The senior population in the United States is skyrocketing. By 2030, one in five Americans will be age 65 or older, according to the U.S. Census Bureau, up from one in seven today.
As the general population ages, housing needs will also shift. People in their 60s, 70s and beyond usually don’t need—or want—large yards or McMansions, often opting for smaller homes or condos in communities with neighbors their own age. And more and more, they are opting to rent rather than own. Eventually, some may need to transition to an assisted living or skilled nursing care facility. Across the board, whatever housing type, there’s not enough supply to meet anticipated demand.
But, aging Baby Boomers aren’t the only factor contributing to the increased demand, according to the National Investment Center for Seniors Housing & Care. Seniors are healthier and living longer, and their increased life expectancy means less turnover in the marketplace.
“It’s going to be a booming market, no pun intended,” says Rick Sharga, chief marketing officer of Ten-X (formerly Auction.com), an online marketplace for residential and commercial properties.
Sharga adds that investors who get in now have an incredible opportunity to learn the nuances of senior housing and establish themselves before the market feels the full force of the Boomer generation’s impact.
Understanding Senior Housing
Until recently, seniors had few housing options. They could downsize, moving into an active adult community for people 55 and over. Or they could cohabitate with a relative, usually one of their grown children. The final option was a nursing home.
Today, senior housing options include:
> Stand-alone properties: These small single-family residences, apartments or condos may be equipped with grab bars and other senior-friendly features and are geared to those who can live independently.
> Active adult communities: Occupants of homes and condos in active adult communities usually must meet an age requirement but are still very active. Communities often include amenities such as clubhouses, swimming pools and gardens.
> Independent living facilities (ILFs): These facilities cater to seniors who are less active and may need some help with meals, housekeeping and transportation. Residents pay premium rents to cover these perks.
> Assisted living facilities (ALFs): Seniors in assisted living facilities may require some additional assistance with daily activities such as bathing and dressing but do not need skilled nursing care.
> Skilled nursing facilities (SNFs): Hospital-like, skilled nursing facilities provide residents with health care services, including medical care and rehabilitation, as well as assistance with daily activities.
> Continuing care retirement communities (CCRCs): A continuing care retirement community is a “one-stop shop,” offering independent living, assisted living and skilled nursing living arrangements within the same facility.
Properties for Independent Seniors
When most people retire, they can still care for themselves and want to lead active, independent lives. Later in life, they may need more help, leading up to skilled nursing care. Based on that natural trajectory, the initial demand, as the population ages, will be for properties that can accommodate independent seniors.
That’s good news for investors because it isn’t much of a stretch to go from targeting singles and families to targeting seniors. You just need to think about their lifestyle and needs, says Manny Gonzalez with KTGY Group. Gonzalez specializes in building senior communities.
Successful properties for independent seniors start with location, according to Gonzalez. Boomers tend to be active, so a property near restaurants, a neighborhood coffeehouse, parks, and a grocery store would be desirable. Hiking and mountain biking trails nearby would also be a plus.
Even active seniors, though, look ahead to when they may not be able to do as much physically, due to age or injury, so features like a walk-in shower, grab bars into the shower and ramps can be selling points. Also, living spaces should be on one level without steps—even a single step—up or down into a room.
Gonzalez adds that Boomers love to entertain, so a large kitchen would be attractive. Other popular features include storage space and pet-friendly amenities.
These guidelines apply whether the property is a single-family residence or a multi-unit complex. With multi-unit complexes, though, seniors also look for a sense of community. Gonzalez recommends hiring a property management company that specializes in senior housing and can help foster that community through activities and social interaction.
Properties with Assistance Services
Historically, there have been few investment opportunities beyond properties for independent seniors, but that is changing, according to Sharga, who sees a growing market in independent living facilities and assisted living facilities.
Sharga says these facilities don’t have to be large or complicated to be profitable. You can purchase a single-family residence with multiple bedrooms and bathrooms and convert it into senior-friendly accommodations that offer simple housekeeping and meal services for five to 10 residents. Instead of receiving $1,500 per month for one family to live there, for example, you could collect $1,500 per tenant.
There would, however, be additional costs for staff, insurance, and other operating costs. And there are risks. Sharga points out that the industry is in its infancy, and no one knows for sure yet what the demand will be for this type of property. You also have to have some knowledge of the health care industry and local regulations pertaining to senior housing.
“It’s less about knowing how to buy and renovate a property than it is about figuring out how to manage,” Sharga says. “This isn’t just collecting and cashing a check.”
He suggests partnering on your first deal with another investor who has experience with independent living facilities and assisted living facilities and who can direct you to local property management companies that specialize in senior housing.
Properties with Skilled Nursing
Your options may be limited when it comes to investing in skilled nursing properties because they require a tremendous amount of cash to purchase and expertise to manage. For the average investor, real estate investment trusts (REITs) specializing in senior housing are usually the best route.
But the demand for these properties will likely lag far behind the others. According to a report issued by the Administration on Aging, the majority of the nation’s senior population is projected to be relatively young (ages 67 to 74) until around 2034, when all of the Boomers will be over the age of 70.
For Further Information
The National Investment Center for Seniors Housing & Care offers an extensive listing of industry resources at: http://www.nic.org/resources/industry-links/
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