Licensed vs. Unlicensed Assisted Living: Which One Should You Start With?

Transcript

00:00:00
Have you been trying to figure out assisted living and you're kind of getting stuck at this phase of licensing? Um, I don't know if licensing if I should do it. Um, licensing seems complicated. I've heard about unlicensed facilities. Maybe that's the route I should go. Have you been thinking about these things and you're just like stuck? You're not sure if you know which of these paths you should be going down. Well, in today's video, we're going to talk about that exactly so you can learn

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which of these routes is going to be best for you. Licensed versus unlicensed. the pros and cons of each of those and how to help you get unstuck and start moving forward as you're trying to launch your assisted living business. So, if you're interested in that, make sure you stick around for today's video. Hey friend, my name is Brandon Gustafson with Assisted Living Investing. I help healthcare workers start their own assisted living business so they're not stuck trying to figure it

00:00:47
out and know exactly what they should do next. So, if you need some help trying to figure out how to get started, head over to assistedlivinginvesting.net. I've also got some links for you down below. And with that, let's hop into our topic for today. And we are talking about licensed versus unlicensed assisted living facilities. And which one of those should you be starting with as you're trying to figure this out? You know, I hear a lot of people in the comments. I see a lot of this in the

00:01:12
comments or if you want to do an unlicensed home because it feels like a very simple path to getting into assisted living, right? And so it feels a little more comfortable, especially as you're in the beginning. There's less regulations. There's it's probably a little bit faster, right? These are the things that are going through your mind. And then there's another uh group of you that are looking at this and you're like, I think licensed is the best way for me to do this and ultimately I do

00:01:38
want to become licensed, but man, there's just so much paperwork. There's so many things involved. I don't know if I can figure this out. And so, what I want to talk to you about today is we're going to start off by talking about the real difference between an unlicensed and a licensed model. And I want to help you have this base understanding of unlicensed versus licensed so you understand what you're getting into when you start looking at these two different models because while they are very

00:02:06
similar in the way that they're going to function as a business, the path that you're going to take as you're trying to get started is slightly different. And I want you to make sure that you know early on in the process which path you should be going down so you don't waste your time if you're going unlicensed trying to figure out all of the state regulations and and figure out how to become a licensed facility when that's not going to give you much value. And on the flip side, if you want to become a

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licensed facility, I want to cut through the noise and tell you what doesn't matter and what you don't need to be focused on if you are going that route compared to an unlicensed facility. So, when it comes to a licensed facility, you are going to experience more regulations that you are licensed, so you are held to a higher standard, quote unquote. I'm going to say that, and you'll hear about why here a little bit later in the video, but you're going to have more regulations that you need to

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deal with. And that scares a lot of people, right? Regulations, when you hear that word, especially if you've been in healthcare for any period of time, you're like, uh, paperwork, right? That's probably what you're thinking. Oh my gosh, there's going to be so much paperwork and I'm going to have to deal with so many other things and there's governments involved and and I just don't want to deal with that. Valid, right? And we'll talk about that here a little bit later in the video about what

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that actually looks like for you. Another thing that I want you to be aware of when it comes to a licensed facility though is when you have a licensed facility, you are oftentimes providing a higher level of care, which means you're probably going to be able to have more income coming in. So, what I want you to think of here is um let's let's talk about cars for a second, okay? To help illustrate this point, when you have a higher quality car, right? uh let's just say it's a Jaguar

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and you compare that to a Honda, you're going to expect to pay more for that Jaguar, right? Compared to the the little Honda Civic. And the reason why is you have this impression that somebody took a lot more time to create all of the different things inside of the car. you know, the the the stitching is better, it's higher quality, the electronics in it are better, they're higher quality. And it's the same thing when it comes to a licensed facility. You're licensed and so you are able to provide a higher

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level of care. And we'll talk about why that is um here in a second. But when you provide a higher level of care, you can charge a premium for those services. So you can charge higher rates, which means more income, which means more money coming in, right? Ultimately, more profit. So, you want to just play that out. It does not mean that you have to be the Jaguar equivalent of all assisted living facilities. You don't have to be this, you know, super high-end car on that side. You don't have to be the

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super high-end assisted living facility on your side to charge premium rates. You don't have to charge $20,000 a month. Now, some of you may want to do that, but you don't have to do it. But what you will see is the licensed facilities provide more and higher quality care and so they charge a higher amount than you would see in an unlicensed facility. The other thing with licensed facilities is there's going to be typically more beds or there's more beds that you can put into the home. There is a cap with unlicensed

