This sector is not new, but it is breaking new ground.
Although most baby boomers are still about a decade away from hitting the stage in their lives when they will be seriously considering their options in senior living, the real estate sector is getting ready now. From active adult communities to co-living spaces for seniors who need non-skilled care (not what it sounds like) to memory care and full-service skilled-care facilities, the housing and construction markets are evolving to meet the current and pending needs of the largest population of seniors ever to age into the demographic at one time.
Clearly, senior living is a real estate topic worth talking about, but what does the term really mean? Once you push through the promotional verbiage, such as “Senior living is about LIVING! Healthy living, comfortable living enjoyable living like you will find at [insert development name here],” you will find that real estate investors and senior-living and -care providers use the term to describe pretty much any physical structure designed with a resident 55 years or older in mind. In order to really discuss the topic, we must establish some common terminology. You will see some of this terminology defined in association with our expert’s commentary in this analysis.
The Senior Living Sector is Expanding
As you can see just from the plethora of terms in use today to talk about senior living, this sector is expanding. With Pew Research estimating 10,000 baby boomers will turn 65 each day until 2029, when about one in five U.S. residents will likely be an official senior citizen, the demand for senior living facilities with offerings across the spectrum will only grow. Check out what experts in all areas of the real estate industry are saying about this incredible, unstoppable trend.
Founder & CEO, Greystone & Co, Commercial HUD Lender
On Acquisitions in Skilled Nursing:
“We’re currently seeing a surge in acquisitions activity within the middle-market of skilled nursing. After several years of large, national REITs owning in the space and smaller (or non-profit) players struggling to scale their operations effectively, there is now an opportunity for mid-sized players to take over. The skilled nursing sector is highly regulated from state-to-state, so regional owners with a reputation for operational excellence will ultimately succeed.
“We are one of the largest providers of funding and financing to nursing homes and skilled nursing facilities, but not everyone knows we also own and operate about 4,000 beds.”
“We have launched an effort on behalf of some of our clients to start acquiring more of these properties over the next couple of years and are collaborating to develop technologies to help facilities flag and resolve operational issues.”
Account Executive, Yardi Matrix
On evaluating age-restricted multifamily properties:
“When we look at markets in terms of senior living opportunities, we look at data on properties with 50 units or more that are age-restricted, usually meaning they are only available to residents 55 and up. Once you have set that parameter, a lot of the considerations are the same as for any other investment. You might look at comps in the area, rent trends, demographics, population growth in your target age group, how much new, directly competitive construction is going on in the area, asset classes, etc. However, you also may want to look at how rents are paid. For example, are they subsidized? Are the age-restricted properties supplemented in part or whole and through which programs? Just like with any property, investors should look at senior living properties through the lens of supply pressures, population growth, and affordability to the local population.”
“Senior living investors must be cognizant of whether or not their investment strategy permits them to offer affordable rents to their local target population. Elderly tenants often live off supplemental income, Social Security, etc. Some investors may struggle if they fail to factor in the ‘fixed-income factor’ and assume they will be able to force appreciation on a senior living property by raising rents.”
Chief Economist at Fannie Mae
On Aging in Place:
“The boomers have said all along they intend to age in place, and they are. They are spending money on remodeling their current homes and staying in place. This is creating a housing supply issue in markets where single-family home inventory is low and millennial job opportunities are rising.”
“When you have a low level of turnover of existing homes and low inventory of newly constructed homes, you have a supply problem that affects housing affordability.”
Founder and president, Secure Pay One
On fair housing laws and age-restricted housing:
“Of course, Fair Housing law is a great tool and guideline to ensure all applicants are treated equally. Senior living is a growing trend, and large senior facilities often carry with them covenants, boards, and even associations to ensure that their age restrictions work.”
“I do get concerned as the small DIY landlord enters this space that they are careful to always consult with their attorney to craft ads and applications to ensure they stay within the codes specific to their municipality and state.”
Founder & president, RALAcademy
On the opportunities in residential assisted living:
“Right now, there are 77,000,000 baby boomers. Every day, 10,000 of them turn 65 and another 4,000 turn 85. Their number-one dilemma is housing. The average cost for a private room in an assisted living facility in the U.S. is more than $4,000 a month. That means running a single residential assisted living (RAL) home can net the owner $10,000 a month or more, although every market, investor, and opportunity is different.”
“Everyone is going to be involved in assisted living in one way or another. The question is, “How?” You can own the real estate, operate the business, or both, or you can end up writing a check to someone else to take care of yourself or a loved one. Timing is key in life, and the massive growth in the senior services market is unstoppable. Right now is the best time to ride this ‘Silver Tsunami’ of seniors to shore.”
Owner, W Streets Inc
On why she is expanding her wholesale real estate business into senior living investments:
“In the next 12 to 18 months, we expect to be at the 200-deal-a-year mark for our wholesale business. As we near that goal, we are moving into the single-family residential assisted living space. It’s one of the best returns in commercial or residential real estate, hands down.”
“I’ve looked at the statistics, and there is such a need for these facilities. That need is not going anywhere. The senior living space is going to be here for a long time.”