Creating an IMPACT

Eight years ago, Gene Guarino contributed another example of the popular phrase necessity is the mother of invention.

Guarino created RAL (Residential Assisted Living) Academy when his own mother needed help. It all became very real for Guarino when one night his mother fell out of bed and cracked her rib trying to get back into it. Guarino and his family looked for care for their mother, but nothing they found felt like the right place. All they could find were “Big Box” facilities with nameless, faceless staff and hundreds of residents being warehoused.

That’s when Guarino took matters into his own hands.

“I vowed to create the solution; an actual home that I’d be proud to have my own mother in,” he said.

Guarino’s epiphany came at an ideal time. It was about 10 years ago when the real estate market had dipped, opening a door for him to purchase bigger properties at lower prices than usual. While others were fixing and flipping, Guarino was purchasing large houses to use as group homes for seniors.

With those purchases, RAL Academy was born. Guarino and his team take single-family homes and convert them into assisted living homes for seniors. Guarino initially did this process on his own, but began to show others how to do it, too. The company has expanded to where it has 30 team members who train thousands of people a year in person and online from all across the United States.

“Our students have opened up homes all over the country, taking care of seniors and it’s been a wonderful journey,” Guarino said.

The RAL Academy shows its students everything they need to know in order to start, own or operate their own residential assisted living homes. This includes showing the best locations to do so, what type of real estate to use and how to build a team so the investor does not have to actively work in the business. The RAL Academy also teaches its students how to operate these homes successfully and profitably, and how to scale their business to multiple homes they call a “3 Pack” and beyond. Some of their students are now scaling their businesses all across the country with an eye to selling them all as a package to hedge funds.

Additionally, the RAL Academy shares multiple opportunities to get involved depending on how hands on or hands off an investor and entrepreneurial student wants to be. People who prefer to just write a check can do so. They can invest in a syndication and receive 8 to 16 percent returns. Those who take the joint venture partner route will have some ownership or interest in the actual business. This investment method could yield returns between 10 and 20 percent, according to Guarino.

“If you just own the real estate, which a lot of people get in this industry to do, you can typically lease it for up to twice the fair market rent,” he said. “If that house normally rents for $2,500 a month, you can now lease it for $5,000 a month because the tenant is a business, and they have the income and cashflow to pay that higher rent. The tenants aren’t the seniors living in the home. The tenant is the company that owns and operates the RAL business. They’re not focused on the real estate as an investment, they are focused on the cashflow of owning and operating the business. They’re using the real estate as a place to do their business. They want a five-year lease with renewals and they will take care of the maintenance as well. That is the Holy Grail for many landlords today especially when you can actually cashflow a bigger and nicer property.”

The third option is for investors to actually own the real estate and operate the business. This doesn’t mean the investor is at the RAL home every day. The level of involvement is up to the investor. Most investors and business owners that RAL Academy trains are hands off and they hire managers and a team to run the day-to-day operations.

One of the biggest pieces of advice Guarino shares with RAL investors is to learn as much as they can before they begin and then get support from knowledgeable people that are actually in the industry. Too often he’s seen people make incorrect assumptions about how the industry works. For example, investors think they’re in good shape if they simply purchase a large house near a hospital. Guarino says that being near a hospital is not even in the top 10 items to look for.

“Location is important—being across the street from a hospital is unimportant,” Guarino said. “If the resident needs to go to the hospital every day, they should be in a nursing home, not an assisted living home. So, there are many things that people need to learn.”

Guarino also advises that students decide what part they want to play in their business early on. People who just want to “be the money” should invest in a fund or a syndication type of investment so they can be hands off. The key to their investment is having a good operator on the team—someone who knows what they’re doing, is trustworthy and is going to do a good overall job. Savvy real estate investors find their tenants before they purchase a property and the RAL Academy shows them how to do that as a part of their training curriculum.

“If you simply want to own the property and be a real estate investor and not be involved in the business at all, there is a success formula to doing that right—too many people try to do it backwards,” Guarino said. “They buy a house, fix it up and then say, ‘Now let me find somebody who wants to operate the business in this location.’ No, find the tenant first and then ask them, ‘Where do you want me to buy a house?’ Then I’ll buy the house in the area they want and fix it up because I’m going to lease it to them for five years at twice the market rent. When you do it right, you’re both going to be happy.”