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facilities and we'll talk about that here a little bit later in the video as well about what that actually looks like. But when you are a licensed facility, it does open you up to having more beds. And I've talked about this several times. And if you're interested in learning more about this, just type in income down below. But you basically have two levers that you can pull to increase your income. And those levers are the amount of beds and the amount that you can charge. And when you're a

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licensed facility, you can pull both of those levers, especially compared to what you can with an unlicensed facility. These are the reasons why you might choose to be a licensed facility, which sounds great, right? But let's talk about an unlicensed facility. With an unlicensed facility, you have less regulations, less paperwork. You don't have to deal with quite as much bureaucratic nonsense, for lack of a better phrase. It's a little bit quicker to get in and get things started, which

00:06:20
is also really nice. Now, you will be capped in most states at four to six beds. kind of depends on the state, but that's your maximum amount, which means that you can start quicker because you can start in a smaller home, which is nice, right? But you are also capping your income earning potential. If you're interested in in learning about how the profit in assisted living works and and what that looks like, just type in profit down below and we can do a video that is specific to the different levers

00:06:48
and how the expenses and the income work and how much you can actually make in assisted living. So, just type in profit. We we'll make a video on that. But when you're working in this world of unlicensed care, it is a lower level of care, which means less income potential. You have less residents. You have lower level of care. You can't charge premium rates in most cases because you can't provide higher level of care. And so you're going to have less earning potential. So when I say lower level of

00:07:17
care, what does that mean? That's probably the thing that you're thinking of. when it comes to an unlicensed facility and providing lower level of care. Basically, what you can do in an unlicensed facility is you can help out with things like you could you can help somebody get dressed or do toileting or showering or you can help with feeding and and cooking food. You can do all of those things, but what you're going to find in the world of assisted living is the people who need a lot of help are

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going to be people that need help with medication. And when it comes to medication, medication management and helping out from that standpoint, you're not actually able to do that in the world of assisted living unless you're a licensed facility. And so that's where you're going to see this bigger gap. You're going to have lower level residents who yes, you're you're going to love them, you're going to care for them, you're going to help them get dressed and give them food, and you're

00:08:08
going to create this incredible atmosphere for them, which is which is great, but their level of care is typically lower. And once they get to a point where they need more assistance or they may need medication management, they're going to have to leave your facility. And so you're taking what would be your highest paying customer, your highest paying person who you love and they love you, but you can't serve them anymore and so they have to leave. So, this is where it's really makes a

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difference between licensed and unlicensed is you're going to have to let go of your highest paying customers as hard as that is. And so, if you want to differentiate yourself or just like allow people to stay in your facility, then becoming a licensed facility is why I suggest you go that route. Now, we're going to talk a little bit more about how that works. So, make sure you continue to stick around because I'll talk a little bit about that as we get deeper into this. Let's talk now about

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how licensing impacts costs, the timeline, and the complexity of the process. So, when it comes to cost, you're going to typically have higher costs when it comes to a licensed facility. And the reason why is you are going to have to probably have more staff because you have more residents. Okay? When you have more residents, that means those residents need more or higher quality of care, which means you're going to have more staff. And that's your biggest cost. Um, that's like your biggest expense by far. Uh, if

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you're interested in that, type in wife wfed down below. I've got a video or I'll make a new one for you that talks about the top five expenses in assisted living so you can be aware of what those look like. Okay. Now, let's talk about the timeline. It is going to typically take you longer to become a licensed facility. And the reason why is you have to wait on government approvals. So, in some states, like I know California, Colorado is actually like this now. Arizona has a very lengthy process.

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you're waiting 12 to 18 months just to become a licensed facility. So, this takes a long period of time for you to to actually become a licensed facility. And that can be hard and frustrating and it can take a long time. Now, in some other states, like if you're down in the south, um I know Tennessee is pretty quick. There's a few other states out there that they actually go relatively quickly and you're ready to go in a few months, then you can um move forward with that. If you're interested in that,

00:10:30
you can see the link for this down below as well. But if you type in foundation, I'll get you a link to my foundation builder program. And in there, we go through market research and help you understand how to do that and give you the tools to help you be successful, including how long it's going to take you generally to become a licensed facility. Okay? So, just type in foundation. Now, let's talk about complexity because in a licensed facility, you're going to have more red tape, especially in the beginning. But

00:10:56
once it's operating, I mean, it's pretty similar to how you would operate an unlicensed facility in the way that you're just running the business day-to-day. But that red tape, you're going to have extra paperwork in the beginning. You're going to have to reertify, which sounds scary. It's not that bad. It's really not that hard to reertify. you're going to have to have people come in and do surveys on the facility, which sounds scary and can be because it can lead to fines and and

