How Much Does It Cost to Start an Assisted Living Facility?
Dec 09, 2024
Starting an assisted living facility is an exciting venture for entrepreneurs eager to make a difference in the lives of seniors while also seizing a significant business opportunity. Today, I’ll guide you through the financial aspects of opening your own facility, drawing from both common industry approaches and personal experiences.
Make sure you check out the video too:
The Two Main Routes to Launching an Assisted Living Business
When entering the world of assisted living, there are two primary paths to consider: rental arbitrage and purchasing an existing facility.
1. Assisted Living through Rental Arbitrage
Rental arbitrage offers a lower-cost entry point into the assisted living market. This method involves leasing a property and then subletting it as an assisted living facility. It’s crucial to have transparent discussions with your landlord about the intended use of the property to ensure compliance and avoid legal issues.
Cost-wise, you might expect to pay between $2,000 to $10,000 in monthly rent, depending on the location and property specifications. Startup costs can range from $50,000 to $80,000, covering initial operational expenses such as staffing, food supplies, and setting up necessary services. This model is particularly suitable for newcomers to the industry who might not have the capital to purchase property but are eager to get started in the sector.
2. Purchasing an Existing Facility
While more capital-intensive, purchasing an existing facility offers immediate operational capabilities and the advantage of real estate ownership. This path typically involves securing a commercial loan, often an SBA loan, which might require a down payment of around 15% to 20% of the purchase price. For example, buying a $1 million facility could necessitate a $200,000 down payment.
Additionally, it’s wise to negotiate for extra operating capital as part of your financing to cover initial running costs without dipping into personal funds or emergency lines of credit. This approach stabilizes the venture's financial outset and leverages existing clientele and operations, allowing for a smoother transition and quicker cash flow.
Financial Planning and Resources
Regardless of the route you choose, thorough financial planning is essential. Utilize tools like an underwriting calculator to estimate and plan for your operational expenses effectively.
Getting Started with Assisted Living Investing
Are you ready to embark on the journey of opening your assisted living facility but unsure where to start? At Assisted Living Investing, we offer a comprehensive Mastermind program that covers every aspect of the business, from building a robust business plan to securing funding and licenses.
Need Help Building a Business Plan?
To begin shaping your assisted living business plan today, download our free Business Plan Checklist. This checklist is designed to guide you through all the essential steps in structuring a successful business plan.
Whether you decide on rental arbitrage or purchasing an existing facility, each method offers unique benefits and challenges. The key is to assess your financial situation, long-term business goals, and the level of immediate control you wish to exert over your business environment.
Embark on your journey into assisted living investing with confidence, knowing you have the tools and knowledge to succeed. Remember, whether you’re starting small or going big from the outset, there’s a path that’s right for you.
What You're Searching For
- Start an assisted living facility
- Assisted living startup costs
- Rental arbitrage assisted living
- Buy an assisted living facility
- Assisted living business plan
- SBA loans for assisted living
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
are you interested in starting your own assisted living facility but you just are kind of unsure of how much it's going to cost to get you started keep watching this video we're going to get into that topic today [Music] hey everybody welcome back to the channel it's Brandon Gustafson at Assisted Living investing happy to have you on here today in today's video we're going to get into the topic of how much does it cost to start an assisted living facility there are a few different ways
00:00:32
that you can actually do this um one I'm going to go through kind of briefly and I don't have a lot of experience with this but I know that people do it um it's it's kind of like uh I don't know Assisted Living Arbitrage or rental Arbitrage so basically what you're doing is you find somebody that has a house and you are renting from them and renting out the space and you're operating the facility now obviously if you're going to do that you want to make sure you talk to that landlord and
00:00:59
explain to them what you're going to be doing at the facility now your rent for that could be it's going to be dependent on the landlord you know two thousand dollars to ten thousand dollars just kind of depends on the house and what they're going to set it at on a monthly basis and then you're going to also need your enough money to start paying staff while you're kind of getting up and running and getting your facility you may need to look at finding a placement agency which is going to take a cut of the
00:01:28
amount of money that you're putting into your facility and kind of getting that started you could be looking at you know building out a pantry of food and things like that if you're going the route of kind of that Arbitrage I think you would be safe getting around I don't know 50 to 80 000 and you'd have enough built in for a few months of operating expenses so that you can get started if you want to learn a little bit more about what those operating expenses might look like make sure you visit me on assisted
00:02:00
livinginvesting.net I'll make sure I link the website down below and get my underwriting calculator um that's that's free for you to use you can kind of get a feel for what those expenses are going to look like and then if you're going the route of an Arbitrage I would suggest getting three to six months of operating expenses in the bank and ready so that you can get your facility full and then really start bringing people in and then start generating cash flow so if that's the
00:02:26
