Inside a Grandfathered Assisted Living Facility: My Discovery
Sep 25, 2024
When exploring the possibility of buying an already-existing assisted living facility, you may encounter the term "grandfathered in." But what does this actually mean, and how might it affect you as an investor? We will explain grandfathering and discuss its ramifications in the context of assisted living facilities in this blog. It's important to understand this phrase because it can have a big impact on your financial results and investment plan.
Grandfathering is the term used to describe exceptions or exemptions for current facilities that satisfy specific requirements, even in the event that newer standards or rules are put into place. In this blog, you will learn how grandfathering can simplify your investing process and possibly save you a significant amount of money.
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What Does "Grandfathered In" Mean?
"Grandfathering" refers to a legal provision that allows an older facility to continue operating under the rules and regulations that were in place when it was originally licensed. This can be a huge advantage if you’re buying an existing assisted living facility, as it often means you won’t have to make costly updates to comply with newer regulations.
For example, suppose a facility was licensed 30 years ago under a different set of rules—perhaps fire suppression systems, the width of hallways, or the placement of restrooms were governed by less stringent standards at that time. If the facility is grandfathered in, these older standards will still apply to you as the new owner, saving you from expensive renovations that would be required if the facility had to meet current regulations.
How Do You Get Grandfathered In?
To benefit from being grandfathered in, you need to purchase an existing assisted living facility. This provision only applies to facilities that have already been licensed under older rules. If you're converting a new home into an assisted living facility, you won't be able to take advantage of this. New conversions are subject to the latest regulations and codes, requiring compliance with all current standards.
Once you’ve identified an existing facility to purchase, the next step is what is known in many states as a Change of Ownership (CHOW). This process involves transferring the facility's license from the previous owner to you. While this isn't a straightforward license transfer, it essentially allows you to continue operating the facility under its existing license, maintaining the same regulatory standards it has been operating under.
The Change of Ownership process will require you to submit an application similar to what you’d need for a new license, but with slight variations. It's crucial to understand that while the facility’s physical attributes might be grandfathered in, you’ll still need to meet all operational and care-related regulations that are in place today.
What If You're Not Grandfathered In?
If you can't take advantage of being grandfathered in—either because you're converting a new facility or because the existing facility isn't eligible—you could be facing some significant expenses. Upgrades such as installing a new fire suppression system can range from $10,000 to $80,000, depending on the size and complexity of the facility. You'll also need to bring the facility into compliance with all the latest regulations, which can involve everything from structural renovations to updated safety protocols.
These potential costs are why many investors prefer to purchase existing facilities that are already licensed and grandfathered in under older rules. It’s a way to minimize upfront costs while still providing a safe, regulated environment for residents.
The Financial Benefits of Grandfathering
The financial advantages of purchasing a grandfathered facility are clear. By avoiding the need for expensive upgrades and renovations, you can allocate your resources more efficiently, perhaps investing in other aspects of the business that will yield higher returns. Additionally, an existing facility may already have a steady stream of residents, which can provide immediate cash flow—another compelling reason to consider this route.
However, it’s important to weigh the pros and cons. While grandfathered facilities offer cost savings, they may also require updates in other areas, such as modernizing interiors or improving resident amenities. In contrast, a brand new facility, while more expensive upfront, may offer better potential for charging higher rates due to its modern amenities and compliance with the latest standards.
Final Thoughts
In summary, grandfathering in the context of assisted living can provide significant financial benefits, allowing you to operate an existing facility without the burden of costly renovations to meet new regulations. However, it’s important to consider all factors, including the age of the facility and any potential updates that may still be necessary, to ensure that you make the best investment decision.
If you help writing a business plan to purchase an existing assisted living facility, download our Business Plan Checklist to help you build a solid foundation for your business.
Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
Show full transcript 👇
Transcript
00:00:00
Hi friend I am Brandon Gustafson I help new and aspiring Real Estate Investors launch their Assisted Living business in today's video we're going to be talking about do you get grandfathered in to Old rules when you purchase an existing assisted living facility welcome to Assisted Living [Music] investing hey friend welcome back to Assisted Living investing before we get into the topic today which is can you get grandfathered into Old rules when you purchase an existing assisted living facility I want to remind you to get
00:00:33
over to the website Assisted Living investing. net we're going to put uh up here our calculator it's going to help you get on your journey to understanding if you have a profitable investment or not and I give that away for free Assisted Living investing. net go get your free underwriting calculator and it will help you along your investment Journey now let's get into the topic for today's video we're going to be talking about do you get grandfathered in to Old rules when you are purchasing an
00:00:59
existing assisted living facility and what does that mean so let's talk about that what does grandfathered in mean you may have heard this from other people you may have even heard me say you get grandfathered into that and it's great uh what does that mean when you get grandfathered into something it means that all the rules and regulations and things at the time of the original licensing exist for you um so there may have been updated requirements for fire suppression systems there could be some
00:01:29
updated things with um how you have restrooms in a certain place or width of hallways or um fire escape or any number of things they they could have been very different 10 15 20 30 40 years ago you take that information that what was current at the time and those rules continue forward um and and you don't have to be up to date with all the new rules and regulations and things like that you don't have to update your home or or things every single time that that a rule changes because you are set in
00:02:04
