Does House Size Matter for Assisted Living? Here’s What REALLY Matters

Transcript

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Hey friend, it's Brandon Gustafson with Assisted Living Investing. Super super excited to have you here with me today on the channel to be talking about um sorry, does house size matter for assisted living. We're going to be discovering what really matters uh as you are trying to get into this to decide which of these options is going to be best for you. super excited to get in here and chat about this with you because this is this is something I was I was looking um at some uh some comments on YouTube and this was a

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question that somebody had around a 3,000 ft home and is it good? I think they were actually asking if it's a 3,300 ft home, would this work for assisted living, is it a good idea? And I got some thoughts on it. So, I want to share those with you today. Before we jump into it though, um welcome to assisted living investing. I help first-time assisted living entrepreneurs launch profitable, purpose-driven businesses, creating prosperity, purpose, and peace in their lives. Super excited to chat with you about this and

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help you kind of decide what is going to work best for you. Uh is it uh is the house size all that important or what should you be focusing on as you get into this? Also, want to remind you, stick around till the end of the video. I've got a special uh a special invitation for you to work with me in my road map challenge. You can learn more by going to roadmapchallenge.com. Um, but I will tell you a little bit more about that here at the end of the video. So, stick around if you're interested or head over to

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roadmapchallenge.com to learn more. And make sure you get over to assistedlivinginvesting.net as well to grab your free underwriting calculator. We're actually going to talk about that today. So, if you can go grab the calculator, uh, you might be able to follow along a little bit as I get into a little bit of numbers and underwriting and and you can get a get a feel for what that's going to look like. All right, let's get into our topic again. Today we're talking about does house

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size matter for assisted living. Uh I'm going to be talking about a few things today. Um number one, we're going to be talking about size of home versus the layout. Uh we're also going to talk about how room count is going to drive your income. Then we're going to get into why why you need to underwrite. That's why you should go to assisted living investing. Uh, grab your net and grab your free underwriting calculator because we're going to talk about why it's so important for you to underwrite

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and understand the numbers and then we'll go through how to validate your market a little bit as well. So, I want to give you a really good guide here so you know exactly what you're getting into as you're trying to figure all of these things out. Uh, let's start off here with size versus layout. So, I got a a little bit of a story that I want to share with you. Um, when I was pretty early on in in my investment journey, I had already purchased my two facilities. So, I had one in Colorado, I had one in

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Idaho at that time. And, uh, I had been reaching out and doing some networking with people and um, on the Bigger Pockets podcast, there was a a lady who uh, was who who was talking about some of her investments that she had done. And just listening to her, I was like, I'm pretty sure she's from Utah. just there there's little uh Utah isms that you can hear when you're from Utah and I could hear it in the way that she was talking and I I can't remember her name now. Um but I I was like I I'm pretty

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sure she's from Utah. So I'm going to reach out to her. I found her on LinkedIn. Uh we connected and uh sure enough she was from Utah. Uh she was in Riverton and which is a part of uh the Salt Lake Valley on the south side. And so I go and uh go chat with her and she's like, I I've you know, this is actually a really good timing. I'm actually considering assisted living right now. And so we we go my wife and I actually uh we stop by her house and uh we have this conversation with her and

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she had this beautiful home in Riverton, Utah. Had it was uh Rambler style, so had a very low entry. There may have been one or two steps um to to get into the home. Uh had a walk out basement um two two levels uh but large large home probably 3500 4,000 ft. Pretty big size home. And she's like I I think that this home would be perfect for assisted living. Can you help me figure it out? So we started going to the drawing board. I had uh I had already developed a relationship with the city planner in

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Riverton. Um, and Riverton was actually one of the cities that I was comfortable doing assisted living in in Utah. And so I re-engaged him about the conversations who I needed to be uh who I needed to interact with and and figure all of these things out, what we needed to do for zoning, um, getting fire department approvals and and we went through this entire process of of looking at the home, uh, having some inspections done, uh, doing our due diligence before we just jumped in and said, "Cool, you

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know, assisted living is going to be great. There's there's a bunch of bedrooms here. It's a a fun layout. We could we could we can make this work. Instead of jumping into it and just trying to figure out on the fly, I used the information I had gathered um from doing this a couple of times already. And we slowed down and we did our due diligence to make sure this is going to work. And as we were doing that, we had the fire department come out and they looked at the home and they said, "Well,

