Funding Options That Actually Work for Assisted Living

Transcript

00:00:00
Work for assisted living. So I'm really excited to get into that. I know there's a lot of you out there that are trying to figure out funding like it's it's the question that I hear the most frequently, you know, the biggest concern for people as they're trying to get started is

00:00:16
funding, how to get funding, how to secure it. Is it possible? What are the options out there? How am I going to go about doing this? I hear that all the time from people. And so I wanted to get this video in here for you and help you out. For those of you that don't know me, my name is Brandon Gustafson. I help beginners like you launch their assisted living business in the next 12 months. I'm excited to have you here with me

00:00:40
today on our channel here at assisted living investing as we get going if you need help as you're trying to make progress and and launch your own assisted living business one of the best things you can do and and a lender is going to ask you for this and so i strongly encourage you to go take advantage of this have a free resource for you so if you go to assistedlivinginvesting.net bp checklist stands for the business plan checklist you can get that it tells you all of the things that you need to have

00:01:09
inside of a business plan to help you get the funding that you need. These are the elements that after working with a lot of different lenders through the years, I've been able to just kind of hone in on this is what they really want to see in a business plan for an assisted living business.

00:01:27
So make sure you go grab that free resource. Again, it's assistedlivinginvesting.net slash BP checklist. And as we go through the video today, we're going to have time for questions. So if you're live, make sure you're typing in those questions. If you're not, that's okay. Type in your questions as well so we can catch you up on things as we get into this and help you along your journey and helping you launch your assisted living business.

00:01:51
For some background on me, I own and operate two assisted living facilities and I've been doing this since 2020. I have secured over one and a half million dollars in SBA funding. I've done three separate SBA loans, understand the process, how to work with lenders and how to navigate that process. And so it's a little bit of what I'm gonna teach you here today in our video. And then at the end, I'm gonna have an offer for you to work with me in one of my communities.

00:02:19
Make sure you stay tuned for that because it's something where I can help you get answers to the questions that you need as you're trying to move forward with this. I also operate out of state with my facilities. So not only have I done this since 2020, but I live in Utah and have a facility in Idaho and another one in Colorado. So I do this out of state.

00:02:36
And I have a strong background in healthcare. So I have a master's in healthcare administration. I have worked in the healthcare industry since 2011. I have a really solid understanding of just how to navigate everything that comes with working inside of the healthcare world and a lot of experience there that I love sharing and teaching people like you.

00:02:56
So if you are new here, you're seeing this for the first time, make sure you type in newbie down below. I love seeing the new people when they find the channel and see how I can help you. So type in newbie and maybe type in your biggest question, the thing that you need the most help with. And that could turn into a future video here for one of our live sessions that we do.

00:03:17
So with that said, let's jump into the topic of today's video. How do you know the different financing options out there, like how you can actually get funding to help you launch your assisted living business as you're trying to find things out. So I want to really kind of dive into the different types of funding that are available to you so you can really kind of fill these out and see which one's going to be the best for you.

00:03:43
I also want you to note that you may have to combine some of these and you may have to do one strategy in the beginning because you can't do an SBA loan. So you might have to do a different strategy in the beginning with the intent to then refinance that into something else.

00:03:59
So those are options. You don't have to hit a home run off your first pitch. You can take some time, maybe do it one way, and then refinance a little bit later on. It's going to open up a lot of doors for you. So don't get too discouraged if you can't make this work.

00:04:14
from day one, there's going to be an option. It just might not be exactly what you were thinking of as you were kind of starting down this path. Okay, so the first one that I really want to talk to you about are traditional or conventional mortgages. So these are, think like you're buying your own house. That's the type of loan that you're going to be looking for.

00:04:36
Now, when you are using this type of a loan to buy a house for assisted living, what you're going to find is more often than not, these are going to be looked at as an investment property. And really what that means is you're going to have higher rates. Terms are going to be the same.

00:04:54
But rather than, let's say, just for even numbers, rates are at 5% right now to buy a house for you as an individual. When you're buying an investment property, you're typically going to have a rate that's maybe 7%, 8%. So it's going to be a little bit higher. Also, your down payment is typically going to be a little bit higher. So you can't...

00:05:17
There may be situations, but I'm going to use an example. Let's say you have an FHA loan where you can do three, 10% down. You're at a smaller down percentage of a down payment, whereas you're doing an investment property that's typically going to be like 15 to 25%. So investment properties are going to have slightly higher rates.

00:05:38
They're going to require more of a down payment because the bank is assuming a little more risk. Because if you're in this situation where it's like, okay, I've got to choose between my family living in a home and my business doing well, I'm going to side with my family first, right?

