Based on Census data, it’s estimated that in the next decade, senior citizens will make up 20 percent of the population.
If you’re a new investor, these statistics are attractive. And you’re not the only one. Promising statistics are drawing many investors are heading to the assisted living facilities industry.
But understanding how assisted living for sale for works can be tricky for first-time owners.
For most of us, this is a demographic we haven’t personally experienced yet. So choosing a location and understanding how to market to this unique demographic can be challenging.
Understanding which amenities to offer and what the basics are for care in these types of buildings is essential.
But even though it may seem like a lot to take on at first. It’s more than doable for most people with the capital to do it. It’s an extremely rewarding industry to work in and has a high return on investment.
Read this guide to avoid falling into the first-timer pitfalls.
Market Overview: High Demand and High Return
Senior living has promising statistics.
The existing inventory of senior living for sale cannot keep up with demand. Which is why senior housing is one of the top types of properties being developed in both commercial and residential real estate.
Another reason development is so high is because of the age of the existing supply. Most assisted living facilities are older.
They don’t offer the modern amenities that many consumers expect. So new facilities are being built to offer what today’s senior needs. We’ll go more into that below.
Senior living is also known for its reliable return rates. It’s one of the most consistent forms of real estate for returns and offers some of the highest.
Senior living has already outpaced housing for total return on investment.
The National Council of Real Estate Investment Fiduciaries (NCREIF) reports that over the past decade, senior housing real estate has maintained a 10.52% return. For reference, returns on multifamily properties average about 6%.
High demand and high return? What’s not to love? But it only works if you choose the right location.
Choosing the Right Market is Key
Despite all of the promising statistics. All markets are not created equal.
National averages do not always hold true to every market. So it’s key to choose carefully.
It’s important to choose a location that has an aging population now, and will in the future. To choose an area that’s not extremely competitive. A state with excellent benefits for the elderly.
It’s also important to remember that investing 101 has taught us that diversification is key. When choosing a market, one of the biggest mistakes you can make is relying on a single community for success.
Economic downturns and state laws regarding Medicaid and Medicare can greatly impact assisted living.
So when choosing a market to set-up shop, base it not only on local market demographics. But don’t rely solely on one small market for your success.
Consider how you can attract renters from other markets too. So if something happens to one market. You have others you can depend on.
Assisted Living for Sale: Marketing is Fundamental to the Success of a Community
Even if you choose a market saturated with the right potential residents, you can’t rely on that alone to pull in the right renters.
With new developments going up every day, more options are becoming available. It’s becoming more competitive for senior housing owners.
A lot of property owners don’t think marketing needs to really start until a couple of months before a property opens.
However, a strong marketing strategy needs to be in place for at least eight to six months before an assisted living facility opens its doors.
Marketing to the 65 plus community is a specialty. What works for multifamily communities marketing to families and singles will not work the same here.
Like all real estate industries right now, assisted living is evolving. New technology, the aging population, and co-living are all key factors changing senior living.
Don’t be fooled into thinking just because you exist, renters will come. It’s a competitive market that requires a competitive strategy for success.
Work with Experienced Operators, Especially if You’re New
If you’re investing in senior living, it’s probably because you’ve read a lot of facts and figures that made it sound like a reliable investment.
And you aren’t the only one who read them. A lot of newcomers are entering the senior housing industry in hopes to cash in on its potential.
Choosing the right operators to work with are some of the riskiest choices an investor can make.
Many new operators don’t have realistic expectations. These expectations can lead to unsupportive budgets, serious roadblocks, and cut corners.
It’s also important to choose operators who understand the local markets they serve. National brands won’t have the know-how or the time to support your property the way a local one can.
When choosing operators to work with. Think about how they can support you. Do they have the right talent? Or the means to recruit a staff that will?
Can they help in times of disaster and emergency? Do they have long-term plans for success? Do they have a proven track record of success?
Understanding the Investment Risks
There’s a reason that people flock to real estate to build wealth. Historically it’s one of the most reliable forms of investment.
If all marketing and market considerations are made, senior housing will most likely be a positive investment.
The number of Americans 65 and older will be 79.2 million by 2035. Promising a secure flow of demand for assisted living facilities.
Development and construction costs are the main financial risks when undertaking a senior housing facility.
Most of the senior housing supply is relatively old. Most buildings are in need of very basic renovations that come with buying any new multifamily property.
However, because demand is high and many investors are flocking to the industry. Successful properties need an edge.
Experiential and community-building amenities extend to senior housing tenants. So buildings will need to be integrated with modern technology and design styles to fit the needs of the current and future market.
Operating costs and interest rates are secondary risks that come with investing in a senior housing community. But they are also the same risks that come with investing in any commercial or multifamily property.
Being Watchful of Economic Changes
Economic changes impact any investment, but they are particularly important to watch when it comes to assisted living.
National and state laws regarding Medicaid and Medicare directly impact the market and demands of the senior housing industry.
A large portion of assisted living residents relies on government assistance and benefits to afford rent at a senior housing community.
If accessibility or availability to benefits changes in your state or in federal courts, it will directly impact the markets you serve.
Stay Up-to-Date on Multifamily Trends
The senior communities of today will be a far cry from the communities of the future.
You can bet that when Millenials age and begin residing in assisted living facilities. That they will bring all of their amenity, experience and technology-driven expectations with them.
A basic paint job, a simple couch, some board games and a community room with a TV will not be enough for a facility’s success.
Trends like co-living will transform elderly care facilities into thriving communities with active tenants. Who wants to engage with their neighbors and thrive.
This industry will be as competitive as apartments are today. Properties will need to find their edge and unique offerings that will set them apart.
Investing in Assisted Living
Senior housing is one of the best investments you can make when it comes to commercial real estate. Real estate forecasts for 2019 and beyond position senior housing as profitable investments.
Aging demographics and longer life expectancies are expected to keep demand high.
When you’re ready to purchase assisted living for sale in your area. And make the next step to invest in your first assisted living facility.
It’s smart to set yourself up for success by deligated the workload and hiring an experienced team.
For more than twenty years, the Paradigm Team have been instrumental in the development, operation, and marketing of more than 50 successful seniors housing ventures valued in excess of $500 million.
Paradigm Senior Living is a leading provider of professional management and related consulting services to the seniors housing and assisted living industries.
Learn more about your options and how to maximize your investment by clicking here for more information.