Profit Potential: Assisted Living Business in 2024
Sep 02, 2024
The assisted living industry is an important aspect of our society and offers a big potential for entrepreneurs willing to take part and make a difference. This blog will teach you the ins and outs of profitability in the assisted living market. We'll look at the important aspects that influence financial performance, such as analyzing market demand and choosing the correct site, as well as managing operational costs and providing excellent care. By the end of this guide, you'll understand how to transform your passion for helping people into a successful, profitable business.
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Many people wonder if it is too late to enter the assisted living business. The quick answer is that it's not too late. There are numerous opportunities to generate money in 2024. To begin, let us look at some numbers. Gross income is your company's entire revenue before expenses are removed. A ten-bed facility might produce $40,000 in gross income per month. Even if you run a Medicaid facility, which some people may avoid, you can still achieve this goal.
Let's look at an example with Medicaid. A Medicaid resident can earn $100 daily for a monthly total of $3,000 ($100 x 30 days). In addition, you can receive approximately $800 in Social Security benefits. There may also be a portion of the expense, adding an additional $200 each month. Adding these figures together, you can achieve the $4,000 per resident monthly target, which equates to $40,000 gross income with ten residents.
Understanding your expenses is crucial for calculating net income, which is the amount left over after deducting all your expenses from your gross income. Staffing, food, insurance, and debt servicing are all major expenses in assisted living communities. Staffing, for example, is the most significant investment because competent employees are important for running a successful business. Food expenses can be calculated using the per resident per day (PRPD) metric. As an example if you have 10 residents at $8/day, you could expect to spend around $80/day for food or around $3,200/month on food. Insurance will also be required to cover potential liabilities.
In a smaller facility, you can expect 75-80% profit margins, meaning if your gross income is $40,000, you could keep $10,000 as net income after covering all expenses.
If residential assisted living sounds appealing, but you're unsure how to begin, Assisted Living Investing is here to guide you through the entire process. Our free underwriting calculator is an excellent tool to help you understand potential income and expenses.
Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
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Transcript
00:00:00
hey friend it's Brandon Gustafson welcome to Assisted Living investing in today's video we're going to be talking about can an assisted living business actually make you money in 2024 if you're interested in learning about that make sure you stick around for today's [Music] video hey friend I'm Brandon guses and I own an operate two assisted living facilities and I created Assisted Living investing. net to help people like you learn the inss and of investing in assisted living welcome to Assisted
00:00:33
Living investing in today's video we're going to be talking about is it really possible for you to make money with your Assisted Living business in 2024 I'm sure you've been looking at this and you're like ah it sounds cool but is it too late to jump in before we talk about that though I want to remind you to get over to the website Assisted Living investing. net you can get access to our free underwriting calculator it's going to help you on your investment journey and you can use a lot of what I'm
00:00:58
talking about in today's video and underwrite that on there so you can get a feel for what it would actually look like and see how much money you can actually make in Assisted Living so make sure you get over to the website again it's Assisted Living investing. net now let's talk about it can you actually make money with your Assisted Living business in 2024 yeah you can you absolutely can make money with it I want to talk to you a little bit about how much money you can make and I did a previous video on
00:01:26
this and we'll try to put like a little clip on or link it up above where I messed up gross and net income and I got a ton of comments for it and I want to thank those of you who did it cuz it was one of those things and I was consistent man I was you know saying it incorrectly the entire time so thank you to all of those that that called me out on it and we're going to try to remake this and I'm hoping that I can do this correctly this time but let's talk about this let's talk about what it means to have
00:01:55
your income coming into a to your Assisted Living business so let's start first talking about gross income this is all of the money that's coming to you from the beginning so it is very conceivable for you to make $40,000 in gross income with a 10 bed facility you could do that pretty easily I think actually so the way that that's going to work and you could even do this as a Medicaid facility we'll link Medicaid um up above I I talk a lot about Medicaid because I think it's
00:02:23
actually a really good way for you to get in and start your business and become profitable a lot of people are scared about it but you don't have to be you can use Medicaid to get yourself up and running and then if you like it then you keep going and if not then fine you're still Medicaid certified and that's okay so let's talk about this for you to get to $40,000 in gross income on a monthly basis what you need to have is 10 residents that are making $4,000 a month that are bringing in $4,000 a
00:02:51
month for you to get there 10 * 4,000 that's $40,000 that's how you get it that's your gross income right there of $40,000 is that possible absolutely so I'm going to tell you a little bit about Medicaid and if you want to learn more go make sure you watch that Medicaid video when you have a Medicaid resident I'm going to use this as an example to show you how easy this is how possible this actually is for you to get to the $40,000 in monthly income you have Medicaid paying you a daily rate so
00:03:21
let's use an example where you get paid $100 a day for your Medicaid resident $100 time 30 days is $3,000 right there and you're I'm sure you're thinking to yourself that's not 4,000 and yes I know that okay so let's say that that's the the case though okay Medicaid 30 30 days at $100 a day here at 3,000 now the other thing with Medicaid is you actually get to collect an amount from your resident from their social security that number is set by the state and they will tell you how much of that and
00:03:53
typically it's like a percentage that they get to keep and the rest of it goes to you so in the states where we're operating in Idaho and Colorado we're able to collect about 800 so 800 plus 3,000 is 3,800 right and it's still a little bit less than 4,000 but what's more some residents can actually get charged a share of cost if they make too much money or they have something else coming in from somewhere else from an investment or something like that and let's say that they have to pay you an
00:04:21
extra $200 this is actually this is a real scenario for us this is something that happens in our facility so this is not outlandish and I'm not making up numbers here $100 a day $800 for my rough is what we call it a rent utilities and food payment and then $200 for my share of cost I'm now at $44,000 with a Medicaid resident if you're doing private pay and you're able to do 5 6,000 now you're up to 50 $60,000 in income which is awesome now I would caution you to make sure that you are