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you can't use this room because of this reason and if you want to do the basement, you've got to do XYZ." and they they gave us this list of of things that we would have to do to the home and uh it it just felt way too prohibitive for us to to move forward with. And I learned something from that experience. Uh what I learned is that it it's really important for you to do do the due diligence first off so you don't get yourself in a bad situation. But more than that, uh, what I learned is it's

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going to benefit you a ton to realize that square footage isn't everything when it comes to assisted living. You might you might watch a video, somebody might have a video online. I've kind of seen this a little bit where you need to have a certain amount of square feet. Um, there's square footage requirements for for the amount of residents and and things like that. And there are for bedrooms uh for a bedroom you need uh in most states uh 100 square ft per resident or in a shared room it's 80

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square ft per resident per room. So it' be a 10 x10 room for a single resident or like a 160 ft room for um residents that would share a room. So like a 16x10 room just for for really quick math for you. And yeah, you could you could definitely have a home that has that many square feet, that has rooms that are that big. Um, those are all entirely possible. There's there's hoops you have to jump through with egress and and a bunch of things. And what I what I really learned from the conversation with this property

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in Riverton is the square footage. While that home had 3500, 4,000 ft² big, beautiful home, the the layout of that home, the amount of bedrooms it had, where those bedrooms were located were too prohibitive for us to turn it into assisted living. It would have been a massive renovation, which for us in that situation wasn't the right wasn't the right move. Um, doesn't mean that it wouldn't be for you if you're watching this. It just means something you want to be aware of as you get into this as

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square footage doesn't automatically make it perfect for assisted living. Um, if you can't use the space that you have or if it's going to cost too much for that space, then it's really not going to matter. I'm going to go back to my home in Idaho. My own home in Idaho is I was doing some research before this. I got on my Zilla listing. I'm pretty sure it's 32 3,400 ft. It's not not this huge mansion. Uh it's not a huge building, but it was designed specifically for

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assisted living. In the early 2000s, there was a guy in the um Treasure Valley, Idaho area, which is Boisey and and the surrounding markets. And uh he went and he built uh between six and 10 of these throughout the the valley there in in the Boisee area. And they were purpose-built for assisted living. So I walk in to the home. Um just to the left of me I've got my dining room and then I have my kitchen and then I have my um my family room communal space where we have the TV and things like that. And then

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around the entire home, the rest of the home are bedrooms with um at least a half bath in in every single one of them. So at least a toilet. Um and then we have some other public facing uh restrooms that are used for showering and and and those types of things. So it was purpose-built for us. So it was smaller. Well, that home is smaller than the one we were looking at in Riverton, but because the space was used well and it was designed correctly, it's perfect for assisted living. Looking at

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it from the outside, you wouldn't know that it was an assisted living home. It's an HOA in in an HOA. Um, it's it looks exactly like a normal home. Um, I mean, it's it's pretty big. Uh, but compared to the other homes in the area, it's it's not bigger. Uh, like it's just kind of normal. But what really counted is the design of the home and that we were able to use that 3,200 3,400 square ft in a way that allows us to have have it designed well for assisted living. So

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when it comes to to working here in in this space and trying to figure out, hey, is this going to work for me? Your room count is going to drive your income um probably more than just like how big your home is. So, you need to be paying attention to that. So, if you've got a a big, you know, 3500 foot home, 3,300 foot home, and it has four bedrooms in it, three bedrooms in it, or or something along those lines, um, but it's just not designed well for assisted living, and the renovations to get more

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bedrooms, um, is going to make it really hard to do it. It might not be worth it to, uh, to move forward with this. So I want to use kind of an illustration here, math illustration of of how to do some simple underwriting so that you can understand uh how the income for assisted living is going to work. So there are really two levers when it comes to income in assisted living. There are the number of rooms, the number of beds, and the amount of money that you can charge per month per bed. So let's say that you uh you've got this

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3500 foot home. Um you've got this beautiful home. It's got five bedrooms, but those bedrooms are laid out in a way that you can't do shared rooms in them. Okay. Um, so you've got you you can only do five beds here. And the rest of the space, it's beautiful. It's big. You can have a lot of fun things in there, but you're not going to be able to convert them into bedrooms. Okay, let's say that that's the scenario we're in. We are able to charge uh $4,000 per per bed in