00:05:57
so it's less risky for somebody to like figure out how they're going to make their house payment for their personal residence rather than a business that it's just like i really don't want it to fail but if if all else came down to it i need somewhere for my family to live right that you're going to prioritize that so from from a bank perspective they're going to look at that and assess the risk and that's why you're going to have a higher rate and a higher down payment when you're doing this when you're going this route now

00:06:24
Typically, also with a traditional or a conventional mortgage, you're only going to be able to use that to buy the real estate. So you're probably not going to be able to use it to get some extra operating capital. Now, if there's enough equity in the home, you could buy it and then you could turn around and you could do a HELOC on it, a home equity line of credit to free up some money there. And then it's all within the house. So there are strategies around this.

00:06:47
But you have to make sure you're buying at the right level so that you have enough equity so you can do that or potentially buying a home with a lot of equity in it and doing what would effectively be getting extra capital because there's enough equity in the house that you could get money out of it. So there's ways around that. But typically, especially in something where you're going to be having to do such a large down payment.

00:07:12
it can throw a wrench in doing that right off the bat. It's possible, but not super likely. You might have to turn around and do something with it later. But oftentimes they're going to be easier to obtain this type of a loan because every bank does it. There are so many lenders out there that do traditional or conventional mortgages. It could be your local credit union, could be

00:07:38
Bank of America could be PNC could be, you know, whichever bank it is. There's so many out there that will do this type of lending. And so it's going to open up a lot of doors for you. So they're just because of the volume, they're going to be easier to obtain for that reason. But remember,

00:07:56
you're probably only buying the real estate with it. So you're going to have to look at combining this with another option unless you already have some of that cash available for you for some of the operating budget that you want to have or renovations on the house or things like that. So that's option one is traditional or conventional mortgages. Next, we're going to talk about hard money and private money.

00:08:18
And there was somebody on YouTube that made a comment about wanting me to dive deeper into this. So if this is something that you'd like me to talk a little bit more about, just type in private money down below or hard money. Type in one of those phrases down below and that will be a sign to me that, hey, you all want to know a little bit more about this type of lending. And we can do a video on specifically on that.

00:08:41
You can also go watch a video I did with Regina Morgan a couple months ago. I'll try to link it up above, but I may not do it because these lives are hard for me to go back and remember to go back and link them. But if you go to my channel and search Regina Morgan, we did a video there and she has options that I think would really help you out that are

00:09:02
kind of in this vein of hard money or private money. Now, the nice thing with this type of funding is there's a lot of flexible options. You're working with individuals. You're not working with a bank. So that's what the difference is. And because you're working with an individual, each individual is going to have a different threshold and different requirements for closing on a deal.

00:09:25
so they're typically going to be looking at the amount of equity that is in the house and that's what they're going to be loaning against they don't care that much about anything else and so they're they're maybe willing to come down and give you a very small down payment percentage because maybe you have enough money built into the equity of the home that they're they feel comfortable with with what's in there

00:09:48
They're going to be more flexible and willing to negotiate terms and timelines and everything there and rates. So that's something that you want to be keeping in mind that you're working with an individual. You want to vet that person if you're going to work with them. Don't get a loan shark. Don't get somebody that has a bad track record. But if you can find good people, these are just incredible people to work with because they're doing this because they have the funds available and they want a good return on their money.

00:10:16
and they're willing to help other investors like you get started. So this is a great option. There's a lot of flexibility there. They can also close very quickly, like within a few days to a few weeks, rather than when you're working with a lender, it can be months for you to close a deal. Whereas you work with hard money and private money, you can close very, very quickly, which can be helpful in a pinch if you're trying to do things quick.

00:10:41
There will be higher interest rates typically. So in that example, we were saying, you know, 5% is the base for me buying my own home. And when I'm doing an investment property, maybe it's like 7, 8. When you're working with hard or private money, you're probably like 10 to 12%. It's just going to kind of depend on the lender and what they want. But they are willing to negotiate some of that based off of the terms and some of the other ways that you're structuring the deal.

00:11:04
So that's encouraging while the rates are higher, there's more room to negotiate those types of deals. These also are typically going to have shorter terms with what are called balloon payments. So oftentimes with hard money or private money, what you're going to see is a term that is just like six to 24 months, very short term, like no longer than five years.

