what's the deal with all the assisted living developments? how does it work?
I'm noticing a lot of assisted living projects and permits in my area. Can someone explain a bit about how these projects work. I understand the business part somewhat, but what would incline a developer to choose this property type.

I assume the developer doesn't stay and run the business after completion... do some?

So do they make these at the request of the owner and simply collect dev fees?

Is it a spec property that they'll shop to assisted living companies? Do they sell the property or rent it to them?

Any other unique details/challenges about these projects?



I'm sure the answer is probably a little bit of everything, I just want to understand why these niche properties are so hot right now.
[{"id": "j11kwc8", "text": "Yes. All of the above is correct. It depends on the entities honestly. Owner/operators will enter into owner\u2019s rep contracts with a local developer. A large company will develop/mange in house. \n\nWhy they\u2019re so hot is market. There are a lot of aging people out there, peak boomer retirement hasn\u2019t even happened yet, so it\u2019s a safe investment for now.", "replies": [{"id": "j11ly13", "text": "I see. what percentage would you say is inhouse development/management?\n\nWhat's the range of returns on these projects?", "replies": [{"id": "j11pw7e", "text": "That I don\u2019t know.  We did owner\u2019s rep on one riiiight as a joined. Before I got there. \n\nIt was a passive house project though and it was super cool.", "replies": [], "depth": 3}, {"id": "j11t2ce", "text": "I toured quite a few facilities when my mom was moving into one.  Return wise my gut feeling is that they're expensive and a pain in the ass to run, and returns would be better overall with regular apartments.  But I'd be fascinated to know from someone experienced running/owning them.  Maybe I'm wrong!", "replies": [], "depth": 3}], "depth": 2}, {"id": "j12dnov", "text": "In my area new units are regulated. And it\u2019s a captured agency so basically the existing facilities get to decide if you can build. Which makes them even more scarce and valuable.", "replies": [], "depth": 2}], "depth": 1}, {"id": "j11o3sp", "text": "Usually since it\u2019s a highly needed building to serve the older population, there will be less pushback. Let\u2019s be honest, or one of the upper elites are in on the deal to push the paperwork and approved. \n\nAssisted living or retirement homes can be profitable since you can get money from gov supporting certain age individuals to live there and be taken care of. \n\nSo it\u2019s both a business in taking care of older group and a business in collecting rent/services. \n\nThere are developers, that mainly build the same specs all over the states and it isn\u2019t new. I\u2019ve worked as a nurse back in my early 20s and seen the amount assisted living are billing per client and it\u2019s in the 4k-15k+ each depending of level of care from 1/2 of room to private rooms.", "replies": [{"id": "j11skx5", "text": "Goodness that's a lot.", "replies": [{"id": "j1b3ant", "text": "Sickness is profitable, look around you 60% of population are obese or have heart issue.", "replies": [{"id": "j1b7a11", "text": "So are spec devs creating these because they sell higher than multifamily?", "replies": [{"id": "j1eirv7", "text": "They don\u2019t sell higher, just like any building there is a competitive cost that it\u2019ll take to build it. They just know it\u2019s in demand and people want senior housing.", "replies": [{"id": "j1ej98l", "text": "Okay, so what would implore the dev to make these as opposed to multifamily if they plan to sell it upon completion?", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j11vwkd", "text": "Well, it's a $ thing.\n\nMedicaid pays pretty well to \"house\" a warm body.\n\nSame for drug rehab facilities. Boatloads of $. Some morons aren't happy with the $ they make and \"upbill\"... to make even more billing for services they haven't provided. Yeah they get caught but not all and they make millions.\n\nI have requests for hotel to ALF or rehab conversions because there's so much $ to be made.\n\nThis is what I'm seeing from between my chair and keyboard.\n\nAnother one is labs... doctors are seeking out old medical facilities in tertiary locations because - get this - if they bill for services in a top MSA the gov pays less than if they bill in a bottom MSA.\n\nSo... they buy a shit property in a low pop density area and bill from that address.\n\nThey make a LOT of money doing this.\n\nI've actually contemplated doing it and actually providing quality service.\n\nI went to one facility in NE Ohio, and there was NO ONE there. No receptionist, no nurse, no nothing except patients, some crying out for nurses.\n\nI finally found a guy that said he worked there.... he had no idea about what tel # to call from an outside line to contact a nurse.\n\nAnyway, the answer to your question.... $$$$$$$$$$$$$$$$$$", "replies": [{"id": "j11wogu", "text": "Damn. Sounds like a crazy racket.\n\nSo are developers turning into operators cause of the money to be made?