00:11:24
things like that, but it can also be very rewarding. Like we just did a survey in our facility a month or so ago and we had a silver award and that's really exciting and and just rewarding to our staff that they are doing such an incredible job. Okay, so there's good and bad there, but let's talk a little bit about why beginners are getting this decision wrong when it comes to unlicensed versus licensed facility. I really think you're asking the wrong question. What you should be trying to do here is

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start with the end in mind. What are your goals uh as you get into this? Because that's the thing that's going to help you make the correct decision. So, is your goal profit? Is it impact? Is it something else? Like what what is your driving force behind getting into assisted living? Comment down below. By the way, I love seeing why people want to get into this. And I don't want you to be ashamed if your goal is like a mix of this or you're just in this because you see that there's a great income

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earning potential. I know a lot of you out there, you have loved ones that have been in facilities that you have been less than impressed with to put it nicely. And so that's something that is a driving force behind this. But what is the reason? You need to ask yourself that before you can get into it. Because what I want you to realize is assisted living, it can be great income earning potential. It really can. It It can help you out. And you know, the the $10,000 months are real. You can get all of

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those things, but you also have to be careful because it's a lot of hard work in there. Even if you're an unlicensed facility, there can be red tape and things you got to work through. And you're dealing with people. You've got your staff. You've got your residents. You have your families of your residents. You have a lot of people that you're working with. And so that can be really hard. And so if you lose track of why you're getting into assisted living in the first place, it's going to make

00:13:17
your life that much harder, right? So the other thing that I want to point out to you is a lot of people think, "Oh, I've got this extra home. I could start an assisted living here." and then we'll be going, you know, I've got two, three, four bedrooms. We can just bring that many residents into the home and we'll generate income. And it I'm here to tell you that sounds great, but in reality, I don't think it's going to work quite as well as you think it will. You're either

00:13:43
going to be creating a new job for yourself, which is I don't know if you want to do that or not. And you might not generate enough income to replace your current job. And so you're working a full-time job, plus you're coming home and you're taking care of residents, which is another full-time job. You're not really sleeping and it's exhausting. So, but if you're okay with that, then fine. I think you'll be okay. Maybe you do make enough that it can sustain you. I know a few people that have done this

00:14:11
in small four-bedroom homes. They just keep it really light and they're fine being the living caregiver, the person that lives there. They love working with the people that are in their home and they make it work and they're successful and they're profitable. I know people like that, but they have just created another job for themselves. So, if you're looking for time freedom, this isn't going to check the box. You might be able to get some financial freedom, but you're still going to be tied to the

00:14:36
home and tied to the work that you're doing. So, you need to be a little bit careful with that. And I want you to just be careful and not jump into this just without thinking about it because you watched a YouTube video that said, "Yeah, assisted living is great." I want you to like really think about this and make sure that you do it right. So, let's talk a little bit about unlicensed facilities. I think a lot of you that are watching this specific video are here because you're like, should I do

00:15:06
unlicensed or not? Like, I'm just I'm not sure if that's the right move for me. So, I want to give you like just be kind of blown with you on this on when it makes sense and when it doesn't make sense. So, when it comes to unlicensed facilities, I think it makes sense when you already own a property that works. By that, what I mean is I don't think you should go out and buy a three-bedroom home to start an unlicensed facility. I I don't think, especially in the economy that we're in as of the

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recording of this video where housing prices are really high, I don't think you're going to be super successful with that. But if you own a property and you want to turn it into assisted living, one of my students in my success system program, by the way, that's what she's doing with it. She has a couple properties already and she's just going to convert it into for her in the beginning adult daycare, right? And so that's something that I think makes a lot of sense. Now, her homes are

00:16:02
actually big and she can fit a lot of people and she's going a licensed route. Uh but the the the principle there is is the same. she already owns those properties or has access to them and so she's going to leverage that. I think it makes a lot more sense when you're doing something that's small and unlicensed to go that route. Now, another reason why you might consider assisted living is you need to generate some income quickly. So, if you're going through this and you're like, I actually really

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do want to be licensed, but I live in California or Colorado or whatever. It's going to take me over a year to become licensed. And one of my students actually did this. It was going to take them, I think it took them about 15 months to become licensed and they were in Colorado. And what happened is they did an unlicensed facility and brought people in while they were waiting for it because they had done the down payments. They ended up leasing. So, they worked with the landlord to get access to this,

