How to Make Money Investing in Housing for Seniors

senior housing investing

Suppose you are looking for an ideal investment. If that is your situation, then you might consider investing in senior housing. Although it may not be the most popular investment, that does not mean it isn't among the most profitable. Depending on the way you position yourself, it could be one of the best investments you can make. However, it's important for you to understand how these businesses operate. That way, you can ensure that your money creates a sizable return, no matter the circumstances.

How to Make Money With Senior Housing

Learning how to make money with senior housing is relatively straightforward. First, it's important for you to understand each of the factors that impact profitability. Once these are under your belt, you can begin to look for somewhere to put your capital. Then, it is up to you to get the business off the ground. Below, you will find the four most important factors that impact your business's bottom line.

Factors That Affect Profitability

  • Occupancy: This refers to the number of rooms with tenants. Just like with other real estate investments, you'll want to keep every room occupied. If a room does not have a tenant, it is not generating any revenue. The more tenants you can maintain, the larger your revenue stream becomes.
  • Location: Besides the occupancy, location will impact what you can charge. Suppose you have a property in a desirable area. In that case, seniors will be willing to pay much more than they would otherwise. Therefore, selecting the right location can have a dramatic impact on your overall revenue.
  • Facility Size: The size of your property determines how many tenants you can have. Thus, it also determines the maximum revenue you can expect. As facility size increases, your maximum level of profit rises as well. Larger facilities generate more revenue.
  • Auxiliary Services: Besides basic services, you can charge for additional things as well. The more services you offer, the more potential profit there is. In our opinion, we believe that offering quality services is essential. Otherwise, you are simply leaving money on the table.

How to Make Money in Residential Assisted Living

When you learn how to make money in residential assisted living, It's important for you to comprehend the various business models. Depending on the model you choose, your approach to the enterprise will vary. Generally speaking, you can operate a business in this industry using three different methods. Below, we've listed descriptions for each of them. In some instances, one will be preferable over the others. However, much of this decision will remain as part of your personal preferences.

Three Different Business Models

  • Own to Lease: Suppose you have large real estate investments. Of course, you could let it sit while it appreciates. On the other hand, you could lease the location to an entrepreneur. By doing this, you can earn rental income without having to operate an assisted living facility yourself. Therefore, it's ideal for people who prefer minimally interactive investments.
  • Lease to Operate: If you are interested in running the above business, you could choose to lease a location. When you do this, your starting capital requirements are lower. Since you do not have to own the property, you'll find fewer barriers to entry. However, your only source of profit will be from the business's revenues.
  • Own and Operate: Ideally, you can own the business location and operate it simultaneously. If you can do this, you'll be earning returns on your investment from multiple angles. Not only do you benefit from property appreciation, but you also get to keep the business revenue. Thus, for people who are interested in the largest returns, we believe this is the best route.

seniors on a bench

Own the Location to Lease to Others

Let's assume that you are a property owner. In some instances, it might be better for you to lease your property to another individual. By doing this, you'll get to collect rental income each month. Additionally, you'll have far fewer requirements. Since someone else is running at the facility, you won't have to think about it at all.

Capitalize on Real Estate Profits:
Letting your property scent is not the best way for you to use it. Instead, you can let someone else use it for their business. Then, you can charge them an appropriate amount of rent. As long as they maintain their business, you'll have a steady supply of tenants.

Easy Cash Flow:
Sometimes, people are not interested in running an intricate business. There is nothing wrong with that, in our opinion. If you believe this is best, then you'll enjoy the easy cash flow. Let the other people handle the assisted living facility.

Low Time Investment:
Not everyone has a ton of free time. If you are already a full-time employee, running an assisted living facility might not be realistic.
In that case, you can rely on entrepreneurs to run it for you. Therefore, you'll have to spend much less time involved with the business.

Limited Income Ceiling:
On the one hand, this approach requires much less time for you to invest. On the other hand, the maximum income you can expect is also lower. Nevertheless, choosing to lease your property to another group is a better idea than letting it sit without any tenants. If you do that, you won't be earning any income at all.

Leasing a Location to Run Your Business

Next, we can look at the benefits and drawbacks of running the business yourself. Perhaps, you would prefer to work with the senior citizens in your facility. Nevertheless, you might not have the property needed for the business. That doesn't mean you can't run one. Instead, you'll have to find someone else who holds the property. Then, you can rent it from them.

