There is a great Tsunami of Seniors turning 85 in 2030…That’s in about 10 years’ time. Soon there will be more older people than there are younger ones in the United States. Who will care for our elderlies?
It doesn’t matter if you are a real estate investor, health care professional, or a loving son/daughter of elderly parents, you are going to want to learn how to get into this recession proof, money making, cash cow business.
You must get in on the ground floor before there is an ALF at every corner.
Meanwhile, you get to secure a business that can breakeven in 3 years’ time…the rest is infinity.
That means, after 3 years, you get a FREE place to live for your loved one until they pass away.
A FREE place for you to live when you turn 85 and Social Security/Medicare/Medicaid in the USA is no longer available.
When you pass away, you will leave this proud LEGACY of taking care of the elderly, for your children and their children.
When it comes to converting a single-family home into an assisted living facility (ALF) for seniors, there are 3 important aspects to look for:
LOCATION, LOCATION, LOCATION
Just because there are many ALFs in one area does not mean that the market is HOT there. It could mean that it’s overbuilt. A lot of vacancy at each ALF means that you SHOULD NOT build another one within the same area. The best way to find this out is to go to this website and enter in any zip code in Texas:
Look for other ALFs within a 5 to 8-mile radius, then call or walk-in to each location to find out how many empty beds they have and make note of it.
For examples, if there are 5 ALFs within a 5-mile radius with 16 beds each, but they all have 3 vacant beds, that means there are a total of 15 vacancies in that area so it’s not a good idea to build another 16 Bed ALF right now.
However, if there are 5 ALFs but there are only 1 vacancy each or if there is a waiting list, then it’s a great idea to add another 16 Bed ALF in that area. It takes 6 to 9 months for your ALF to be up and running. By then, there will be a growing need so your beds, too, can be easily filled.
Location matters when it comes to price per bed. On a rough side of town, you can charge $2,000/bed to $2,500/bed but in a beautiful neighborhood, the same bed can be leased out for $3,500/bed to $4,000/bed. In an upscale neighborhood, however, you can charge $5,000 to $6,000 per bed, per person, per month.
That means you can’t expect to charge $4,000/bed inside an area where the going rate is only $2,500/bed, no matter how much sprucing up you do to the property.
Location also matters when it comes to convenience. Is it near a freeway, a hospital, a clinic or other geriatric services? You cannot expect to build an ALF out in the boonies where emergency services are too far away. That is a huge risk for your elderly residents and to your ALF.
One of the biggest obstacles when finding a good location for your ALF is the HOA (Home Owner’s Association). Do your best to find a location where there are no HOA. Otherwise, introduce yourself and get permission from the HOA before buying a home to convert. If you don’t inform them, they can shut you down once they find out. If you take them to Federal Court, you will win but only if you have the money and time for such a lawsuit. It’s best to avoid it altogether.
Are there ALFs inside neighborhoods that don’t allow this? Yes. Especially, those with only 3 paying Beds. In Texas, you can have mom & dad (non-paying) plus 3 paying residents without the need to get licensed. It’s difficult for HOA to call these small ALFs out. But if you register a 16 Bed ALF, it’s public knowledge. HOA will find out sooner or later.
MARKET VALUE MATTERS
While you are doing Market Research at those ALFs within a 5 to 8-mile radius, be sure to ask for different price points for private and semi-private beds, whether it is a Type A, Type B or Memory Care Facility and whether or not they charge for Level of Care. If so, how much?
Type A = Somewhat Mobile but can get around by themselves. Need supervision but can still perform some tasks on their own.
Type B = More bed-bound and not so mobile without assistance. Need much more help when it comes to daily living activities such as grooming, feeding changing, and bathing.
Memory Care – It doesn’t matter if you are 16 or 96; when your memory starts to go, you need a specialized kind of care. One that is usually around the clock and the facility must be more secure.
Due to the nature of the resident’s mental state, you must hire more staff and follow a different set of rules & regulations as well as building codes. While these requirements add to your expenses, you can charge more per bed and increase your ALF’s bottom line by 20% to 25% each month.
Level of Care – Additional $200 to $2,000 in service fee, per resident, per bed, per month – Some residents need assistance with feeding while others don’t. Some are on oxygen but most are not. It’s not fair to charge the same for the level of care for each resident. Each facility has special pricing for the many tasks that are involved in ADL (Adult Daily Living). Your ALF should know what the competition is doing so you don’t overcharge residents at your ALF.
QUALITY & SIZE
In some states, you can only have up to 10 Beds for Assisted Living inside a residential home. However, in most of Texas, you can have up to 16 Beds. There are a few exceptions in Houston, where you can only have up to 6 beds inside the 610 Loop. Be sure to check with the City, County, State, Federal and the Fire Marshall for the latest rules and regulations.
In Texas, the magic number is 80 sqft per resident. If you have a 10 X 10 room, you can only fit 1 resident.
Texas does not require a room to have closets. With a 12 X 12 room, you can remove the closet door and bring a 5 X 5 closet space into the room so you can have 2 residents in a room. We call this a semi-private room.
Type B residents are in their 80’s so they do not drive – We can convert the 460 sqft (2 car) garage into living space for 3 to 4 more residents plus a bathroom.
THE FOLLOWING ARE EXAMPLES ONLY: (location and cost of living matters)
2,000 sqft Home – 10 Beds – Break even at 7 beds – You’ll make money on only 2 Beds while 1 bed is usually vacant due to someone is moving out or has passed away.
4,000 sqft Home – 16 Beds – Break even is at 8 Beds – You’ll make money on 6 beds while 2 beds are usually vacant. Always plan for the worst case scenario so when your ALF has zero vacancies, it’s icing on the cake.
The risk of having more empty beds is much higher when there is too much competition in a given area. So, don’t spare the expense of finding out whether the location, market rate, quality, and size is right for your ALF. Be smart and lower your risk level at every opportunity.
If this is your first ALF, don’t go it alone. Find experts to point you in the right direction. Most of the education you need can be found online for FREE, when it comes to starting a senior care business, like an assisted living facility for seniors. Don’t be fooled by those charging top $$$ unless they are going to help you START and RUN a recession-proof business for you so that you don’t have to. This is called “Hands-Off” investing.
Brought to you by Frances Chau, Spiritual, and Financial Enrichment Coach and Mentor.
Visit her website at FrancesChau.com.