that that snapshot of when the original license was put on the home which is really kind of a cool thing uh when you think about it it can save you a ton of money uh to be able to go through that process and and not have to make all of the renovations that you might otherwise have to make if you are doing a full brand new conversion on a home um so it's it's actually a really nice perk of purchasing an existing facility so how do you get grandfathered in into one of those uh types of of situations number
00:02:34
one you need to find an existing facility to purchase uh you can it's you can't get grandfathered into an old rule if you are taking a home and doing a conversion because when you are doing that conversion it's getting a brand new license and a new purpose to that home so you're not going to get grandfathered into any of the old rules uh when you do that so you need to find something that is existing that you're going to purchase then the next step of that process is what the states that I've
00:03:00
worked in they call it a change of ownership or a chow so this is a license um transfer basically and what it does is it it's the almost the exact same application that you use when you are doing a conversion on your own home um to become an assisted living faciliity there just going to be a slightly different box you check maybe a few different questions that you need to answer but that change of ownership B is basically saying it was this facility these people owned it and now we're changing the ownership over to this one
00:03:29
and it's going to continue in its purpose as an assisted living facility so you just are doing a change of ownership you're shifting that license over to you essentially it's not necessarily a straight license transfer but that's at its core kind of what it does you still have to get relicensed and and all those things but at its core it's it's Shifting the ownership over and you're continuing the operations continuing the purpose of that home that is being operated what do you do if you
00:03:55
are not grandfathered in if you're not grandfathered in there's a chance that you're going to have to have some costly Renovations I always use the example of a fire suppression system they can be very costly I've seen quotes from 10 to $80,000 like it runs the full gam depends on the size of the house and the complexity and things like that but it can be very expensive for you to do so you might have some very costly Renovations the second thing is you're going to have to comply with all every
00:04:24
single new updated regulation that has come into play um since you know if you're looking at a home that was 20 years old and was licensed 20 years ago all of the things that have come in in that space if you're doing a brand new uh conversion on a home you now have to deal with every single one of those regulations and make sure that they're in place so those are the two reasons why grandfathering in is such a benefit you don't have to worry about those Renovations you don't have to worry
00:04:49
about getting in compliance with all those new rules and regulations because it's going to kind of push pause on those and you don't have to worry about them which is really a nice thing so something you need to be aware of when you're doing that conversion as I mentioned a little bit earlier is you don't get grandfathered in to any of these rules or or anything like that as you're doing this you have to adhere to all of the the new things so if you're talking to somebody and they're like oh
00:05:13
yeah our house has this you know it was built in the 60s and we've been a facility for 40 years and we don't have to have fire extinguishers um I'm embellishing a little bit with this story U but just go with me um and and you think to yourself oh cool I don't have to buy buy fire extinguishers and then you go and you start doing a conversion and the fire department says hey where are your fire extinguishers and you say I don't have to do that my friend who owns a facility Didn't Do It
00:05:39
um at that point you have to remember you're doing a conversion you have to be up to date on all of the new rules and regulations and and everything that has happened since your friend down the street uh did it 40 years ago you're going to have to adhere to all of those things and make sure you have those things in place so that you can successfully run your business and be licensed properly without having having any uh issues with that so that's what grandfathering in means there's still
00:06:04
going to be rules and and regulations that you have to adhere to regardless of when you get into this um from a care standpoint and documentation standpoint and and things like that those are things that that are just broadly in the industry but specific things on the home you can get grandfathered in on is going to potentially save you some money so to recap what we talked about today first what is grandfathering second U what it means to get grandfathered in and how that can benefit you from a financial
00:06:32
standpoint which is really beneficial and how to go about doing that uh through the change of ownership process and then third that um the reasons why you might want to consider going the route of purchasing an existing facility to help you get grandfathered in to some of these rules it doesn't mean that purchasing an existing facility is the exact way to go um I did a live on that topic a while ago where we were comparing uh existing facilities with doing a conversion and there's definitely pros and cons to both of
00:07:00
those scenarios I'm just telling you exactly what it means to be grandfathered in and how that could potentially benefit you but you have to understand if you're doing that you also might have a home that's now 40 or 50 years old and needs some of this updating and uh whereas if you do that conversion you've got something brand new and it fits exactly what your residence needs and it's probably going to be a little bit better uh suited for charging higher prices and things like
00:07:24
that so there's pros and cons and tradeoffs all over the place with this I want to remind you if you found this information to be helpful to first off like the video um subscribe and ring the bell as well so you get notified when we put this content out cuz it's going to help you out I love putting this content out helping you along your journey and helping you launch your Assisted Living business it's it's one of my passions I'm so excited to do it get over to the website as well Assisted Living
00:07:48
investing. net we have the free underwriting calculator there to help you out our business planning guide which will is a guide to help you build a business plan and underwrite and make sure you're confident in your investment and also the accelerator which is a 12E we path to ownership and if you look at that accelerator you're like oh this would be really good but I feel like I need a little something extra go to Assisted Living investing. net strategy set up a call and I can teach I can
00:08:11
share with you a little bit about how the accelerator course plus some extra coaching that I offer can really help you launch into starting your Assisted Living business does residential Assisted Living sound interesting to you but you don't know how to get started at Assisted Living investing. net we are here to help you through the process start to finish and launching your Assisted Living business and remember it doesn't take a lot just a little bit keep making progress step by step by
00:08:35
step I promise you that if you do that and you're consistent and persistent you're going to be successful I want to thank you for watching and have a great day [Music]
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