00:11:24
And so it's going to be for that period of time. Now you can re-up with them and you can negotiate in their options to extend potentially. But for that six to 24 month period, you're going to have what looks like a mortgage payment. It's going to be, let's, you know, at that 10% interest rate, you're going to be paying on a monthly basis. Let's say you've got a payment of $8,000 a month and you're making that as like a normal mortgage payment. When you get to where the balloon comes in,

00:11:52
So at whatever mark that is six to 24 months, you're going to have this balloon payment. And that basically says the loan is now due. So when you have this coming up, let's say you have a 24 month balloon payment at month 20, after you've been operating your business for a year and a half, you might want to start looking at an SBA lender and, and start looking at refinancing into a different type of a loan that would allow you to get the funds to make the balloon payment. And,

00:12:21
and then you pay that off you don't have the hard money loan anymore and now you're in with an sba loan so that's a way for you to really get into this in a way that um you know if you can't find funding your credit's bad uh you for whatever reason uh you just can't get a lender to work with you can't find a lender or anything like that working with hard money lenders or private money lenders is a good way for you to get into this you're going to oftentimes hear from sba lenders you know we love the business

00:12:50
but we don't, you haven't done this before. You're doing this in a brand new home. We don't trust, we need to see that it's actually going to work. And so that's where working with a hard money lender, private money lender can help you get things going from the beginning. And then you have this track record now of,

00:13:08
12, 18, 24 months of operating a facility at that point, an SBA lender is much more likely to work with you. So this is a really great option for people that, uh, like you can't find lenders keep telling, you know, cause you don't have the experience, uh, those types of things. This is an option that works really, really well for them. Um,

00:13:29
It will also, let's see, yeah, and I talked about refinancing relatively quickly in this scenario because typically a hard money lender, private money lender isn't going to keep that for a full 25 years. They don't want that. They want to get their money back so they can reinvest it into another opportunity. So that's the reason that they do that. But it is a great money, a great option. I think it gets a bad rap.

00:13:54
And there are certainly people out there that do this with bad intentions. So make sure you are doing your research before you do it. If you see anybody in my Facebook groups or somebody says, Oh, I know Brandon, unless I have specifically said that I know them, like don't trust them, vet them personally, make sure you're comfortable with them. Talk to referrals that they have, do your research before you create a relationship with these people. Um,

00:14:21
because you don't wanna get in a bad situation, okay? But this is a really great opportunity for you if you're struggling to find some of that funding somewhere else. Next is going to be small business loans or lines of credit. And this is different from an SBA loan. We're gonna talk about that here in just a second. So make sure you stick around for that part of the video. But this is...

00:14:41
These are loans that are specific for small businesses, and these loans can be used for renovations or operating capital there. Sometimes they can have stipulations like I'm working with somebody inside of our mastermind program and we found a great small business loan product that is actually done by a city. And I've done this with a few of the students that I have and helping them secure funding here in this area.

00:15:09
But those funds have to be used for operating capital. Those funds cannot be used for renovations at all. It's a stipulation inside of the way that they're going to provide those funds to this individual. So if you needed funds for renovation, they're going to have to look somewhere else.

00:15:27
So these are sometimes there's stipulations. Sometimes they say you can only use the money for X purpose and you have to follow that or else you'll get in trouble. They won't give you the money for whatever reason. You have to kind of figure out what that's going to look like.

00:15:42
Sometimes these are with traditional lenders. So this could be at your local bank or credit union. And that's where I always suggest that you start is local banks, credit unions, small local places. They're going to be a lot better to have conversations with and develop relationships with. Or they can be with municipal programs. I've seen this twice already. So these types of programs exist. They're out there. You just have to know how to look and how to find them. But they're great options for you as well.

00:16:11
These are really great options, these small business loans or even lines of credit, which basically is a credit card, or we talked about a HELOC, a home equity line of credit. They're great options to pair with something like a private money lender or a traditional mortgage, where those are gonna be a little more focused generally on helping acquire the real estate and not so much on renovations or operating capital.

00:16:39
so you might have to combine those different types of loans you can always refinance this later as well what i want you to make sure you're doing as you get into this though is underwrite it so if you're going to have different loans

00:16:54
Um, that means you're going to have two different loan payments and that can be really hard. And so you want to make sure you're doing your research, understanding what the terms and the interest rates are, and then make sure that you can handle an $8,000 a month house payment with a $6,000 a month, um, little small business type of a loan that's for 50 to a hundred thousand dollars.

00:17:16
um because these smaller business loans and lines of credit are going to have higher interest rates as well so you want to be aware of that so you want to make sure that as a whole you can handle all of the the debt service payments that you're going to be having to make for the different loans you want to make sure that you're underwriting that and that you're confident in your ability to pay those down but these can be really good options if you're confident in your numbers

00:17:40
And you can grab my free underwriting calculator at assistedlivinginvesting.net slash calculator, or just go to assistedlivinginvesting.net. It's the big blue box in the top right corner. If you just go there, go grab that free resource. It can help you out as you're going through the process of trying to underwrite an opportunity and understand the finances.

