Why Invest in Senior Care Real Estate?

There are many reasons why investing in senior care real estate is a good idea.  But one of the best reasons is something nobody can deny.

 

Demographics and  the Senior Care Boom

The world is becoming more crowded.  And older. But do you know how old? And how fast it’s growing? Here are some numbers that may surprise you.

  1. According to the U.S. National Institue on Aging, the number of people 65 and older worldwide will more than double to 1.4 billion (yes, billion) people by 2040.
  2. In the U.S., we’ll have more than 88 million age 65+ by 2050.  One in five people will be in that age group.
  3. Also in the U.S., the number of persons age 85+ is growing at an even faster rate, tripling to 19 million by 2050.

The population growth of persons 65+ will mean many things for our world.  But it’s sure to mean a significantly greater demand for senior care real estate.  Over the next 30 years, senior care real estate will change in many ways, just as it has over the past 30 years.  Consumer preferences will change.  Payment sources will change.  Regulations will surely change.

How will each of us meet the challenges of this change?  And how can we benefit from the opportunities of this change?    I’m curious what others have to say.  Leave a comment with your thoughts on the challenges and opportunities with the senior care boom.

Comments

  1. chris wheeler says:

    do you only broker in Wisconsin? I’m in Salt Lake City, and interested in investing/purchasing senior care property and using professional property management.

    • Chris – Our company is based in Wisconsin and does a lot of work here, but we help buyers and sellers nationwide. Let’s get in touch and find how we can help you. I’ve sent an email to you. Mike

  2. Wendy White says:

    Mike, We have a 5200 square foot lodge, previously operated as a bed and breakfast/boutique hotel It has a commercial kitchen, zoned commercial and has 6-9bedrooms. We’d like to sell or lease the property and are thinking that it would be a good and relatively easy conversion to senior housing. We’re in northern Arizona. We have a separate 3 bedroom house next door that could be converted or used as a guest house. Interested in getting some feedback/consultation regarding feasibility.

    • Wendy – Great question. I always coach clients that feasibility starts with your market before the property. Is there demand in your area? How many competitors are there and what is their occupancy? If there is unmet demand or if you think you have a good opportunity to offer a better product, then it’s time to consider buying, building or converting a property. As for the property, is it one story? Is it ADA compliant? How does it compare to competitors? Those are some questions that you should consider early on. I’m not currently offering to coach or consult for new clients, but please keep checking back here and we’ll do our best to answer questions – or ask you important questions to consider. Mike

  3. Hi Mike, its an interesting post. In addition to the demographic boom, I think the threat of automation is minimal in senior care industry. I don’t think robots replacing nurses any time soon. I have three questions and if you have time please reply:
    1) I am thinking to enter into senior care business and at present I have budget of $200k – $300k. Is it sufficient enough to buy an existing business? If yes, how many beds? The real estate will be on lease.
    2) What should be the sufficient working capital for such scale of business?
    3) Finally, my wife had 7 years of nursing experience and I have Accounting degree. We both are working full time. When we start our senior care business, my wife will work full time in our business and look after the operation. I am thinking to continue working full time in my existing job and take care of finances of our business during the week ends. Do you think its feasible?
    Hope I am not taking too much of your time.
    Thank you for the great posts.

    • Jampa – Thanks for your comments – and questions. Here are some answers.

      1) If you have $200,000 to $300,000 in capital to buy a business that leases its real estate (and you’re not using the capital to buy real estate), you should be able to buy a substantially sized business. You need to reserve some of that capital to use for working capital, to have available for operating costs and payroll as you’re getting started and for some reserves. So let’s say you have $150,000 to buy a business – in that case, I think you could buy an assisted living business with 10 to 20 beds, or maybe even more especially if you ask the seller to finance some of the purchase price. In some cases with some creativity, you could buy a business with even more scale.

      2) How much working capital should you have? It varies but I’d use a rule of thumb of two month’s operating expenses, perhaps about $5,000 per bed.

      3) I really like your idea of keeping your job while your wife works full-time in the new business. Having that other source of income will give you and your wife some extra peace of mind and a way to cover your living expenses while the business gets started.

      Given your plan and your capital, I really like your chances of being successful. Good luck!! Stay in touch. Mike

Speak Your Mind

*