“The silver tsunami is unstoppable,” Gene Guarino, CEO of the Residential Assisted Living Academy, is fond of saying. He follows that with some pretty incredible numbers, including that there are 1.4 million people turning 85 every single year and 10,000 people turning 65 every single day. “They’re going to need assistance as they age, and offering that assistance is a very viable real estate investing strategy,” Guarino said recently during an educational training at a Think Realty National Conference and Expo in Atlanta, Georgia.
Guarino, who has been teaching real estate investors how to get involved in residential assisted living for years, explained in detail during that session how real estate investors can cash in on senior living, a sector that has posted and will likely continue to post astronomical growth in recent years, without having to build high-rise senior living apartments or get into the nursing field. “It is an extremely simple process,” he observed. “Take a home and rent it to four individuals for, say, $1,000 a month per bedroom. Include the utilities and you have a very long-term tenant that will not move out until they need assisted living, which most investors who do this offer in the form of professional caregivers.”
1 | Not a Hotel, but a Home
Guarino explained that while many investors find the idea of entering the residential assisted living space intimidating because of all the large-scale properties being developed to meet an aging population’s needs, in reality, smaller is better. “If you see those big senior living buildings go up, I’ll tell you where you should be located: at the end of their driveway,” he said. “Grandma has lived in a house her whole life. She does not want to move into a hotel.”
Guarino’s properties tend to be one level and be true homes. “It’s not a nursing home, and it’s not the Golden Girls either,” he said. “It has a normal kitchen, normal dining room, and normal furnishings. The bathrooms have amenities like bigger, wider bathing areas customized for seniors and the dining rooms have enough seating for everyone to eat at once, but it’s a home. Instead of a mom, a dad, two kids, and a dog, it’s a group of seniors.”
2 | Different Options
He also noted that there are many options for investors to maximize space in single-family residences by converting some living areas to additional bedrooms. “If you have a home that is 6,000 square feet and has only three bedrooms, do you think you might be able to find some additional square feet?” he asked. Many seniors will also opt to share a bedroom in order to enjoy the benefits of living in a real home instead of a larger nursing home community. “You can offer private or shared rooms. It’s a common budgetary issue,” Guarino said.
3 | Running the Numbers
Guarino went on to run through some specifics on the costs and potential benefits of investing in residential assisted living. “Labor will be your biggest expense in the whole home,” he noted, since expenses include not just real estate taxes, maintenance, and utilities, but also business licensing, caregivers, and managers. Interestingly, one of investors’ biggest concerns, liability, is not a very big factor in this investment strategy. “Liability tends to be less than a dollar a day, a $300-line item, because we’re a group home, not a medical facility,” he said.
Guarino noted that the average person living in assisted living pays slightly in excess of $3,600 a month, although in some areas of the country the rates may rise as high as $9,000 a month. On average, an investor can generate roughly $10,000 a month in cash flow on this type of property after expenses, which translates to about $120,000 a year, he added. “That is double the national average income in our country today. That means one home can set you free and, just like kids, you can have more than one.”
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Carole Van Sickle Ellis is the editor-in-chief for Think Realty Magazine. You can reach her at cellis@thinkrealty.com.
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