00:17:58
So really important for you to do that and make sure you have a handle on what that's going to look like because it can make a huge difference in the way that you're going to operate. So this is another great option, probably one that you're going to pair or if you're renting somewhere, these are great options for you to get access to those funds.

00:18:18
Now let's talk about SBA loans. So SBA loans, it's what I've done with my facilities. I think it's an incredible way to get started if you can find lenders that will work with you. These work really well when you're buying an existing facility. It gives a lender a lot of confidence in doing it. Also, if you're going to be buying into a franchise type of an opportunity, SBA loans are another great option there.

00:18:41
If you're going to buy a home or you're going to lease a home and then you're going to convert it, you may struggle to find SBA lenders that will work with you. That's not to say that they won't work with you. You want to make sure your underwriting is really tight and conservative and sound. And you want to make sure you have a really solid business plan. You have those two things and you've shown that you've done the research about the area and everything.

00:19:03
you may find SBA lenders that will work with you, especially if you have some experience running small businesses in the past, or you can develop your resume in a way that it makes them feel confident in working with you. So this isn't to say that you can't do it. It just is a bit of a steeper climb if you're trying to do this when you are converting a home, whether you're buying or renting. Not impossible.

00:19:28
But they're great for buying both the real estate and the business. And like I mentioned, they often want an existing business in the purchase, but not necessarily. So they're great for buying those existing businesses. The other thing I want to mention to you here is there's a few different loan products, a few different SBA loan types. There is

00:19:47
the 7a loan which is what i've done it's a great option to use as you're buying an existing business as you're working through that there's a 504 loan and oftentimes you see these in hospitality type businesses like hotels and things like that but they can work really well for larger types of portfolios or larger types of facilities they generally like larger amounts

00:20:11
They have slightly better terms and slightly better rates than a 7A. But if you're starting out, like when I was starting out, I could not do a 504. I could only do a 7A.

00:20:19
But now that I've done this a couple of times, if I wanted to refinance, I could probably do a 504 loan. So it's an option for me to look at that. Or if I'm looking at doing adding to my portfolio, which is something I plan on doing here in the not too distant future. So those are the types of things that you can be looking at. And there's a third one that is for a much smaller amount. And they're kind of like those small business loans that we were just talking about in the previous slide.

00:20:44
it's called an sba express loan these are typically i want to say they're less than a hundred thousand um they're more designed for operating type capital and so if you can't find something and you need to combine loans you might be able to combine a traditional mortgage with an sba express loan so traditional mortgage to buy the the existing house an sba express for your operating capital and your renovations and you can combine those two and

00:21:10
An XBA Express loan is probably going to be, there's gonna be a lot more paperwork involved than just a small business loan, but you're probably gonna get better rates and better terms. So that's something, if you are looking at this and you're trying to figure things out, then make sure that you are talking to lenders

00:21:27
And you're asking, number one, what small business loan products do you have available? Are you an SBA lender? Do you lend to assisted living? And which type of SBA loans do you have available? And specifically, you could call out, do you have an SBA 7A or you have an SBA Express loan that you offer?

00:21:48
So those are questions that you can be asking as you get into this because you can combine these things, right? You don't have to do any single one of them. You can take a few of them and you can create something that works really well, which is what I talked about here on this slide. Real estate, renovations, operating capital, those are the three things that you're going to have to hit on when you're getting the funding that you need. And you may have to just combine, mix and match until you get to a point where you can refinance.

00:22:16
Another thing, and I don't have this on a slide, but when you are refinancing or you can actually buy these, and I had a ton of doors open up to me after I purchased my first facilities because from the beginning, these are a little bit hard to find and a little bit hard to secure if you don't have the experience. But once you start having experience, you can see HUD loans, H-U-D.

00:22:37
So HUD loans, there's a loan program there that is specifically for assisted living. And these have really great terms. They have really great rates. They're far better than SBA, but there are extra requirements. So I've talked about grants a lot on this channel.

00:22:54
and my process of getting grants and how i've done that and also managing grants grants are free money but free is in quotations because you still have to do a lot of work and still have to demonstrate a lot of the things that you're doing for you to continue to receive those funds it's kind of the same way with hud you're going to have extra reporting requirements that you have to that you have to meet when you have a hud loan

00:23:16
but HUD is something that you could look at refinancing into, and it's a great option. So if you're interested in learning more about how HUD loans work with assisted living, type in HUD, H-U-D, down below, and that'll be assigned for me to be like, oh, people want to learn a little bit more about this program because it is a great program. It's just a little bit more advanced than somebody that's in the beginning stages of launching their assisted living business. So let me know on that if that would be of interest to you.