\n\nOr is it mostly the operators developing these.projects?", "replies": [{"id": "j11xw21", "text": "IMHO it's a mix.\n\nSome \"develop\" and hold and others build for sponsor operators.\n\n$$$$$$$", "replies": [], "depth": 3}, {"id": "j12hjj4", "text": "My wife is a litigation attorney and represented insurance companies that insured assisted living facilities. All that glitters is not gold. It\u2019s a super specialized operation and you really need detailed understanding of the medical industry and especially staffing your facilities and developing policies and procedures and establishing a strong management culture, which is hard to do.\n\nThere\u2019s a reason it\u2019s so expensive and why most players are established with scale. Shit happens ALL THE TIME and depending on where you\u2019re located you will learn A METRIC SHIT TON about elder abuse laws the hard way.", "replies": [{"id": "j12k4hf", "text": "That's what I figured, which is why I assumed most developers aren't becoming operators.", "replies": [{"id": "j12mm0c", "text": "I don\u2019t really know, most of the groups that I know of are family owned/operated with lots of experience and multiple locations. \n\nIt\u2019s not impossible to back into it, but you better have a detailed business plan for the operating company.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j11w4l7", "text": "Everyone here is missing something crucial and it involves the cost of schooling kids. In my town, we spend $21k/child/yr to go to school K-12. A regular apartment building might have a dozen kids in it when full. Depending on the type of units you might end up having a building that costs the township more money in new school age kids than it brings in in tax revenue. A retirement/assisted living community has no such burden on the school system but brings in similar tax revenue. Towns are way more likely to approve high density housing projects that are age restricted because of the effect on the tax base and revenue overall.", "replies": [], "depth": 1}, {"id": "j129eqf", "text": "Senior housing is not all the same. The properties can be run as Independent Living (IL), Assisted Living (ALF) or Skilled Nursing (SNF). The types correspond to the level of independence and medical care that the residents need.\n  \n  \n Independent Living is a glorified apartment setup with the difference that it usually has a dining room which prepares meals for those residents that don't want to cook. ALF residents usually need some help and revenue per resident is usually noted on a per month amount and ranges between $3K and $5K. SNF is mostly for those needing continuous healthcare and relies on Medicaid, Medicare, and Private Pay / Comercial Insurance. Payment is noted in days (Per Patient Day).  \n  \n Medicaid is state run and the PPD ranges but right now averages about $250. Medicare reimbursement is usually higher and I have seen it range between $400s and $500s per day. Note that it depends on the acuity of the patient or how much care the patient needs.   \n  \nWhat does that mean? It means that other than IL, you are going to need licenses and be subject to regulations/inspections to run one of these. Cap rates are lower for IL, slightly higher for ALFs, and in the double digits for SNFs. It has been a difficult business in the last couple of years with the Pandemic, but PPP and ERC have saved the industry. There is a lot of coming demand from the demographics so it is not a bad business to get into, but I have seen many failures in the last three years.", "replies": [{"id": "j12o89s", "text": "Thank you for the detailed response!", "replies": [], "depth": 2}], "depth": 1}, {"id": "j12kh7z", "text": "We have a broker in house that does these exclusively. The deal flow is slower than Christmas but she closes at least 1 big deal a year. Definitely something to this.", "replies": [], "depth": 1}, {"id": "j141azr", "text": "I have underwritten and followed the investment for ALF in Florida.\n\nIt is a very rentable work, with beds going between $2,500 up to $4,000. Again, these are beds, not room or apartments.\n\nAt least in Florida, and despite the terrible shake that was Covid for occupancy, there will be a huge demographical demand for these beds in the next 3 to 5 years. \n\nOperations is definitely a lot more complex than traditional real estate, but if you have a good manager or operator, you should be able to make sense financially.", "replies": [], "depth": 1}, {"id": "j150ugz", "text": "Call in to a few of them and ask for example pricing for your aging mom. \n\nThen you'll understand.", "replies": [], "depth": 1}, {"id": "j161dm3", "text": "I am very interested in these development types.