Residential Assisted Living Landlording

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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 residential assisted living marketplace as a great place to find potential tenants. Today, Toby Mathis of Anderson Business Advisors talks to Vern 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? The 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, and 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; the average age is 82 years old)
  • What about the 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 become a residential assisted living investor 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 the 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; a 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? The 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

Full Episode Transcript

Toby: Hey, guys. This is Toby Mathis with the Anderson Business Advisors podcast. Today I have a great guest, Vern Harris, who does pretty much what a lot of you guys might be thinking of doing. I’m not going to ruin it. Vern, how are you doing?

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