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this home. So, I've got five beds at $4,000 per bed. That's $20,000 in income. Now, this is one of those things where I I've done videos on this in the past where um small homes uh $20,000 in income seems great, but that's if you're at full capacity and then you have to realize that you've got to spend a bunch of money on your expenses. You're not going to be cash flowing very much in that scenario. You're just not. So, let's say there's a lever that you can

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pull and that's the price per bed. Let's just bump it up and say instead of $4,000, we're going to be able to charge 6,000. So, five beds times 6,000, we're up to $30,000 in income. Now, we're we're probably in a pretty good spot as long as we stay at capacity there. But if we lose one resident, that's $6,000 in income that goes away. And now we're at $24,000 in income. So, this can that money can really dry up fast. So, all of the profit is probably coming from that

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one resident when you're at 100% occupancy. Otherwise, you're kind of breaking even. So, you just have to be very, very careful when you do this. Now, let's say that that home is actually designed so you could have multiple residents in a room or let's say that um it's it's laid out in such a way that you could um kind of knock down some old walls and put up some new walls and you could create more bedrooms or bigger spaces to allow for more beds in the home. And now you can get up to 10

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residents. You're doubling that amount. And so if you stay at that 40,000 or that $4,000 per uh per resident in there, that's $40,000 in income. And the reality of your expenses is they're not going to increase all that much when you go from five residents to to 10 residents. Your biggest one's going to be wages. Um you might have to add an extra person or two to your payroll, but you're not doubling the amount of people that that you have to hire to do this either. Okay. So, let's say that you've

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got uh $4,000 10 that's $40,000. That's that already is more than that $30,000 you were making in the scenario of 5 time 6,000. But let's say that you can pull both of these levers and you can get 10 residents in there at $6,000. Now you're up to $60,000. That is three times more than what you were getting when you had five residents at 4,000. Right? Simple math. You're going from 20,000 to 60,000. Now you are definitely going to be turning a profit. Um, and it's double what it was at five

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residents and and 6,000 that $30,000 in income. Now you're up to 60. So you're doubling that amount. So this hopefully shows to you the power and why it's so important for you to understand these these two big levers that you have um and what you can pull, what you're able to do. Now I will say if you are one of those people that is going the route of unlicensed, type in unlicensed down below. would love to hear from you on this. But when you're when you're an unlicensed facility, you're probably

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going to cap yourself out at six residents in the home. Like that's just the reality of of what you can do inside of the home. And so you want to understand what that what that's going to do to your income. It takes that one lever that is the amount of rooms that you have and it really uh like you can't pull it anymore. And so you only have one lever and that's your price per bed. And in some states you can't even do up to six. you might be capped out at four. So, you can really kind of hamstring

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yourself in in doing this. Even if you have this big beautiful home and you want to do unlicensed, if the the state regulations don't allow you to have more than a certain amount of residents, if you want to go unlicensed, um then then you really are kind of kneecapping yourself. The licensing process can be lengthy. It's relatively expensive. it's probably going to be a few thousand dollar. But when you take it into the scheme of things of, you know, I could have five residents in a home versus 10 residents,

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all of a sudden it starts to make a whole lot of sense to increase your bed count as much as you can. That's where becoming a licensed facility so you can have more than the four to six residents starts to make sense. Now, there are certain states where you might not be able to do this. the the the process that you want to go through to become licensed may be too prohibitive, may take too long, maybe you need to start out as unlicensed. There's a lot of uh different balls that can be in the air

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that that can really make your life hard as you're trying to uh trying to figure those things out. So, you just need to take all of that into consideration. But, at its core, look at these two levers. They're really important. Number of rooms and price per bed. see which of those you can pull or can you pull both of them and that's going to increase your ability to to generate profit. So that's that's the basic for underwriting when it comes to uh understanding your income. But you also are going to want

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to make sure you do underwriting from an expense standpoint and understand your expenses. So number one in understand your income potential. Super important. Number two understand your big expenses. I call these the wife expenses w i f d because you are married to them as you as you own this facility. The big and if you're interested in learning more about this, type in wife down below and we'll do a separate video for that. But the wife expenses are wages, insurance, food, um utility or energy, which is

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your utilities, and then your debt service, which is like your mortgage payment, um or your lease, uh payment, the amount of money that you pay so you can have the building. Um, basically if you can figure out those five expenses, then you're going to know about 80 to 90% of your total expenses for the entire business. It really lets you kind of back this in. We we actually go uh and and do an entire day on this process in the roadmap challenge. So, go check it out, roadmapchallenge.com. But, um, when you're doing your

