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assisted living

How to Invest in Assisted Living Facilities


Jul 08, 2020 by Liz Brumer

Assisted living facilities play an important role in serving elderly Americans. For real estate investors, knowing how to invest in assisted living facilities can be beneficial as the number of baby boomers age over the next 10 to 20 years. If you're contemplating investing in assisted living facilities, learn how it works, ways you can invest, and things to consider before investing.

What is an assisted living facility?

An assisted living facility (ALF) provides live-in care for those who require ongoing or extenuating physical or medical attention or rehabilitation therapy. While most assisted living facilities focus on serving seniors, care can be provided to anyone in need, including those who may have mental or physical disabilities. Care can include helping residents use the bathroom, get dressed, bathe, take medication, and provide meals.

Assisted living facilities are privately owned and operated, although many partner with local hospitals or medical schools to help with ongoing training of students and staff. Since this is a privately-operated sector of senior housing, quality of care, living units, cost, and amenities will vary. With that being said, each assisted senior-living facility provides 24-hour on-site care by a staff of licensed skilled nurses and medical professionals.

Ways to invest in assisted living facilities

Invest in a REIT

The easiest way to invest in a senior housing property, such as an ALF, is through a real estate investment trust (REIT). There are several REITs that specialize specifically in the senior care industry that can provide diversified exposure to this asset class in institutional-quality investments. This requires no active management of the facilities because they're managed by the REIT directly.

While most real estate investors choose to passively invest in assisted living communities because of the skill, knowledge, financial investment, and expertise required to actively own and operate a facility independently, experienced real estate investors can actively invest in a facility by owning and renting the real estate to an individual operator or owning and operating a facility on their own.

Rent to a private operator or third-party management company

The most common way an active investor invests in an assisted living facility is by purchasing an existing facility or by converting a commercial property into an ALF and renting the property to a third-party management company or private operator who runs the facility. With this method of investing, the property owner earns passive income in the form of rent while reducing their exposure to the risk and liability associated with operating and managing an ALF.

Own and operate individually

If the investor chooses, they can also own and operate an assisted living facility themselves, which in many cases is where the majority of the money in an ALF is made. But with the additional income potential also comes additional risk and liability. Those choosing to manage and operate a facility should have a deep understanding of the laws, regulations, practices, and quality of care required to own and operate a well-run facility before getting started. While this is first and foremost a real estate investment, it's also a business responsible for the livelihood of its residents.

The Millionacres take

An assisted living facility is one way to invest in senior housing. This niche of the senior housing industry serves a specific clientele and requires significant knowledge, experience, and understanding to invest profitably while providing adequate and competent elderly care.

As the aging population rises, demand for senior housing, including assisted living facilities, will grow with it. Right now is a great time to get started in the senior housing sector. It's a matter of doing your due diligence on the various methods of investing and risk to reward associated with it.

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