00:04:52
taking into account that you're going to have vacancies in your home so maybe you're licensed for 10 but you're consistently keeping your census at at nine so you have nine residents in your home but even at nine residents if you are doing $55,000 a month that's $45,000 in monthly gross income which is awesome right so you're able to do this this is how you make the money in in the business this is how you get paid there's a few different ways I have a video on that one as well so make sure
00:05:19
you go and watch that how do you actually get paid in your Assisted Living business and there's a lot of different ways you can get paid so go watch that video it's going to teach you a lot as you go through that process now let's talk about income so net income this is where people just like kept getting it on me for saying this incorrectly but net income is going to be your gross income minus your expenses equals your net income so if my gross income is $40,000 that comes in and it
00:05:47
costs me $25,000 to run my business with all of the Staffing and the food and the insurance and The Debt Service and everything all those expenses um that go through there and I actually have a list and I don't know if I can link another video but we'll try uh of all the biggest expenses in running your Assisted Living business make sure you go watch that video you're going to take all of those expenses there and you are going to minus them from that gross income now that's your net income so if
00:06:15
it was you got 40,000 coming in cost you $25,000 to operate you have uh a profit there your net income is going to be $155,000 which is really cool right and actually if you want to get really technical from a an accounting perspective your debt service doesn't count into your net operating income um it's a separate thing um just for you from an easiness perspective I like to lump it in um but if you're working with investors and and Banks and things like that you actually don't need to to put um the death
00:06:46
service in there just a quick point I was working with one of my with one of the guys in my coaching program we were talking about that recently and I had built that in the calculator and that was a point of feedback from the investors was like this is really profitable it looks like a really good deal but actually could look better because you have the death service here on your noi and it doesn't need to be so I just made a quick adjustment for him on on his calculator and sent it off and
00:07:08
we got some really really good feedback from his investors that they like the calculator they love the way that it was put together I spent a lot of time with him and doing this and he has just this incredible model that he's doing with a Memory Care Facility I'm super excited for what he's building if if you want those kinds of results make sure you get over to Assisted Living investing. net sign up for the calculator sign up for the course the accelerator course that we've got on the website and I have
00:07:31
mentorships there as well so make sure you go and apply for those because it's just it's going to help you out through your process and it's what I'm here for is I'm I'm here to help you out in your journey to reach your Assisted Living goals and and is what I love to do so make sure you get over to the to the website and sign up for those things so I alluded to this a little bit but let's talk a little bit about your biggest expenses for operating your Assisted Living business your first one's going
00:07:55
to be your Staffing it's going to cost you a lot to to do Staffing Staffing and in in my video I talk a little bit about just like percentage wise how much each of these things are going to cost you so make sure you go and watch that next one is going to be food it's going to cost you quite a bit for you to feed your residents so you want to make sure that you're aware of what that looks like there's actually kind of a metric that we use in the industry it's called per resident per day prpd but it's basically
00:08:21
says you know if I have 10 residents it's going to cost me $10 per day per resident to feed them so that's $100 per day and then you can extrapolate that out to a monthly basis which would put you at $3,000 so it just kind of gives you an idea really quick metric for you to look at um and see what it is you want to you actually might be able to find this online somewhere in in your area find some details on this so it's definitely worth taking a look and see if you can find that type of information
00:08:50
out there next one is going to be insurance so your insurance is going to cost you quite a bit as well you but you want to make sure you have that just in case something comes up where a resident Falls or or some other event happens it's always good to have that insurance in place next is going to be Debt Service and this one if you're going the SBA route something that I did not know is it is a variable rate so it will adjust which is kind of a pain right now in the climate that we're in because
00:09:15
rates have just been going up and so our debt service payments have gone up considerably almost doubling what they were when we initially had it so something you want to be aware of but your debt service is going to be another huge expense that you want to be aware of and those are the four big main expenses that you want to be aware of so what do those margins look like I would say in a smaller home you're probably looking at something like a 75 to 80% margin meaning that you're going to
00:09:39
probably be able to take you know 75 to 80% of your income of that gross income coming into you is going to go out as an expense and then the remaining 20 to 25% is going to remain with you as net income that you get keep and and use for you know to pay yourself and show you how profitable you're going to be in the business so it kind of gives you an idea of what those margins might look like in one of these smaller homes where you've got 10ish beds in the home so what that means is if you have gross income of
00:10:10
$40,000 and you have a 75% margin 10% you're going to have $10,000 of that as your net income that's what you're going to be able to to keep so it kind of gives you an idea of what that's going to look like these are just really rough numbers but I would say they're also pretty typical from what I'm seeing as I go through this process does residential assistant 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
00:10:34
process start to finish I want to thank you for watching if you have not yet subscribed make sure you subscribe ring the bell get and get notified every time we go live on the channel we do that once a week we also drop these videos out once a week I've got a lot of content coming out here some really exciting things that are that are about to drop get over to the website Assisted Living investing. net get access to that free underwriting calculator sign up for the accelerator course do all the things
00:10:58
that you need to do to prepare yourself so you are ready to jump in and start your Assisted Living business I want to remind you as well you can do this it doesn't take a lot just a little bit just keep going step by step by step if you keep doing it you're consistent I promise you you're going to be successful thanks for watching and have a great [Music] day
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