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underwriting, you also want to be conservative. I I I have what I call the 80% rule. The 80% rule basically says if I am um if I if I'm doing my underwriting, I need to be uh comfortable with the profit goal that I have, I should be reaching that at 80% occupancy, not at 100% occupancy. I should I should be able to reach my income goal when I am at 80% occupancy. Because the reality is you're probably going to be sitting around that 80 to 90%. you're probably not going to be 100% full 100% of the time. You're going

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to have beds open. Like, it's just going to happen. And so, if you can hit your $10,000 per month goal at 80% occupancy, and your break even point is being 60% full, you've got a pretty good deal on your hands. if you're not going to reach that $10,000 per month, which is your income goal, unless you are at 100% occupancy. You know, the example that we just used where we were saying uh we had five five residents at $6,000 and we had one resident leave, we went from $30,000 in income to $2,400.

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And and so that profit there, that all came from that extra resident from being there. who were losing two residents and that takes us down to three residents at 6,000. Now we are at $18,000 in in income coming into us and our expenses are going to be higher than that. So we're losing thousands of dollars per month when we do that. So you have to really understand the numbers here and make sure that you're hitting your goals before you get to 100% occupancy. That's what you should be shooting for if you

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want to have something that's really successful. So don't don't run into something just because you think you know you heard a video and somebody said you have the potential to do this. Make sure you run the numbers so you know exactly what it's going to look like for the money can dry up so fast when you have this happen. We had an experience in our facility in Colorado at one point where we uh we were we were licensed for 16. We we had our uh our census was probably about 14 or 15 and then we had

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in the span of about 3 weeks we had five residents leave. um for various reasons. And that was it took us from cool, we're making money, everything's good, down to crap, now we're losing thousands of dollars per month and we're scrambling, we're trying to bring in more residents. And so you have to really set yourself up uh to be successful and understand your numbers and the levers that you can pull and that's what's going to allow you to to be successful and move forward

00:19:00 - 00:19:51
with confidence that you have a profitable opportunity in front of you. Underwriting is so important. Make sure you go grab the underwriting calculator at assistedlivinginvesting.net. I give it away for free. So, go grab that and and make sure you get start getting familiar with the numbers when it comes to um when it comes to assisted living. It's going to help you out a ton. The other thing that you should be doing uh when you are looking at these types of facilities as you're trying to just look

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at the landscape and hey, is this going to be good for me for assisted living or not? Is you need to analyze the market. Um so I I teach this um this is part of something that in my focus framework which is the five-phase process for how you get started in assisted living. The first the first phase of that is foundation first and a part of that foundation you need to build is your business plan your underwriting. Go to assisted livinginvesting.net grab the free underwriting calculator. Um it is

00:19:55 - 00:20:54
uh analyzing the market and it's creating your entity. So analyzing the market is a part of building your foundation to make sure that you're going to have enough people that are going to need assisted living services. I have what I call my 5% rule and I talk about this in my book, the profitable assisted living facility. Uh you can get that at the alibook.com. We'll have that linked down below for you. But inside of the book, uh I talk about what I call the 5% rule. And basically what that

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says is I want to if if if I have a population I'm going to serve. Let's say I'm going to serve uh elderly individuals. So they're 75 plus. Okay. So if that's the population I want to look at when I look at the data, census data, all the data that I can find on on a specific area and I identify that there are 20,000 individuals that are 75 years and older in an area. What I should be able to deduce from that is 5% of the that 20,000 are going to need assisted living services. So 5% of

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20,000 is a,000 people. So what I can gather from that uh group, that area that I'm looking at, if there are a,000 people, which is 5% of of the the total population I want to be pulling from, if there's a thousand people there that need assisted living services, that means there's there's a need for at least a thousand beds. a thousand assisted living beds. So, when I start doing a deeper analysis of the market to see if if it's going to work for me, then I I would be looking at how many

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licensed beds are there. Am I at that thousand mark or not? And that that's going to tell me if I'm in a good spot. And then I would also dig a little bit deeper because if you find, yep, there are a thousand. But if I dig deeper and I find that the majority of those facilities are big box facilities and I'm going to be a small residential facility, I still might be able to carve a little bit of a of a market share out of that because I can I can market my stuff as as a much more personal uh

