Invest in the Growing Demand for Assisted Living

Go ahead and get off the roller coaster. Or, at the very least, take some of your assets away from the roller coaster of stocks and bonds. If you are tired of watching the stock market go up and down, then it’s time to consider an investment in an asset with lots of room to run. In this article, we are going to discuss the financial returns available from owning senior assisted living facilities.

As an investment in your portfolio, this is a real estate play that generates annual cash flow with the option to cash out in four to five years. Annual returns of approximately 10% are reasonable expectations, along with a defined buyout strategy for a premium of your original investment amount. What makes this type of opportunity attractive is the wave of baby boomers moving toward needing this living environment — demand is growing.

An investment in assisted living requires a good basic understanding of what it is and what it isn’t. When we talk about owning assisted living facilities, we mean owning a facility that provides 24-hour elder care in a home-like setting with private rooms. A small community is created within the few dozen residents, and consequently the people enjoy a higher quality lifestyle — both physically and psychologically.

Compared to home health care or a traditional institutional nursing home, assisted living facilities are much more cost effective. In addition, residents receive more attention because there are more caregivers per resident.

Outside of an assisted living arrangement, the other choices include inexpensive senior apartments that lack medical or other services for seniors; nursing homes that are expensive and often lack privacy; or staying at home and adding the cost of a professional hourly nurse. For many people, assisted living facilities are the right choice because of the balance of good care at the right price.

As baby boomers are between the ages of 48 and 66 this year, most are still too young to need assisted living services. However, they have become very familiar with the concept as they search for solutions for care of their elder parents. We are on the front end of a wave of growing demand for assisted living facilities that will span at least the next 15-plus years.

Smart developers have noticed this trend and capitalized on it by building assisted living facilities to meet the demand. We see everything from high-end facilities to very basic ones being built to house and serve aging seniors. The most interesting developments are those targeting middle class retirees.

As you might expect, many of those in the market for assisted living come from the middle class. For the most part, these future residents are looking to live in a place that is clean and friendly.

Pricing is done one of two ways — either everything is included or there is a base price plus an à la carte menu of additional services. Since many middle class retirees are living on a fixed income, the popular choice tends to be the “everything is included” option.

As you learn more about assisted living facilities and the opportunities for investment, remember the basics. You want a good operator who understands that people are looking for places that are clean and employ a friendly staff. Once you find that right fit, you can take the time you used to spend worrying about the movement of the stock market on something else, like enjoying the walk to your mailbox to pick up your monthly check from your ownership in assisted living facilities.

Marshall H. Dean J.D., MBA, is a registered representative at Alliance Affiliated Equities Corporation, a FINRA-registered broker/dealer specializing in the evaluation and acquisition of alternative investments. He invites questions and comments at (913) 428-8278 or marsh@aaeconline.com.