How to Know Your Assisted Living Business Will Be Profitable
Nov 07, 2025
Starting an assisted living business is exciting — but scary too. One of the first questions everyone asks is:
“Will this even make money?”
Good news: you can know the answer before you open your doors.
In this guide, I’ll show you how to run the numbers, understand your costs, and feel confident about your profit potential — even if you’re brand new.
Let’s dive in! π
Check out this video, too:
Why Knowing Your Numbers Matters
You wouldn’t buy a house without knowing if you could afford the mortgage.
The same is true for assisted living — profitability starts with the math.
If you don’t run the numbers first, you could:
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Overpay for a property
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Underestimate your expenses
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End up with a business that barely breaks even
When you know the numbers upfront, you’ll make smarter decisions and feel confident moving forward.
π‘ Pro tip: Download the free Underwriting Calculator to make this part 10X easier!
Step 1: Underwrite Your Business (This Is the First Thing You Do)
The word “underwrite” might sound fancy, but it’s simple: it’s just the math behind your business.
π Here’s what to do:
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Look at real past numbers from similar homes.
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Build a proforma — a simple forecast of what you expect to earn and spend.
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Ask: “How much will it cost to run?” and “How much will I bring in?”
The difference between those two is your net profit.
π‘ Want help with this step? Grab the free Underwriting Calculator to plug in your numbers quickly and accurately.
Step 2: Know the 5 Big Expenses (The “WIFED” Expenses)
About 80–90% of your costs will come from these five areas. Master these, and you’ll understand your financial picture fast:
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πΈ Wages – Your biggest cost. Expect staff wages, taxes, and benefits to be 50–70% of all expenses. Be conservative and plan for more staff than you think you’ll need.
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π‘οΈ Insurance – Property, liability, and workers’ comp. Work with a broker to make sure you’re covered.
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π½οΈ Food – Meals and snacks for residents. Budget about $8–$12 per resident per day (about $3,000/month for 10 residents).
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π Energy – Gas, power, internet, trash, and TV. If you own the property, these are easy to estimate, but they’ll rise a bit with more residents.
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π Debt Service – Your mortgage or rent. This is your monthly loan payment and a major part of your budget.
β Add these up and you’ll know most of your operating costs.
Step 3: Project Your Income (It’s Easier Than You Think)
This part is simple math:
Monthly rate × number of residents = gross income
π Example:
If you charge $5,000/month and have 10 residents, that’s $50,000/month in gross income.
Now subtract your five big expenses and smaller costs. What’s left is your net income — your profit.
Step 4: Make Sure You Actually Collect Payments
This step sounds basic, but it’s a big deal.
If one resident misses a payment, that’s a huge chunk of revenue gone.
π‘ Tips:
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Use clear contracts.
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Offer simple, reliable payment methods (checks, ACH, etc.).
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Put billing systems in place from day one.
In a small facility, missing payments from even 1–3 residents can mean the difference between profit and loss.
Step 5: Be Conservative With Your Numbers
When you’re forecasting, always play it safe. Here’s how:
βοΈ Be conservative:
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Assume 80–90% occupancy, not 100%.
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Round expenses up slightly to prepare for surprises.
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Plan for repairs, temp staff, and new equipment.
Also calculate your break-even point — the minimum residents you need to cover costs.
π If you need 8 out of 10 residents to break even, that’s risky.
π If you only need 5 out of 10, that’s safer.
Quick Action Plan β
Here’s your 6-step profit checklist:
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Download the free Underwriting Calculator.
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List your five big expenses.
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Set a monthly rate per resident.
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Multiply rate × beds to get gross income.
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Subtract expenses to get net income.
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Check your break-even point — and be conservative.
Do this, and you’ll know exactly if your business will make money before you spend a dime.
Next Steps: Turn the Numbers Into Reality π
Want to launch your assisted living business and know it will be profitable? Here’s what to do now:
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Step 1: Download the Business Plan Checklist to start planning.
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Step 2: Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
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Step 3: Use this guide, run your numbers, and build a profitable, purpose-driven business.