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place for you to do assisted living as opposed to, you know, just like the big box um just cookie cutter type of a thing. I'm much more personal. But if I look at it and I find that 500 of those beds are already residential facilities, yeah, I might not I might want to look somewhere else. So, this is all a part of the foundation that you need to build as you are trying to get into assisted living and identify if a home is going to be if it's going to work well for you. You can't message me and be like,

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"Hey, I've got this 3,300 ft home. Do you think it would be a good opportunity?" There's so many different factors that go into it. What's the the room count? Have you talked to zoning? Uh have you talked to the fire department? Have you looked at all of these different scenarios? Have you have you gone and done your market research? How many beds are there? What's the market? How many people um for the population you want to serve? How many of those people are in the area? You

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need to be looking at all of these things. And if you don't do that, you can get yourself in a really bad situation where you you have where you start losing money hand over fist. I have had businesses, not my assisted living business, but I've had other businesses where that has happened to me where I I tried to project the market and I was off and um my brother and I in that business ended up not being successful and having to I had to sell my personal residence. He had to file for bankruptcy and that was really hard

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and a lot of that was we didn't spend the time upfront to understand the market and what we were getting into and it it led us to making incorrect assumptions. uh rosecolored glasses assumptions that put us in a really bad situation. I don't want you to do that. I want you to make sure that you are looking at things and understanding exactly what you're getting into. So, if you need help with that, that's what I teach in the road map challenge. I would love to have you there. Go to

00:23:42 - 00:24:32
roadmapchallenge.com. You can learn more about it. Uh we have an upcoming challenge soon. Um they're they're live coaching challenges. This is not me giving you a bunch of videos and saying good luck. this is we're in a room together for the entire week and you can ask me whatever questions you have and I will help you get unstuck. I would love to have you there. It's one of my favorite things to do is just sit there in coaching and this is the best way for me to do it is to get you in our in our

00:24:07 - 00:25:04
challenge and it's super affordable. Uh by the way, uh like I I charge people $15,000 for this type of experience usually and this is at a significant fraction of that. Uh like a very small amount. [laughter] Uh so go check it out. roadmapchallenge.com. I would love to have you in there as you are trying to build uh your facility, build your business plan, build your business, and launch it and and get things going. Let me help you build the road map so you know exactly what to do as you're

00:24:36 - 00:25:36
getting into this. Also, if you need help, go grab my book, The Profitable Assisted Living Facility at theibbook.com. Would love to have you uh read that. It it Oh, man. It's it it took everything out of my brain. and I put it into paper and I give it to you for like 20 bucks. So, um, go get it. It It is. And actually, because of when we're recording this there, I I think I saw some Black Friday deal thingies that, um, that Kindle was doing on it, so it's even less than that. So, um, go check it

00:25:05 - 00:26:01
out. Uh, make make sure you go get it. Not saying that it will always be a available, but, uh, I didn't run the promo. Kindle's doing it. Go grab it [laughter] and get the help that you need as you're trying to launch your assisted living business. So, we talked about a lot today. Uh, today we were talking specifically about does house size matter for assisted living and uh we went into the size versus the layout. Um, the room count, how that's going to drive income, why you need to underwrite, and then why

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it's so important for you to validate the market. I'd be really interested what was the thing in here that like resonated with you that you're like, that's the thing I needed to hear today. If it was if it was size, type in size down below. If it was underwriting, just type in underwrite down below. And if it was like that market validation, just type in market down below. Cuz there's there's so many things that uh that you need to be doing as you get into this as you're trying to figure out how to

00:25:58 - 00:26:49
launch your assisted living business. It's really important for you to um to do these things the right way. That's what's going to to bring you success as you're trying to get into this. Are you curious about assisted living, but you're not sure how to get started? At Assisted Living Investing, I help beginners like you launch their assisted living business in the next 12 months, creating prosperity, purpose, and peace in their lives. I'm super excited to help people do that. Go check out

00:26:23 - 00:27:12
roadmapchallenge.com. If you haven't already, like the video as well, subscribe, and make sure you turn on notifications so you get notified every time we put out content like this. We go live on Tuesdays and put out content on Thursdays uh to help you out and and help you get unstuck as you're trying to launch your assisted living business. And remember, it doesn't take a lot, just a little bit. Just keep going step by step by step and I promise you if you do and you're consistent and persistent,

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you will be successful. Thanks for watching and have a great day.