Anderson Business Advisors Podcast

Residential Assisted Living Landlording

December 31, 2019

Have you ever thought about assisted living homes? Whether it’s for you, your loved ones, or as a real estate investment? If you’re thinking about becoming a landlord, consider the assisted living marketplace as a great place to find potential tenants. Today, Toby Mathis of Anderson Business Advisors talks to Vern Harris from A Better Way Realty, which invests in assisted living real estate. Vern shares how he helps buy, fix, and get assisted living homes ready for operators.

Highlights/Topics: 

  • Who puts up the money? Investors invest in A Better Way Realty funds, and their money is deployed into assisted living homes 
  • Do you lease it to an operator? What's the typical lease term? Usually, a five-year lease
  • Do operators have to keep paying Vern as their landlord for five years? After three years, operators are given the option to buy the property
  • How is the purchase price calculated? Purchase price is agreed on ahead of time
  • Have any operators purchased a property? Two operators exercised the purchase option in the last 10 years
  • How are the operators doing? Assisted living is a tough business; operators that understand the business, work at it, can grow it 
  • What’s the typical age range of those in assisted living? Silver Tsunami (i.e., people over 65 in residential assisted living; average age is 82 years old)
  • What about ages of those in adult care homes? As young as 18 and up to 60 years old on average, including sober living, medical illness, and/or autistic clients
  • How do you identify properties? Assisted living works best with space for either a 10- or 16-bed home and about 3,500 sq. feet, which can be hard to find in certain locations
  • Your model is different by running a fund. How does somebody invest or put money in, if interested? Passive investors can get into the fund and management is taken care of; operators make sure everything works, and investors are paid
  • Are you doing a share? Carve-out? How are you running that? Usually, it's an 8-10% annual return by monthly payout
  • What's been your favorite project that you've been involved in? Four-pack of houses that helped operator more than double their business
  • Where do you find your operators? Do they find you, or are you looking for them? Both
  • How does somebody become an operator? Volunteer in an assisted living home; unique type of caregiving that requires compassion and business sense 
  • What’s the worst part? If you fail and lose money, worse than that, you displace tenants 
  • Do you have projects that you're waiting on to be completed? Newest fund has been open a few months and has a fair amount of cash lined up 
  • What's the average amount that tenants pay? Depends on home, location, and Medicaid vs. private payments  

Resources

A Better Way Realty

Denver Association of Assisted Living Residences

Residential Assisted Living (RAL) National Association

Toby Mathis

Anderson Advisors

Anderson Advisors Tax and Asset Protection Event

Anderson Advisors on YouTube