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but they still were going to have to start making payments on this. I think they gave them about 6 months of rent free until they got something up and running. And then they had to start making those rent payments. and but they weren't completely licensed. So, they were able to shift a little bit of their model, bring people in in an unlicensed uh home and provide care to them and start generating some income so they could at least cover those base expenses. So, you can do this as well if your long-term plan is licensed and

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you're thinking that's what I want to do, but I need money today so I can actually, you know, pay my rent, buy groceries, pay the staff, and those types of things. You can go the route of starting out really small, bringing people in. You've created an atmosphere where your residents don't have to leave you. You know, those highest paying residents, they're not going to have to leave you because you're going to become licensed. Like, this is a really good pathway to getting in there and getting

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started. And a third one is you're trying to build your resume for future business. And this one, I think, is is really important because something you're going to hear from a lot of lenders, they're going to tell you no. Like, I'm just going to be blunt with you. 90% of the time a lender will tell you no. even if you have tons of money in the bank, you've got a lot of experience, like most lenders will just tell you no, and you can't get discouraged by that. But one of the

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reasons why a lender might tell you no is you don't have the experience. You don't have the experience running a business, you don't have experience like um in in the healthcare world um in this world of assisted living, all these things are new and they tell you, yeah, go and do something. This happened to me actually when I was in grad school. I had applied to a graduate program um a master's in healthcare administration at the University of Utah and I was already in an MBA program a masters of business

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administration and wanted to add the MHA healthcare administration onto my pathway of degrees that I would get and I applied for it and was told no. And like I remember sitting in the office and they're like I'm sorry we're not going to take you. You need to do more things. you need to go and get more experience in the world of healthcare. And they gave me a list of things to do. And for me, what I did rather than sit and be like, well, you know, you're never going to get me and getting all

00:19:10
angry about it was I went to work and built out my resume a little bit more. So the next time I applied the following year, I got a yes and I got into the program and I graduated with it and now I have two master's degrees, right? But um you're going to have something along those lines when it comes to trying to build your resume to get funding or to expand your business portfolio or whatever it is in the future. So if you need help with that, starting an unlicensed home and running that for

00:19:40
a year or two, you know, somewhere between 12 and 24 months is going to benefit you quite a bit. You have this big resume builder and it's going to increase your chances of getting funding. And that funding could come in the form of working with a lender to get funds. It could be finding a partner. It could be maybe you you've done this for a little bit and now you could get access to grant funds. Like there's so many different options around there that can help you out with it. And it's a

00:20:05
great way to build your resume as you're trying to shift into something that's a little bit bigger and more profitable long term. So those are the reasons why uh you might want to start an assisted living facility that is unlicensed. Again, if you're interested in learning a little bit about how to do that, type in foundation down below. Help you out on how to get started as you're trying to shift into this and focusing on the things that are really important for you. Now, let's talk about how this

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decision license versus unlicensed is going to impact your funding, your property, and your staffing models as well. So, when it comes to funding, it can be harder to get traditional quote unquote traditional funding for an unlicensed home. And this is because they're just not viewed the same way. When you go and talk to a lender, like a traditional lender, and you tell them, I want to start an unlicensed home, they focus on that word, really the prefix there, un unlicensed. Like that's the

00:21:01
thing that they focus on that thing. They hyperfocus on it. And then their willingness to open the coffers and give you the funding that you need is going to be reduced. And so you're going to be looking at uh a few different options. One would be something that's more like um getting funding to buy the home, which is going to be viewed as an investment property more than likely, which is going to be a higher down payment. Are you're going to need to be looking at private or hard money that's

00:21:28
going to allow you to get into a facility for a year, you know, somewhere between 12 and 24 months, give or take, and you're going to leverage that. And then you're going to um refinance afterwards. But that can be something that can be hard when you're getting into this. So, you just want to be aware of it. This is why I tell you if you already own the property, have access to a property, it's probably a better way for you to get into an unlicensed route because you don't have to worry about

00:21:55
trying to secure the funding for it. Licensed facilities are a little bit easier, especially if you're buying an existing facility, because they have established numbers already in place. And so, a lender is much more likely to be like, "Yeah, okay. we can see the profit potential here, we'll lend on it. Um, you can cover the debt service, you know, that that mortgage payment, that lease payment, you can cover that with the amount of money that you're bringing in for the business. We feel comfortable

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with it. We can move forward with it. Like that that's the thought process that a lender is going to go through. Now, let's talk about property because this is another one. If you are doing this, you're even with an unlicensed facility, you're probably still going to likely need to do renovations because when it comes to doing an unlicensed home, you still are going to need to talk to the city, to that local municipality, talk to zoning, talk to the fire department, and understand what