People who choose to own and operate a RAL business, may be more involved than a passive investor at times. Their level of involvement is completely up them and their management style. On the plus side, they will likely make more money and they will own a “saleable” asset, the RAL business itself. The secret that many people don’t understand is, they are creating a business that has tremendous value. That business can be sold separately from the real estate. Many times, the value of the business is close to the value of the real estate itself. An investor can sell the business and then lease the property to the business owner at twice the market rent for years.

“When you own and operate the RAL business you can make your $10,000 to $15,000 or more per month from a single-family home as the owner of the business,” Guarino said. “And your real estate investment and appreciation is on top of that. When you are a hands-off investor typically there’s a lower return. When you are involved hands on, it can be a much higher return but you are earning that additional return with your time and involvement.”

Currently, the RAL Academy student base is about a 50-50 split among people who want to own and operate the RAL business and those who are looking for a good real estate investment, according to Guarino. Initially real estate investors were the ones who expressed interest to Guarino about this opportunity. They liked the idea of purchasing a house that could create such significant cashflow.

“The numbers are really good when you explain to people that, according to Genworth financial, a Long-Term Care Insurance company, the average person in assisted living pays $4,300 per person per month, Guarino said. “You might have 10 people in a home and the net profit might be $10,000 to $12,000 per month from a single-family home. You can go even higher than that with bigger homes in better areas.

“People get involved in the RAL Industry for all kinds of reasons. Some people would say, ‘I have a parent who needs help’ or, ‘My mom or dad was in a facility, and it was not a good experience. I want to be part of the solution.’ Or they don’t want to pay $5,000 a month for two or three years to take care of their mother or father. Instead, they realize they can open a RAL home, and their loved one can move in, live there for free while they are making a lot of money. All while they are gaining equity in the property, they are operating their business in. They can own and control better real estate in better areas while they capture higher appreciation.”

Networking became one of the best business resources Guarino came across over his four decades of being an entrepreneur. Joining mastermind groups and networking with people who are at higher levels, has been more helpful and educational for him than any book, app, or software program.

“That has been the biggest game changer because it’s important to surround yourself with great people with great minds,” Guarino said. “And people that are encouraging you to grow and move forward. The RAL industry itself, we’re creating it—even though it existed on a mom-and-pop level for years it’s not something that was well defined. We’re shaping it right now; we’re disrupting the industry,” he said. “We really want this to be better than it was, and we can make money along the way.”

A Real Estate Life

Guarino’s qualifications to teach real estate investing began when he was just a teenager. He was a professional musician at the time and he and his older brother opened a music school. The building they rented was not in the best condition and the landlord was “difficult” to say the least. Ultimately, they had a decision to make—move or shut down the school. They chose the former and purchased a nearby building for $28,500, which they sold five years later for a $90,000 profit. Gene was just 18 years old when he bought his first property.

“It was a lot of money for a couple of kids in the mid-eighties,” Guarino said.

Along the way, Guarino and his brother did fix and flips and buy and holds. They also purchased and renovated a nearby church and they expanded their music school and recording studio. Their music school eventually reached 300 students and the studio grew into a significant business too. They invested in themselves and hired a business consultant who showed them how they could triple their business. To the shock of the business consultant, once they received the news, they decided to close the school and sell the property.

“We got into (music) because we wanted to be rock stars on the stage,” Guarino said. “But here we were teaching eight-year-olds how to play the drums. Getting into real estate was more by accident, but I’ve done it since I was 18. The key to the experience with our business consultant was to have the end in mind and stay focused. If you’re off course, recalibrate and refocus on where you are going.”

More Than a Nursing Home

Guarino has been involved in the senior housing market for nearly a decade, and he’s already seen a number of industry changes. One of those changes is the perception of assisted living itself. In the past, assisted living was only associated with big buildings, maybe a converted hospital that has 200-plus people in it. The RAL Academy has helped disrupt the industry and shake up that connotation.

“We’ve named (Residential Assisted Living AKA, RAL) and claimed it. It’s called 20 different things across the country,” Guarino said. “The residential assisted living model of a single-family home is more known and accepted today than ever before.”

The COVID-19 pandemic has also caused reconsiderations in the operation of the senior housing industry. Guarino recalled seeing a statistic in April 2020 that said senior housing was down 47 percent. That figure was in part because there was an assumption that the pandemic would crush the senior housing industry and that particular housing market would be finished, according to Guarino.

“The reality is the ‘Big Box’ facilities, with 100, 200 or 300 beds said at that time, ‘No new residents can come in, and if you are here you have to stay isolated in your rooms,’” he said. “What a horrible situation and what a terrible business model. The problem was you have 200-plus elderly people together in a large community and it’s the perfect environment for spreading the virus amongst them.”

