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Should You Invest in Senior Living Facilities?

Jul 25, 2020 by Maurie Backman

Some seniors like to age in place, living out their later years at home. But often, that only works if there's a caregiver on hand to make it happen. Older people who don't live near family or have access to a regular home health aide often have no choice but to move to a senior living facility to benefit from assisted living or nursing home care. And as an investor, that's a need you have an opportunity to capitalize on.

It’s estimated that the number of Americans aged 65 and older will nearly double from 52 million in 2018 to 95 million by 2060, at which point adults 65 and over will comprise 23% of the population. We can chalk that statistic up to rising life expectancies coupled with the baby boom of the mid-1940s to 1960s. As such, the number of seniors needing assisted living or nursing home care could explode in the next few decades. And that's why it pays to invest in senior living facilities -- but with a caveat.

A wise investment -- if you proceed with caution

Senior living facilities fulfill a need that's never going to go away, so putting your money into either physical senior living centers or senior living real estate investment trusts (REITs) is a move that could pay off in time.

On the other hand, the COVID-19 crisis has exposed the inherent flaws in senior living facilities. As of late June, more than 40% of U.S. COVID-19 deaths were linked to long-term care facilities, and as of July 15, the virus had infected more than 316,000 people across 14,000 nursing homes and assisted living establishments.

At this stage of the game, the country is still struggling to get the outbreak under control, and so it's too soon to know what the actual backlash will be and what regulations will ensue to ensure that if another pandemic hits, or if an infectious disease outbreak occurs locally or regionally, these facilities will be better prepared.

But one thing's for sure: If you're going to invest in senior living facilities, expect changes -- costly changes -- to come down the pipeline. Those changes could very well impact your bottom line, and that's something you'll need to gear up for.

Furthermore, changes in the way senior living facilities are run could drive their already exorbitant cost up even more, thereby pricing some seniors out. Therefore, while an estimated 6 million seniors might need nursing homes or assisted living care in the next two decades, there's a good chance not everyone will manage to afford it. Families may need to relocate or shift plans to allow for additional at-home care, which could result in senior living vacancies that, once again, impact your bottom line as an investor.

The takeaway, therefore, is that while senior living facilities serve a very obvious need, and there's a clear market for them in the coming years, investing in them still poses a risk. The fallout from the COVID-19 crisis has yet to hit, but once it does, it could change the senior living landscape in a very meaningful way. And while that might ultimately serve the important purpose of protecting the people who live and work at these facilities, it could also make investing in senior living centers a less lucrative endeavor down the line.

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