reside and are cared for by a designated caregiver who also lives in the home.
  • Assisted Living Centers are large communities caring for 11 or more people
  • Assisted Living Homes are defined as senior care homes which provide assisted living care for up to 10 people

Management

  • Consider that Management will receive 20% of the Gross Income
  • They are responsible for everything that is done
  • Management will oversee the Staff, Residents and the Facility
  • Your job as an Investor is to manage the Manager but DON’T try to micro-manage

Monthly Returns: 10 unit

  • In a stabilized Property the expenses should be approx. 65% of the Income
  • If you have a vacant property, be sure that you have the funds to carry the Investment until you reach 5 Tenants
  • After 5 Tenants you should see your returns
  • Average Rent  = $5,000
  • x10 beds = $50,000
  • Operating Expense @ 65%= ($32,500)
  • MONTHLY PROFIT = $17,500
  • Vacancy is almost nonexistent (remember that every facility is different and these are projections)

Full Ownership or Partnership

  • Average Cost of Purchase is about $1,000,000-2,000,000 of a 10 bed for a FULLY functioning Facility
  • To build, furnish and tenant a property is about 1.5 million plus carrying costs
  • We like to recommend areas that will maintain a $5,000 a month Tenant
  • The returns are higher and can be a longtime passive investment. We have the knowledge and would always like to have a discussion about this Asset Class.