The RAL Academy meanwhile focuses on homes with six to 20 people living in them. It’s easier to keep people safe and they don’t have to be isolated in their rooms all day. Visitation was more complicated, but at least it was possible. People moved out of the larger communities with hundreds of people into our RAL homes across the country.

“There was a watershed article written in June 2020 that stated, ‘smaller is safer’ and that was the beginning of this tide change—people were now understanding what I had been saying for years. Homes in residential settings with less people just makes sense,” Guarino said. “Even the big box players are asking how they can get their 200 beds into small pods of 16 so they can isolate them if needed. It’s become clearer by the day that we’re in the right place at the right time.”

The caregiver-to-resident ratio is one of the biggest differences between the RAL Academy model and traditional, “big box” senior care facilities. The larger facilities might have one caregiver for every 15 to 20 residents, whereas a RAL home will typically have one caregiver per five or six residents. Another major difference is RAL homes are just that—a home, not a hotel, according to Guarino.

“(A large facility) is eye candy for you and me; we’re brothers, we love Mom and want to bring her someplace, so we’re going to put her there because we think she wants the movie theater, bowling alley and the gardens,” he said. “What she really wants is to be safe and comfortable, loved and taken care of. She also wants (to be with) a group of peers her own age—eight or 10 people she can get along with, not 200 people, because that’s not how she was brought up. She was brought up in a home not a hotel.”

Residential Assisted Living homes do not provide medical care. That lack of “nursing” also separates them from the standard nursing home. They are truly residences; a place for seniors who can’t be home alone or take care of themselves completely anymore. If an incident does arise, trained caregivers are available to assist 24/7.

“If you remember ‘The Golden Girls’ from the 1980s, and you think of nursing homes with doctors, nurses and gurneys, we’re right in between (the two),” Guarino said.

The Future of the Senior Housing Market

No real estate venture is 100 percent risk-free, but residential assisted living might be the closest thing to it. People will continue to age, and many will require assistance on a daily basis, meaning there will be a growing and ongoing need for RAL Academy’s services.

“The (senior housing market) isn’t only sustainable, but it’s growing exponentially over the next 20 years,” Guarino said. “I’ve been saying for years that the ‘Silver Tsunami’ of Seniors is coming. The Baby Boomers aren’t in assisted living yet, but they’re coming, they’re 10, 15 years out. But right now, the front edge of the Baby Boomers are now just starting to enter assisted living. The Baby Boomer generation has been the driving force for the world’s economy for the last 70 years. Right now, they’re just entering senior housing, which means an explosion of need for assisted living.”

In some ways, Guarino and the family are just getting started as well. The RAL Academy is just one piece of The IMPACT Housing Group.

For the past three decades, real estate, business, and education have become Guarino’s forté. He’s done more buy and holds than fix and flips over the years, but his acquisitions are wide-ranging from single-family homes, multi-unit properties and some commercial real estate. Today, Guarino and his IMPACT Housing Group put his real estate expertise to work to not only help seniors, but their new companies also include groups that are experiencing housing insecurity beyond just senior housing.

The IMPACT Housing Group launched the Majestic Residences RAL Franchise in 2020 as well as The Shared Housing Academy (SHA). The SHA is more of a straightforward real estate investment focused on providing real estate investors an opportunity to get two or three times the typical gross rent. The homes are used as group homes for people facing housing insecurity because of many reasons including justice involvement, recovery homes for addictions, veterans, foster kids that age out of the system, and more.

The IMPACT Housing Group is a family-run business that Guarino and his four children are leading. Guarino has also created the RAL Charitable Foundation that’s he’s been personally been funding and is now looking for outside donors. The foundation is designed to help seniors and will focus on providing music and art for them in an effort to help improve their mental state.

“It’s amazing how people can just snap right out of dementia when a certain song plays,” Guarino said.

They formed the RAL National Association in 2018 and they have over 20,000 members at this time. The RAL Academy’s National Convention also continues to gain momentum. The RAL NAT CON first started with 250 attendees in its first year in 2016 and they are anticipating over 800 people in person this year at the fifth annual RAL National Convention.

“I always tell people that you’re going to get involved in senior housing one way or another,” he said. “Either through the real estate, the business or you or a family member is going to be lying in a bed, writing a check to somebody who does. Right now, you have a choice, so make it a good one.”

To learn more about the RAL Academy, The RAL National Association and the Shared Housing Academy, visit their websites at: www.RALAcademy.com www.RALNA.org www.SharedHousingAcademy.com