A Demographic Shift Prime for Investment

With inflation on the rise and uncertainty growing, investors look to the horizon, watching for patterns and identifying changes that point to opportunity.

The desire to diversify amid growing market concerns is nothing new. For years, investors have looked for the best methods to increase return on investment while ensuring that their assets were diverse enough to weather any bumps in the market.

Real estate makes sense, and for most, it is a tried and true point of stability.

However, real estate is a highly leveraged asset, albeit a profitable one historically. It still involves a certain amount of risk, leveraging a high amount of debt for an asset that essentially produces nothing.

This can be great when markets are stable and inflation is minimal, but what about when conditions aren’t ideal?

What if there was a way to combine the relative stability of real estate with a profitable business that produces a good or service?

There is an investment strategy that is gaining momentum, and it’s not based on market fluctuations, but directly connected to demand; more specifically, demand based on demographic changes in the nation. And one particular demographic group has stood out for years due to its sheer size.

The Demographic Shift

It’s no secret that the United States is an aging country. One of the main reasons for America’s aging is the baby boomers. Historically, one of the largest generations, boomers have influenced the U.S. economy at every turn, and they are poised to do this yet again as they enter their golden years.

By 2030, the last of the boomers will be 65, and according to projections, Americans aged 65 and up will comprise 21 percent of the nation’s population; an increase from 16 percent today. Additionally, the number of Americans aged 85+ is expected to more than double by 2040. It may not seem significant in light of the overall population, but in relation to the infrastructure and senior housing currently available, considerable investment will need to be made to ensure this age group has sufficient housing and care as they age.

While some see this demographic change as a looming crisis, many investors looking at these numbers are seeing the chance to be at the forefront of an investment boom.

For many, it represents a potential shift from traditional single-family rentals, commercial rentals, and fix-and-flips in an already squeezed market to an asset type with decades of growth ahead.

In the words of Warren Buffett,

“A great investment opportunity occurs when a marvelous business encounters a one-time huge, but solvable problem.”

This once-in-a-lifetime demographic shift may have some people concerned, but others are seizing the moment, the chance to meet a growing need, and placing themselves at the center of opportunity.

With this change in tide, it might be time to rethink investing.

Making an Impact

By the end of this decade, 24 million seniors in America will require long-term care, which is nearly double the current demand. This presents a challenge as professionals in the long-term care and medical communities suggest that the current infrastructure in senior housing and medical assistance is not ready to handle this influx.

Nevertheless, investment in these sectors will occur, it’s just a matter of when and who will be responsible for it. Social and public policy will inevitably change to help shape the solutions that will meet the needs of this generation of seniors.

So what does this mean for the investor? The opportunity is two-fold. Those who place themselves in a position to provide quality housing for these seniors will undoubtedly benefit financially, but they will also be able to make an impact in their communities with their investment.

The reality is that most seniors prefer to live at home, but when health issues deem that it is no longer possible, then the need for long-term care is at hand.

According to the Department of Health and Human Services, nearly 70 percent of seniors are expected to need some form of long-term care during their lifetime.

This long-term care comes in many forms. Traditionally, nursing homes have been widely employed to care for the elderly, often due to financial constraints or the inability of family members to adequately care for them.

However, this is an extremely unpopular option and most seniors would prefer to avoid this scenario.

Moreover, if the past two years have taught us anything, it’s that packing large numbers of seniors into big facilities isn’t the best choice when health and safety are concerned.

What’s the Alternative?

A growing number of investors are turning to residential assisted living, where large single-family homes are redesigned and repurposed to comfortably house 6-10 seniors in a home-like environment. An environment that most seniors prefer to the large institutional facilities.

The result is quality personalized care that affords independence; something that means a great deal to the baby boomer generation.

Not only has this long-term care option shown an opportunity for investment with high returns, but it also meets a significant and growing demand that will need to be met across the country.

At this point, you may be thinking, “But wait, I don’t want to take care of old people.” The reality is, as the investor, you don’t have to. Just like you would in any business, it’s all about hiring the right manager and team to make the business run smoothly.

Only instead of simply owning a piece of real estate, the investor owns both the home and a profitable business that is providing a needed service. For many, it’s the perfect marriage of asset investment and the profitability of a service-producing business in high demand.

Regardless of what the market is doing, people will continue to age, and as they do they will need care and appropriate housing. This sector of the real estate market is primed for growth over the next few decades, all thanks to the baby boomers.