Paying Rent:
Buying a property is not always attainable for people. However, that doesn't mean that you cannot get a space for your enterprise. Instead of purchasing it, you can rent a spot. By doing this, you won't have to pony up the cash for a sizable down payment. All you will need is enough money for the deposit. Typically, this is much less than it would be for a down payment on the same property.

Collecting Service Payments:
As the business owner, you'll collect all the payments made by the residents at your facility. Thus, the amount you charge for your services will directly affect your overall profitability. The more you can charge for them, the more profitable your business. Therefore, marketing can be an important component of your business. With good marketing, the demand for your services will increase. As demand increases, so will the amount you can charge for your services.

Other Business Proceeds:
Suppose your business is offering additional services. If that is the case, then you'll get to keep all the proceeds from those as well. Nowadays, senior citizen facilities offer a wide variety of services. Each of them is an additional opportunity for potential revenue. The more services you offer, the more opportunities you have available. Thus, expanding your service provisions can also expand your bottom line.

Renewing Your Lease:
One downside would be that you must renew your lease. Since your rent affects profitability, renewing your lease can be a major hassle. In some instances, the property owner may decide to charge you more than they did before. Therefore, you'll earn less profit unless you can increase the revenue. Additionally, there is also a chance that the property holder refuses to renew the lease. Although this is unlikely, it is still something for you to keep in mind. Otherwise, you could hit an impasse later on down the road.

Owning the Location Where You Run the Business

If you are interested in maximizing your returns, then you should own the property and run the business. That way, you'll get all the returns from every source. You won't have to pay for rent. Plus, you'll be the one responsible for the business's revenue as well. Besides, when you own a property, you can pay it off. Afterward, you'll have unlimited one of your business's largest monthly expenses. At that point, it will not take much for you to generate a massive profit.

Highest Startup Costs:
Perhaps, the largest downside would be the barrier to entry. Considering the size of some down payments, it may be difficult for some people to come up with the necessary cash. If that is the case, then you will be forced to use another approach. Besides the investment cash needed for the property, you'll also need the money to start the business. Therefore, you will need startup capital for both of these tasks. Without enough of it, you will not be able to go down this road.

Largest Profit Margin:
On the other hand, by choosing this approach, you could see the largest returns. When you own the property, you do not have to pay a landlord. Therefore, you have eliminated one of the largest expenses most assisted living facilities have to pay. If you can do this, the overall level of profit might be shocking for you. Eventually, you can pay the property off. Once it is owned outright, you will not even have to pay for a mortgage. Now, that is how you create a resilient business. Even if you cannot keep it occupied, you will still turn a profit with ease. Plus, as the property appreciates, you can pocket all of that growth as well.

Business and Real Estate Proceeds:
Now, with one of these businesses, you will have revenue coming from two sources. On the one hand, the real estate itself will increase in value. Over time, most real estate appreciates at a fairly steady rate. On the other hand, you will be running an assisted living facility. For each tenant you have, you can collect monthly rent from them. Since you own the building, none of that rent will go to anyone else. If you can offer auxiliary services, you can also collect premiums for those. Therefore, it should be easy for anyone to see that this approach is the most profitable.

Breaking Down the Profits of an Assisted Living Facility

While this probably isn't a wise choice for your first ever real estate investment, it could be a solid addition to your portfolio once you gain experience.

So, now that you know all three approaches, you must decide which one to use. Then, you can begin to look at the mechanics of the business. Once you own it, it's up to you to make the numbers make sense. Below, we have included few ways for you to enhance the revenue from your enterprise. By using these effectively, you can further expand your profitability.

Expanding Your Clientele:
It should come as no surprise that more clients are better for the business. Therefore, you should not neglect marketing. Unless you are at full occupancy, you should be searching for new tenants. Otherwise, you are wasting a room in the building that could be earning money for you.

Minimizing Expenses:
Even though the income you generate is important, that does not mean you should neglect your expenses. If you can get your expenses lower, you will need to earn less income to generate the same profit. At the end of the day, lowering your expenses can produce the same effect as expanding your income. Not to mention, there are plenty of ways for you to produce your overhead. For example, consider limiting the amount of labor you hire. That way, you'll have less to cover at the end of the month. As long as you've got enough people, additional hands are nothing but a drain.

Maximizing Service Offerings:
You should not limit the services offered at your facility. In fact, you could even bring in outside professionals. Then, you could collect a portion of their proceeds. That way, your tenants have access to additional services they would not have otherwise. Plus, you'll get to take a portion of the proceeds from them as well. By doing this, you'll create the most revenue possible with the property.