Got questions? Drop them in the comments below! β¬οΈ
Show full transcript π
Transcript
00:00:00 - 00:00:48
Hey friend, it's Brandon Gustafson with Assisted Living Investing. I help beginners like you launch their assisted living business in the next 12 months. In today's video, we're going to be talking about how to know if your assisted living business is actually going to be profitable. So, if you're wondering how to figure that out, make sure you stick around for today's video. Hey friend, welcome back to Assisted Living Investing. Before we jump into our topic today, I want to remind you to
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hop over to the website assisted livinginvesting.net. You look in the big blue box in the top right corner, you're going to get our free underwriting calculator to help you out as you're trying to launch your assisted living business. It's going to be really helpful in what we're talking about today, which is how to know if your assisted living business is actually going to be profitable. So, make sure you go and grab that free resource. Now, let's start talking about how to know if it will be profitable.
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Number one is you need to underwrite it. Underwriting is going to be absolutely key as you are trying to launch your assisted living business and as you're trying it's something lenders are going to want to see something you absolutely have to do and you need to understand what those numbers look like. So what is underwriting? Underwriting is basically taking the information that's out there, understanding the finances and seeing what they were like in the past and then projecting that into the future with
00:01:17 - 00:02:05
what's called a proforma. So you want to be taking all of that information. You want to be looking at all of those numbers. You want to be ingesting them. You want to be understanding what they look like and then taking them and say, "Okay, this is how much it's going to cost me to operate. This is how much money I'm going to make." And the difference there hopefully is a profit and that's going to be your net profit and what is going to allow you to make money in this business. That's a very
00:01:42 - 00:02:35
simplified version of it, but that's what underwriting is. So the more time that you spend underwriting your facilities, the more time you take to understand what those numbers look like, the better off you're going to be. Helps you feel confident in your investment, helps you feel confident in moving forward with an opportunity. So that's in a nutshell what underwriting is. Now, let's talk about understanding the expenses. And when it comes to assisted living, there are five main expenses. I
00:02:08 - 00:03:10
have an acronym for it because, you know, it's healthcare. We got to have acronyms. The acronym that I've created is WEUD cuz you know it's it's a cool one. WFUD stands for wages, insurance, food, utilities, and your debt service. Now, if you understand what those five are, the Wii FUD expenses, you're going to be so much further ahead in understanding if you're going to be profitable or not. Make sure you understand those five expenses: wages, insurance, food, utilities, and your
00:02:39 - 00:03:32
debt service. Once you figure those out, you're going to be way further ahead than anybody else. So, let's dive a little bit into each of these. Wages is is basically what you are paying your staff. This is going to be your biggest expense. Your your we expenses are 80 to 90% of all of your expenses. Wages are going to be 50 to 70% of all of the expenses. They make up a huge amount. This is what you're paying your staff, your administrator, the taxes that are associated with it, any benefits, it's
00:03:06 - 00:03:56
all kind of lumped into one thing. You're going to use a payroll vendor. I suggest using Gusto. We'll link down below a link to use Gusto. I've got a special promotion for you where I think you get like a $100 Visa gift card once you run your first payroll with Gusto. So, make sure you go check that out. But wages are huge. You need to understand what they look like. And as you are trying to understand wages and and how much that's going to cost, if you can hone in on that number and get really
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comfortable with it. And I would say be conservative with that number. overestimate how many staff you need. You're going to be in a really good spot to know if your facility is going to be profitable. The next one is going to be insurance. Now, insurance, when you get insurance for your assisted living business, you're going to need property liability and workers comp insurance. So, those are the three big ones. When you're working with the state, when you're working with Medicaid, they're
00:03:54 - 00:04:43
going to want to see what's called a certificate of insurance to validate that you have the proper insurance in place. So, you want to make sure that you have those. I suggest that you work with an insurance broker to help you obtain the correct insurance and they will negotiate with the insurance carrier for you and then you don't have to worry too much about that because it can be confusing. There's a lot of paperwork involved and they'll be able to help you navigate exactly what that
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looks like. So, get your insurance. You need those three types, liability, property, and workers comp. And work with an insurance broker, tell them what your requirements are. And when you do that, you're going to have a lot of success in getting the insurance that you need at a pretty good price. Food is your next expense. So with food, this is buying the food for the residents, right? You have to provide those meals. Typically, what you have to provide is breakfast, lunch, dinner, and two to
00:04:42 - 00:05:35
three snacks per day. Now, the number that I tell people to use when you are trying to figure out food, and I understand I just told you you have to do three meals plus snacks every day, but the number that you should be looking at doing as you're trying to underwrite this is $8 to $10 per resident per day. That's going to be your food budget. Now, I I know you're just like that there's no way that these people can eat that much food with those many meals for that little amount of
