2024 Costs to Start an Assisted Living Business: A Complete Guide
Aug 12, 2024
This blog will discuss the costs of opening an assisted living business in 2024 and beyond. Starting an assisted living business is a substantial enterprise with financial advantages and the potential to influence the lives of seniors and their families meaningfully. However, determining the expenses is one of the most important components of this journey. From initial setup to ongoing operational expenses, understanding the financial situation can help you plan successfully and avoid surprises.
This comprehensive guide will break down the numerous costs associated with launching an assisted living business. Whether you want to develop a new facility from the ground up, buy an existing property, or convert a residential home into an assisted living facility, this blog will offer you essential information to help you make informed decisions.
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Funding Options and Initial Costs
The cost of establishing an assisted living business is mostly determined by your financing method. An SBA loan is a popular alternative, typically demanding a 10-20% down payment. In my experience, it has been around 17-18%. Another alternative is a standard mortgage, which often requires a 25-30% down payment on investment homes. Hard money loans may require a 0-10% down payment, depending on whether the loan is secured by an asset. You may also consider partnering with someone who has the funds, which will allow you to invest with little to no money down instead of relying on sweat equity.
Cost Breakdown
To help you understand, let's use a $1 million property as an example. An SBA loan requires a 20% down payment, which equates to $200,000. A standard mortgage requires a 30% down payment of $300,000. A hard money loan requires a 5% down payment of $50,000. If you form a partnership and contribute sweat equity, your initial investment might be $0. For a more inexpensive house, say $750,000, a conventional mortgage requires a 30% down payment of $225,000, whereas an SBA loan just a 20% down payment of $150,000.
Considerations for Existing Facilities vs. New Conversions
When purchasing an existing facility, the cost comprises both the real estate and the business, frequently resulting in a larger initial investment. However, transforming a residential property into an assisted living facility might result in large renovation and start-up costs.
Building Relationships with Lenders
Engaging with different lenders—SBA, local banks, and credit unions—is crucial to understanding their lending programs. Creating a solid business plan and underwriting will increase your confidence and chances of receiving money.
Overcoming Rejection
Expect to face rejections along the way. Persistence is key; different lenders have varying criteria, so keep reaching out until you find one willing to work with you.
To recap, starting an assisted living business in 2024 requires a significant investment, typically ranging from $0 to $350,000, depending on your funding method and property cost. Whether you're purchasing an existing facility or converting a home, thorough planning and lender relationships are essential.
Does residential assisted living interest you, but you're unsure how to begin? Grab our free underwriting calculator, which provides detailed insights into the costs of starting an assisted living business.
Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
Show full transcript 👇
Transcript
00:00:00
hey friend welcome back to the channel in today's video we're going to be getting into the topic of how much does it cost to start an assisted living business in 2024 and Beyond if you're interested in knowing how much it's going to cost you to start up make sure you stick around and we'll get into that in today's [Music] video hey everybody I'm Brandon Gustafson I own and operate two assisted living facilities and I created this channel to help people just like you learn the ins and outs of investing in
00:00:32
assisted living welcome to Assisted Living investing as I mentioned in today's video we're going to be talking a little bit about how much does it cost to start an assisted living business in 2024 but before I get into that I wanted to remind you to get over to the website Assisted Living investing. net you can get access to our free underwriting calculator which is going to give you a lot of really good information about exactly how much it costs to start that business um and how you can underwrite
00:00:59
that and success have a have a successful program going forward we also have the Assisted Living accelerator course on the website so make sure you get over there if you're wanting to kind of get started on on your journey this course is going to help you out a ton in getting you uh on the right track to investing in Assisted Living again that's Assisted Living investing. net now let's get into the topic for today's video we're going to be talking about how much does it cost to get to start an
00:01:29
assisted living business in 2024 and I did a video about this previously and so we're going to talk a lot about the same things but there's a few different ways that you can get into this business and each of those methods have a slightly different starting point to how much it's going to cost you to start your own Assisted Living business here this year a lot of this is actually going to be dependent on the type of funding that you are going to get to start your Assisted Living business there's a few
00:01:56
different options here there's SBA uh which is the route that I've gone and I'm really comfortable with and can teach you along that process really easily there's a conventional mortgage which is kind of like a traditional mortgage that you would see if you were buying a house there is kind of partnering that you could go with and there's also hard money so each of these are going to have different levels of commitment with the SBA what you're going to be looking at there is they'll
00:02:21
tell you as low as 10% but my experience is it's going to be probably closer to 20% from my facilities that I purchased it was like 17 18% down is what we ended up putting down to purchase our facilities so it kind of gives you an idea of what that's going to look like as far as a down payment 17 to 18% with the SBA when you go a conventional route it's probably going to be up like 25 to 30% because this is an investment property this isn't a single family home that you're living in if you're doing a
00:02:50
conversion that's a different story maybe you already own the home and you're doing the conversion so that that could be very different here but if you're purchasing a home and you're going to do a version on it yourself you're going to need to do 25 to 30% down if you are using hard money hard money is going to be a little bit different because there's not necessarily always going to be an asset that they are leveraging sometimes it will be an unsecured line of credit it
00:03:16
