Does anyone have any experience investing in Assisted Living Facility?

September 06, 2022

by a searcher from Asbury College in Jacksonville, FL, USA

If so, could you give some input in regards to profitability. What is your opinion of how inflation/recession could affect the industry? What are the strengths of the business and what would be some of the weaknesses of the industry? Do you recommend owning big box facilities or residential type homes###-###-#### beds)?

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Reply by an investor
from University of Nebraska in Austin, TX, USA

My dental company sells into these types of communal living centers and know them well. There are many public companies like BKD, WELL, ENSG, PEAK, you can just pull their 10ks and get the answers to your profitability question. They will probably speak to inflation specifically in their 10k as labor + post-COVID labor has impacted them significantly. It's always been operationally intensive with high amount of regulations involved. Depending on the payment model you may be beholden to a certain payor (Medicare, Medicaid, private insurance), which is where you see 'issues' in the industry of not providing appropriate care. The industry will have incredible growth and demand the next###-###-#### years so there will be lots of opportunities and growth in the space just due to sheer demand. People are living longer and the industry will continue to provide more & better services if the operators can keep up with the staffing constraints.

I'm biased that I think scale is better in the senior industry (at least when you compare 100 vs 20 beds) - there will be continued regulatory & labor issues that mean taking care of 100 residents is not 5x harder than taking care of 20 (admin, healthcare staff, sales, etc). Residential homes (16 beds) are most of the time just a job. Of course, residential homes are a popular way for people to 'get in' the industry senior living, HCBS, behavioral health...but their quality and abilities are just lower on average than a scaled facility. Take it for what you want.

Reply by a searcher
from Towson University in Portland, OR, USA

As an owner/investor, I would never want to own a small RALF...you can do fine, but it is more than a full time job. Incredible hard to hire folks for night shifts, so that becomes. a problem. However at a larger scale, it can be very lucrative. I would have also have a huge bias towards private pay as opposed to medicare. I co-own a tiny home health company with my wife and we service a lot of folks in these facilities. If you can become familiar with how to build RALFs and can find folks who want to be operators and can help them start the business operationally, there's a good niche in repositioning residential homes into RALFs and structuring a NNN lease with an operator.

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