route that you want to go it's a very valid one it's probably less expensive than going a different you know going the route to that I'm going to explain here in just second the downsides of that is you don't own the real estate and so if you are getting in this because you not only want to to make money doing assisted living but you want the asset um of having real estate then might not be the best option for you but if you just want to get started you're somebody brand new you're young you're hungry you
00:02:54
want to do it you just kind of want to see if you can do the assisted living thing that's actually a really good route my buddy Serge the pescu you might have seen his channel that's how he got started and uh he's kind of gone and have made a really good name for himself and what he's doing with assistive living so if you want to learn more about his story make sure you go and visit his channel because he's got a lot of really good information on how to get started using that
00:03:20
now the method that I use to get started is purchasing a facility now there's a lot more money that goes into it as you're getting started when you're purchasing a facility I specifically purchased existing facilities so we're already operating they were largely full they were certainly more than halfway full with residents so I didn't have to spend any extra money getting started on bringing new residents in but I had to buy the real estate which Real Estate is expensive and so what we ended up doing
00:03:52
we used an SBA loan and I'll link a video above and kind of the process that I went through as I was getting into assisted living and how we went through that process using an SBA loan it will kind of get a little bit more in the nitty-gritty of that process and and what we went through but you know depending on what you're doing with your assisted living facility you're going to Let's you're going to need between 15 to 20 percent if you go and talk to an SBA lender they're going to tell you we
00:04:20
could do as low as 10 on an SBA loan in my experience it's going to be a lot higher than that I think ours typically ended up being like 15 to 18 down is what we ended up doing so let's use some round numbers so you get an idea of what this is going to look like for you from an upfront cost to to start your facility so let's say you're purchasing a facility for a million dollars and let's say that you need to do a 20 down payment so 20 of a million dollars is two hundred thousand dollars so you need
00:04:50
two hundred thousand dollars ready to go to purchase this facility which is a lot of money but if you're also getting that real estate um so you're going to have that asset which is great the other thing when you are doing an SBA loan is you can ask for extra operating capital on your loan so what you want to do is use a calculator again get over to assisted livinginvesting.net grab that underwriting calculator that's free or purchasing a facility that already exists and is operating is two
00:05:19
to three months of operating expenses so let's say that you get in there and you're like okay so it's going to cost me thirty thousand dollars for me to operate my facility I want to ask for an extra sixty thousand dollars in operating expenses you add that on you want to make sure you do this very early in the process when you're talking with your lender I really want to make sure I have enough money to operate this facility I need sixty thousand dollars it's going to be allocated for operating
00:05:46
expenses for operating the facility so you're going to do that this is not extra money coming out of your pocket it is coming from the lender now you're going to have to pay it back as you go through that loan process but then you're not strapped for cash you're not having to borrow from your cousin or a hard money lender or even a line of credit to get things going you're going to have that built in to your SBA loan and it's going to be available to you so in this scenario let's say you've asked
00:06:12
your your facility is a million dollars and you're asking for 60 000 in your operating expenses your loan is now going to be for um you know a million minus the 200 000 so 800 000 plus the sixty thousand that you're asking so 860 000 is what your loan is going to to be but you out of pocket it's costing you two hundred thousand dollars to get started and now you have an asset now you have operating Capital that you don't have to front by yourself and you're able to just jump in
00:06:45
because you already have an operating facility that has multiple residents already in it and you just kind of have to go through a change of ownership process with the state to make sure that you are up and running so those two different scenarios one is you know fifty to eighty thousand dollars that you're putting in of your own money to get started um so it's a little bit less you don't own the asset um so there's that but if you go the route of purchasing it on an SBA loan and I can coach you through that process
00:07:14
make sure you get over to assisted livinginvesting.net I have a 12-week program where I can kind of show you how to do all of this and get that funding from the SBA I've actually been funded by the SBA three times and can help you out through that process make sure you get over there and join the newsletter as well and I give you weekly updates on on tips and tricks on how you can do this um and and get through that process but doing that is going to allow you to get uh you know get that fun get those
00:07:43
funds get started on operating your facility and get up and running so do the one that works best for you um look at the budget the amount of money that you have available to you I'm partial to the one where you go and use an SBA loan and get that asset and get started with a facility that's already going and ask for the operating capital I think it's a great option for you but going the Arbitrage Arbitrage route is not a bad one and not a bad way to go about it either and uh you know you can be
00:08:12
successful either way and then as you kind of start growing you can increase your portfolio and and then you're really off Off to the Races and and making a lot of money and doing a lot of good in the world through helping people out through Assisted Living does assisted living investing sound interesting to you but you don't know how to get started at Assisted Living investing we're here to help you through the process start to finish thanks for watching and have a great day [Music]
00:08:49
thank you
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