00:05:09 - 00:05:59
money, but I promise you it can. Um there's national data on this. This is me talking from experience. Even in the economy that we are in when groceries are high, it works. So, I encourage you when you're underwriting to probably use the $10 figure per day. If you want to be even more conservative, maybe bump it up to 12, but I promise you, you don't need it. It's not going to be that high. So, make sure that you're looking at this. So, let's use a quick example. Use quick math. And I will try to do this on
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the fly off my head so you can see an example. $10 for 10 residents. That's $100 per day. Times that by 30 days in a month. Now, we're at $3,000 per month for my food budget. Boom. I got it. Right. It's that simple to figure out what your food budget's going to look like. It is a big expense. You have to have it. You're going to have to have a stacked pantry, but that's what you're going to be paying. We probably pay about that much for our 16 bed facilities. It It's your food expense is
00:06:04 - 00:06:51
big, but it's not so much that it's going to ruin you. You have to remember the population you're working with generally going to be elderly. If if you're doing this, you don't have to do elderly care. I have a mental health home, so you can work with different populations. But what you do want to be aware of is they're elderly. They're not going to eat a ton. There's these are not teenage boys, and you're buying in bulk. you're buying for 10, 15 people at
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the same time. And so you can create contracts with companies like Cisco or you can go buy in bulk from Costco or Sam's Club or something like that. Look for deals when when you're trying to buy in bulk. Maybe you get in with the local grocery store and develop a relationship there. There's a lot of ways for you to kind of save on some of the food that you are buying because you're buying in high quantities and high volumes and you're feeding a lot of people. So make sure you look for ways to kind of take
00:06:52 - 00:07:41
advantage of that. Your fourth one is your utilities. Now, utilities are going to be things like your gas, your internet, your trash, your power, all of the things that you have for utilities. You're going to need to put all of these into a bucket, and that's what you're going to have to be paying for those. So, if you own this house already, you already know what those utilities are going to look like. They might increase a little bit because you have more people in the house, but generally,
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they're going to be about the same. You can go and price out internet and TV services if you want to do that. You could look at streaming options. There's a lot of different ways to look at what type of utilities do we have and what are those going to look like. Pretty easy to track down what your utility costs are going to be. So, go figure those out. And that's going to be, you know, one of those five pillars for understanding what your expenses are, your utilities. And the fifth one, and
00:07:43 - 00:08:26
this is probably the second biggest one after wages, is going to be your debt service. This is the amount of money that you pay for your mortgage payment, basically. So, anything that you have a loan on, this is going to be included in the debt service payment. You're going to have to do this or you could get the house repossessed. You could lose the house if you don't stay on top of this one. It's very important for you to have, but it's one that as you're trying to figure this out. If you go grab our
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offer underwriting calculator at the big blue box in the top right corner, assisted livinginvesting.net, in there, there's a way for you to calculate what you think, what you project your monthly payment is going to be using a mortgage calculator that I have built into that calculator for you. So, you're going to put in your interest rates that you're going to be charged and the terms. How long is this going to be and the amount that you're going to get? And from there, it's going to spit
00:08:29 - 00:09:23
out for you what your debt service payment is going to look like. So, use that tool to help you figure out what that is. So, I've just kind of walked you through how to figure out those top five expenses, the we expenses, the things that you need to be working with as you're trying to figure out, is this going to be profitable for me or not? You figure those five things out. You're 80 to 90% of the way there and you're probably going to have a pretty good idea of what your expenses are going to
00:08:56 - 00:09:58
be for your assisted living business. Now, now that you have found out what those expenses are, you need to start figuring out what your earning potential is. So, in order for you to figure out what the earning potential is for your business, for your assisted living business, it's a very simple math formula. It is the monthly rate that you're going to be charging your residents multiplied by the number of residents that you have in the house. That's it. So, if you have a monthly rate of $5,000 and you have 10 residents
00:09:27 - 00:10:21
in the house, that is $50,000 per month in income. That simple. That that's that's what your income is. That's your gross income. That's what you're getting in there. The other thing that I want to make sure I point out to you with when it comes to income is you have to make sure you actually get paid. Make sure you are implementing processes to collect the money from your residents. So when it comes to collecting money from your residents, you're going to be using tools like a check and sometimes
00:09:54 - 00:10:53
even cash. And when you are collecting from your residents using those methods, it's going to help ensure that you have the money inside. So, when I say you are collecting $5,000 per month from 10 residents, that's a total potential of $50,000 in income coming into the facility. But if you don't collect from somebody or somebody misses a check or something like that, that's $5,000 less per resident that forgets to give it to you, that's a huge chunk of money. So, assisted living can be very profitable.