00:22:43
those local rules and regulations are. And that can lead to potentially needing to do renovations on the house to get it ADA compliant. could lead to having some kind of fire suppression system. Whether that's a sprinkler system in the roof or fire extinguishers on the walls and smoke detectors, you're probably going to need to increase something. There's going to be some kind of expense that's associated with that. So, you need to make sure that you are paying attention to those things because if you don't and

00:23:11
you just start it willy-nilly, that's where you can run into issues. is if somebody were to report you to the city and you hadn't gone through the proper permitting process and verified zoning and and those types of things, you can get shut down. So, you need to or incur just huge fines, right? And so, you need to make sure that you are following that process even if you're unlicensed. And when it comes to staffing, you're likely going to have less staff in a compared to a licensed facility, which is great.

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It means you get to keep more of the money that you bring in, right? Because the way that that money comes in, this is how finances work. You get income, money comes in on one side and then that money is going to go out in the form of expenses on the other side and then whatever is left over is what you get to keep as profit. Okay? So this is this is a simple way of how how money works here in the world of assisted living really in the world of business. And if you have that amount that goes out

00:24:10
that flows out that are expenses, if that amount is lower because you have less less staff, then you may get to keep more money. But you do have to understand in an unlicensed facility with less residents, your flow that's coming in is also a much smaller um amount. It's like a garden hose compared to like a fire hose. Fire hose being a licensed facility that has 20 beds. Garden hose being an unlicensed facility with four, right? It's just a very different amount of money coming in on

00:24:38
on the one side. So, you need to to be aware of that staffing is still going to need to exist in some form. And that staffing is either you're pay you're hiring somebody to take care of the staffing for you or you've created a second job or a new job for yourself and you have to decide if that's something that you want to do because it it can be a lot. So, staffing is very expensive. If you're interested in learning more about staffing, by the way, just type in staffing and we'll do a video that's

00:25:06
kind of around the staffing process, how much it costs, and what that looks like so you understand what you're getting into. Okay, we've covered a lot today. I hope this was helpful for you. Make sure you like the video, subscribe, ring the bell as well so you get notified every time we put out content like this to help you out as you're trying to figure out if assisted living is right for you. I know this video is is kind of niche. There's not all of you out there that are like, "Yep, I want to do the

00:25:30
unlicensed route." But what I hope you gathered from this, I hope you got some really good education here because I'm not going to be mad at you for going the unlicensed route, but I want you to understand, just go into it with your eyes wide open, right? Go into it with the expectation that your income earning potential is going to be reduced. Uh, and you're still going to have to be jumping through some hoops. you're still going to have to be working with the city and and understanding exactly the

00:26:00
different zoning and permitting laws and exactly how that's going to work for you. Like there's still a lot that goes into this. Even though you're an unlicensed facility, there's still a lot of bureaucraticness and and paperwork that's going to exist as you get into this with your own assisted living business. I personally, if if you wanted my opinion, I think, and you stayed to the end of the video, I'll give you my opinion now. I would suggest going a licensed route. I think it's a better

00:26:29
way to go. I think it's more established. It helps you have more success in the way that you're launching your assisted living business. I really think that it's the best way to go through this. Now, as you're trying to figure out how to get started, I have a free resource for you. If you just go down here into the comments or you type in top mistake, I'll get you the link for it. But so many people like you are stuck because you don't know how to get started and you feel overwhelmed and

00:26:57
confused by the process. And like, if that's you, then like I feel you because I've been there not knowing how to do this. If you go right below this video, you're going to see a free resource for you. It's a 10-minute training, really quick, but it will help give you some clarity on the things that you should be focusing on right now as you're trying to launch your assisted living business. So, go watch that video and then send me an email. Uh, I think I give you the email um address in that video about how

00:27:24
are you stuck and how are you going to start moving forward. I would love to hear from you. So, make sure you go grab that free resource. Let me know where you're at and how you plan on moving forward as you're trying to get started on your assisted living journey. I hope this information was helpful. You know, are you curious about assisted living, but you're just not sure how to get started? Well, I help healthcare workers start their own assisted living business so they're not stuck trying to

00:27:48
figure it out and know exactly what they should do next. So, if you need help with that, go grab the free resource, the free training, check out all the information down below with other free resources that I have for you. And I want you to remember that it doesn't take a lot, just a little bit. Just keep going step by step by step. I promise you if you do and you are consistent and persistent, you are going to be successful. Thanks for watching and have a great day. [music]