\n\nMy cousin is a medical architect. He is working on a project right now that is a massive community where you pay 250k-500k up front then there are yearly fees. However you don\u2019t actually own anything. \n\nAs you age and have more needs they move you around the complex into higher care phases. There are onsite doctors and other physicians. \n\nIt\u2019s really a genius model.", "replies": [{"id": "j16391w", "text": "That's what they call a Life Plan, or Entrance Fee community. The real advantage of these is the Entrance Fee income. You only have to hold to cover expected move outs.", "replies": [], "depth": 2}, {"id": "j165733", "text": "Sounds like a super complex business model with tons of regulations. I bet it makes money tho!", "replies": [], "depth": 2}], "depth": 1}, {"id": "j1644jz", "text": "Search for 'Silver Tsunami'. One of the largest generations ever is going to need senior living options and they don't want what their parents lived in. Their parents, dubbed The Greatest Generation, stayed in 'homes' which were institutional in feel. Boomers want a product that is much more like an apartment with Senior Living amenities.\n\nSo what has been happening is a slow change towards a new product in the industry. As we get closer to boomers in their 70s and 80s that change is accelerating, hence why you're seeing more about it. As an asset class it is moving from niche to mainstream.\n\nI work for a large owner/operator if you have any more questions.", "replies": [], "depth": 1}, {"id": "j1mckos", "text": "Op co Prop co\n\nA developer builds, and then is either the landlord or sells it to the landlord, and this is the property company.\n\nThe property company then leases the facility to an operating company or tenant. And the landlord has nothing to do with the services rendered at the assisted living facility they are just the landlord. \n\nThe reason these are popping up is because Medicare and Medicaid at least in my state hasn\u2019t had a cost of living increase since 2007 being illegally held much lower than the actual cost of living since our legislature states these need to be adjusted within three calendar years of the current year. It also takes 13 to 14 months to be reimbursed for Medicare and Medicaid services at skilled nursing homes.\n\nAssisted living is private pay so the cash flow is there to run the business at a high-level. The average American stays in assisted-living for less than two years before going to a nursing home, passing away, or moving in with family so it\u2019s also low impact to the units", "replies": [{"id": "j1y1flo", "text": "Where did you learn all that about the industry? It's spot on.", "replies": [{"id": "j1z2xnx", "text": "Thanks! And thanks for asking. 10 years with a car dealer who diversified into commercail real estate as his \u201cassistant\u201d, he was never there and everyone else worked in the automotive store so I just took control was nice to lenders, attorneys, insurance guys, contractors, brokers and made sure everyone always got what they needed. And I watched YouTube and took classes in property management and asset management. \n\nThen one day he \u201ccouldn\u2019t afford me\u201d anymore so I was let go. Crushing. \n\nI retreated to an another assistant job to the CEO Whose family owned and operated a senior living portfolio with independent living, assisted living, and nursing homes and even a large home care company. While I was there interest rates were really low and they brought in a chief asset officer For the first time in their companies history.I went right to that guy and I was like whatever you need I am here I just want a front row seat to every deal you build. \n\nBack to the CEO, he was also the president of a very large trade association And really knew his stuff, and taught me about the Medicare and Medicaid situation\n\nMy old dealership boss hired a girl for half of my wage she walked out after four months. He hired a guy for $120,000 more per year than what he was paying me after that, Who only knew how to do transactions and couldn\u2019t property manage or asset manage or do any accounting. \n\nSo he still had to call me back in 2020 &amp; made me the Director of Real Estate Operations,  and then treated me like shit, Then hired his daughter to replace me after I trained her, so I left without training her because I was tired of that guy fucking with my life. \n\nSo I left . I am currently studying for my insurance tests, and I\u2019m going to launch an embedded virtual insurance agency at 10 dealerships with one of his competitors, I\u2019ll also write all of the commercial property for that company, and I will write all of the insurance regarding operating a dealership for them so it\u2019s all built in revenues with my products being offered at time of purchase two people who just bought cars in need Insurance to register them. \n\nI also have a scholarship to become a commercial real estate appraiser through the appraisal institute so in addition to what I already know I\u2019m learning more and more and more\u2026 There\u2019s no money really in senior care Unless your the landlord  (although there\u2019s tons of liability on the operation side that I also would like to avoid) so I am going to just focus on commercial real estate appraising, and my insurance agency working , and then working for myself in an environment I\u2019m very familiar with.\n\nNever stop learning and trying!!!", "replies": [{"id": "j1z4sic", "text": "Opco Propco Is not exclusive to senior living BTW it\u2019s all commercial real estate in one way or another", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]