won't be secured by real estate so that's something you want to be aware of I've typically seen the conversations I've had is the one 0 to 10% down so you could plan on it being about 5% for example and then if you're doing a partnership which is is also something that I did I went the SBA route but I partnered with my dad who had money through a HELOC to get started and I didn't have to put any money into it I just had Sweat Equity that I brought to the deal and did all the underwriting
00:03:41
and worked everything with the lender and all of that process uh together that's what I brought to the deal not not money and so I was able to get into it for zero down Okay so let's do a little bit of math on here and this is a little bit dangerous but I want to kind of give you an idea so you can see exactly what these percentages mean let's just say everything we're doing here is a million dooll home let's make the math really easy so we're buying a million doll home now if I'm doing this
00:04:08
on an SBA loan it's going to be 20% down I'm looking at $200,000 down for my payment if I'm doing a conventional route and I'm buying a million dooll home for for a home for 30% down I'm looking at $300,000 down if I am going the route of hard money and I need to put 5% into to it in that scenario I need to put 50,000 down and then if I'm going the partnership route where I'm not bringing any money but I'm doing The Sweat Equity zero dollars it's it's that
00:04:40
simple so you can kind of see what that looks like now where that is a little bit different is if you're going the SBA route you're probably going to be purchasing an already existing facility and as you do that it's going to be slightly more cuz you're buying the real estate and a business if you're buying just a single family home you might be able to get something for a little bit less less so let's say that you're able to purchase that single family home at $750,000 now you're 30% is going to be
00:05:10
$225,000 down so that $225,000 at a $750,000 home versus $200,000 for a million doll existing home and Business that's a little bit more comparable but then you're going to also have to put some money in to do some of the renovations you're going to have the startup cost of of starting a facility um that come when you're doing a Comm conventional mortgage probably going to have to have that come out of your pocket so it might end up being a little bit more if you go that rout but that's
00:05:39
just a way for you to kind of see exactly what that's going to look like for you and kind of help you plan how much these things are going to cost you as you get into it so which of these options is best for you and really it's going to depend there's pros and cons for each of them and I've talked about that in previous videos as well we'll link those videos up above uh so you can watch those to get a feel for the different Pros and cons of it does it make sense to purchase the existing
00:06:03
business and and start running and hit the ground running so you can really start moving things forward or does it make a little bit more sense for you to buy something or or have a house that you can do the conversion on and there's a lot that goes into that but it can also be really exciting and really rewarding you can get it exactly how you want it to be to run your facility those are really your two big main things we're going to talk about that in in a future video here as well so make sure
00:06:30
sure you like the the the video subscribe and and ring the bell so you get notified when we put out that other content here on the channel what I'd really suggest that you do though is start talking with lenders start getting a feel for what their different loan products are talk to different SBA lenders talk to different mortgage local credit unions local banks and see what they have available when I was purchasing one of my businesses the my business that failed called Novis Health what I did I needed to get SBA funding
00:06:58
and so I did an internet search to figure out who all of the different SBA lenders were in my area I created a list of them and then I started cold calling and saying hey I'm doing this franchise business I have a business plan I have my underwriting it looks really good this is what I would like this is how much money I need for it what's your application process like and then we would have conversations back and forth and I ended up being able to apply to about 10 different banks and credit
00:07:26
unions and ultimately we found one that wanted to work with us and so it's kind of going through that process you're going to do the same thing with a a a local credit union or a local bank the more that you can build in that business plan that underwriting that you're really confident and comfortable with the numbers the more confident you're going to be when you have that conversation with a lender whether it's SBA or more conventional but having that confidence is going to make it a much
00:07:51
better experience for you as you try to get the funding that you need to purchase and start your own Assisted Living business and your own assisted living home so it's something you really should be spending a lot of time doing and trying to figure out how to build and cultivate those relationships because you never know what's going to happen the other thing I would tell you is you're going to get told no and you have to just be okay with that that it's okay to be told no and just because One
00:08:18
bank or One Credit Union tells you no it doesn't mean that all of the other ones are going to tell you no they all have different criteria and so the more that you get out and start talking with them and building those relationships the more likely you are to find somebody faster and get started on your own Assisted Living business with that said at its core though what we just talked about with those amounts going from anywhere from zero to2 $350,000 depending on the amount of money that you need to purchase the home
00:08:47
for is what it's going to cost you to start your Assisted Living business in 2024 is going to be the same in future years as well so it's something that you want to just kind of be aware of it really is contingent on on how much you're purchasing the thing for and then you're going to look at what percentage down do I need to put to get the loan with the bank that's what's going to help you get there does residential Assisted Living sound interesting to you but you don't know how to get started at
00:09:14
Assisted Living investing. net we are here to help you through the process start to finish I want to thank you for watching make sure you like the video give it a thumbs up and subscribe and ring the bell so you get notified we put out content multiple times a week and I do lives and I'd love to have you there also get over to the website assist living investing. net so you can get access to our free underwriting calculator to help you along your investment journey and remember it doesn't take a lot just a little bit if
00:09:38
you keep going step by step by step I promise you you're going to be successful thanks for watching and have a great [Music] day
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