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But if you are missing on just one of those payments, it's a big gap. And a lot of times your profitability is the your gap to being profitable is just going to be one to three residents. Especially in a smaller residential style home like a lot of you are looking for. That's something you need to take into consideration that your profit potential can shrink really really fast. So make sure you are getting paid from your residence. Now let's talk about your net income. This is going to tell
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you what your earning potential is. So, now that you have an understanding of how to figure out exactly what your expenses are and what your income potential is, the way that you find out your net income, what that number is going to be, and what I teach you inside the calculator, make sure you go grab that assisted livinginvesting.net, big blue box, top right corner. Go grab the underwriting calculator. It's going to help you out with all of this. You take your income, your potential income, you
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minus that from your expenses. That right there, that's your net income. I want you when you're doing this to be conservative in your underwriting. I I want you to maybe project that your census is going to be lower. It's not always going to be 100%. It's probably going to be closer to 80, 90%. So, make sure that you're comfortable with it. Learn what your break even point is. Is your break even point at eight residents, nine residents, and you have only 10 beds? Ah, that's really slim
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margins. It's like if you're not at 80 or 90% occupied, then you're losing money. You're at least not gaining any money. And and so you want to be aware of that. But if you have 10 residents, you know, have potential for 10, and your break even point is five. Wow. Now, now you're now we're talking. Now you have the potential to be getting to some really good profitability with the facility that you're looking at. So don't be too optimistic. Do the same thing with your expenses. Make sure you
00:12:15 - 00:13:02
are projecting a little bit high. If you've done the research on your utilities, for example, and you come back and it's saying, "Oh, 1,500 is probably what the utilities are going to be on a monthly basis and you're underwriting, maybe bump it up to 1,800." Like, give yourself a little bit of cushion because there's some seasonality or rates could increase. Or when it comes to staffing and you look at it and you say, you know what, bare minimum, I need eight total staff for my
00:12:38 - 00:13:30
facility. Maybe you just build in that you need 10 just to be safe and see what that does to your underwriting. What happens if you end up having to pay temporary staff that are double the cost of your normal staff? There's a lot of things that can come up when you're in this business. And so, you want to be conservative in how you underwrite those facilities, these opportunities to make sure that the numbers are actually going to continue working even when it's hard. Because what I don't want you to do is
00:13:05 - 00:13:54
get into a situation where you underwrote it and you used all of the rosy numbers and everything and you're like, "Man, this is going to be great. we're going to make, you know, tens of thousands of dollars. And then you get into this business and all of a sudden stuff happens. You have to buy new furnace. You you've got to get all new appliances in the kitchen. You end up having to hire extra staff because the state changes its regulations. You're not collecting money from residents. All
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of these things have happened to me, by the way. These are not like I'm pulling these out of the hat. All of these things have happened to me in the years that I have owned my facilities. So, it will probably happen to you. So, you want to account for that as you are trying to figure out what this is going to look like and plan for it and make sure you're comfortable with those numbers before you just make an assumption and jump into it. Get comfortable with the numbers. Understand what you're looking at. And when you do
00:13:54 - 00:14:35
that, you're going to be successful. All right. So, to recap, we talked about a lot here. We talked about all the expenses, the we expenses that you need to be aware of and how you're going to handle those and how you're going to calculate those. Make sure you understand those. We talked about earning potential, what that looks like, how much you can earn, how you're going to collect the money. And it's important for you to collect the money if you want this to work, and then how you can
00:14:15 - 00:15:03
figure out what that net income number is going to look like for you so that you can, you know, figure out how much you're actually going to make. So, if you implement those things, go grab your free underwriting calculator at assisted livinginvesting.net, the big blue box in the top right corner. you're going to be a lot further ahead in the game and you're going to be able to move forward with confidence that you know that you have a good opportunity on your hands. Now, if you found this video to be
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helpful, make sure you like the video, subscribe, and ring the bell as well so you get notified every time we put out content like this. We go live on Tuesdays. We put out content on Thursdays as well. I love helping and coaching people and giving back and helping you make progress so you can launch your assisted living business successfully as well. 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
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launch their assisted living business in the next 12 months. I love helping and coaching people. It is one of my favorite things to do. And I want to remind you that 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, you're going to be successful. Thanks for watching and have a great day. [Music]
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