00:23:44
so those are a few different options that are available to you as you're trying to obtain funding and what i want to reiterate and i've said this a few times throughout the video is you don't have to like don't get discouraged if you can't find an sba lender that works for you and and things just aren't working because you can't find a different lender you're gonna have to talk to dozens i have been told no by

00:24:06
so many lenders. I can't even count them. Like dozen, literally dozens of lenders, probably like 50. Um, I get told no by lenders all the time and it doesn't, and I've, I've secured one and a half million. Like I know, I know the process, but you just have to keep going and keep being persistent. That's how you're going to obtain funding. It,

00:24:25
No really means not yet. Just like I need something. That's what lenders are telling you. So you just have to keep working through it. You have to develop relationships and maintain those relationships. Keep yourself in good graces with people because you never know when you might need to go back and talk to them. It's something that you want to be working towards.

00:24:47
is developing really solid relationships with those lenders to help you out. And don't be scared to mix and match, especially if you're really confident in your underwriting and your ability to be profitable. It might be worth it for you to have two different loans for six to 24 months and take a little bit of a hit and not make quite as much profit

00:25:08
just so that you can jump into this and make more progress. But you have to be really confident in your numbers before you do that. Don't just take this video saying, oh, Brandon told me I should just get two loans and jump into this. Do your homework. Make sure you're confident in your numbers. Make sure you do that before you jump into something that's going to put you backwards because I don't want you to do that. I don't want you to put yourself in a situation where you're

00:25:32
Thinking that this is going to be great. You're going to make $10,000 a month because somebody on YouTube told you that that's what you have the potential to do. And the potential is there. Yes. But you have to make sure the numbers actually work for your situation. Okay. So make sure you do that homework.

00:25:48
if you need help with stuff like this you have questions you want to dive deeper into this make sure you join our our ali basics community i would love to have you there you can go check it out at assistedlivinginvesting.net basics in there we have monthly member only q a calls we just had one last week it was great had a lot of good interaction there from the people

00:26:07
I give you priority answers here on these YouTube and Facebook lives. So if you have questions, we'll answer them in the group. But I also will answer them here inside of these videos and make sure I tag you inside of the group over there so that you make sure you're seeing your answers to make sure you get the answers to your questions. There's a bunch of resources, webinar recordings, library of Q&A stuff.

00:26:29
uh an active community like it's it's a fun community it's the the cheapest way or the least expensive way for you to work with me is to jump into um ali basics so go check it out again it's assistedlivinginvesting.net basics uh would love to have you in there and make help you make some progress as you're trying to to launch your assisted living business it's one of my favorite things to do so um make sure you go check that out

00:26:53
now with that uh let's hop over and do some questions so if you have questions make sure you're typing those in in the meantime for those of you um you know thanks for watching i appreciate it uh make sure you like the video subscribe ring the bell do all those things because we go live on tuesdays every tuesday we're doing these i put out things i put out notices um and make sure that you know what's coming up so make sure you're hopping in there

00:27:19
If you have questions, type them in so I can capture them and answer your questions. We also do content on Thursdays. And in Facebook, we're putting out a bunch of content. I love coaching people and giving back to people and helping you along the path because I know how hard it is. I've been there. I've done this a couple times. I know how difficult it can be and how lonely it can feel that you have questions and it can be hard to make progress. So I want to be here for you as you're on your journey and helping you make some progress.

00:27:49
Yeah, like the video, subscribe, ring the bell. Make sure you get notified every time we put out content like this so I can help you out along your journey and help you make some progress.

00:27:58
So with that, I actually don't have, we've got a few people here in the lab, but I'm not getting any questions. So I'm going to stall just a little bit longer just in case somebody's typing them up. But I do want to thank those of you who have made it live. And for those of you that didn't, thank you for watching as well. I appreciate it. It is one of my favorite things to do is get on here, interact with you and help answer your questions.

00:28:21
and help you launch your assisted living business and make progress so you can achieve those goals of time and financial freedom. So make sure you go and grab that free resource, assistedlivinginvesting.net slash BP checklist. Go grab that to help you out as you're trying to build your business plan.

00:28:39
Does residential assisted living sound interesting to you, but you don't know how to get started? At Assisted Living Investing, I'm here to help beginners like you launch their assisted living business in the next 12 months. I love helping and coaching people. It's one of my favorite things. And I want to remind you as well that it doesn't take a lot, just a little bit. Just keep going, keep making progress step by step by step. And I promise you, if you do and you're consistent and persistent, you will be successful. Thanks for watching and have a great day.