Securing Funding for Your Residential Assisted Living Business
Sep 04, 2024
In this blog, we'll go over an important aspect for anyone interested in assisted living investments: how to secure money to convert a residential property into an assisted living facility. Converting a property into a thriving assisted living facility takes more than just a vision; it also necessitates a complete awareness of the associated expenditures, extensive research into alternative finance options, and strategic planning for a profitable investment.
The financial component of opening an assisted care facility may appear daunting, but it is feasible with the correct information and resources. Essential financial components include initial remodeling expenditures, license acquisition, and operational expenses. This guide aims to simplify the process by providing a step-by-step strategy for identifying and securing the financing required to convert a residential property into a fully operating assisted living facility.
We will explore various funding possibilities, such as standard financial institution loans, assistance from the government, private investors, and financing programs designed specifically for the assisted living sector. To help you establish a strong case for your concept, we'll also offer helpful ideas and approaches for presenting your business plan to possible lenders and investors.
Regardless of your level of experience or portfolio objectives for development, this guide will offer you insightful analysis and useful advice to help you successfully navigate the complex world of assisted living investments. After viewing this blog, you should have the information and self-assurance necessary to move forward with your assisted living investment. Together, let's begin the process of realizing your vision!
Check out the video too:
Understanding Conversion Costs
It's important to comprehend the costs of turning a residential property into an assisted living facility before looking into finance alternatives. Understanding these expenses will allow you to estimate your required money.
Key Conversion Costs
- Renovations: When a house is converted, extensive renovations must be made, such as ADA compliance and expanding doorways and hallways for accessibility. Installing a sprinkler system can be a significant expense, ranging from $40,000 to $90,000, depending on the location and size of the property.
- Licensing Fees: These are state-specific and dependent upon your facility's capacity. Usually, licensing costs fall between $1,500 and $5,000.
- Staffing: You must hire employees before your business begins earning a profit. In the beginning stages, this needs extra money to support wages, particularly if you're managing delayed Medicaid payments.
- Initial Operational Costs: These consist of buying food supplies, medical carts, mattresses, and furniture. The size of your building and your unique needs will determine the precise pricing.
Funding Options
Now that you know the expenses, let's look at different ways to finance your conversion operation.
1. Personal Savings and Investments
One of the easiest ways to finance your project is to use your personal funds. Use a self-directed IRA or withdraw from retirement assets. However, speaking with a financial counselor is important before making these choices.
2. Traditional Business Loans
Traditional business loans, including SBA loans, are a common option. The SBA 7(a) loan is especially beneficial because it provides flexibility for both the purchase of the property and operating capital.
3. Home Equity Line of Credit (HELOC)
Leverage the equity in your house or an investment property with a home equity loan (HELOC). This can be used with other financing alternatives, such as SBA loans, to offer significant funding for your conversion project.
4. Government Grants and Programs
Grants are worth looking into, even though they can be difficult to obtain. Great resources are websites such as Grants.gov and GrantGopher.com. You can follow my grant writing template as a guide during this procedure.
5. Private Investors
Think about collaborating with private investors—friends, relatives, or other people who are passionate about your idea. Establish a solid business strategy and financial model to win over potential investors.
6. Crowdfunding and Community Support
Using crowdfunding services, you can collect money from many donors. Even though this method might be better suited for smaller initiatives, it can greatly increase the money you raise.
7. Specialized Assisted Living Loans
Specialized loans for assisted living facilities are available but are less prevalent. These loans might be a great way to finance your project because they frequently target particular groups or needs.
Tips for Successful Funding and Partnerships
- Create a Comprehensive Business Plan: A strong company plan with thorough financial estimates is essential. Use resources like the Business Planning Guide to create your plan.
- Seek Professional Help: Talk to professionals who are knowledgeable about assisted living investments. Check out the Success System to see if you qualify for our coaching program.
- Ensure Compliance and Licensing: Stay current on licensing requirements and local restrictions. Involve local governments and health agencies from the beginning of your project to prevent expensive errors.
Final Thoughts
Securing funding for converting a residential property into an assisted living facility requires careful planning and exploring various funding sources. By understanding the associated costs, leveraging different funding options, and following best practices, you can successfully navigate the process and achieve your investment goals.
Are you ready to take the next step in your assisted living investment journey? Download our Business Plan Checklist to get started on planning your conversion project. For more detailed guidance, check out our Business Planning Guide.
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
hey friend it is Brandon Gustafson I am so excited to have you here on the channel today our topic for today is how do you get funding to convert a residential assisted living facility so we're not talking about purchasing we're going to talk about conversions today and how do you get funding for that if you're interested make sure you stick around for today's [Music] video hey friend it is Brandon gustofson I own and operate two assisted living facilities I create this channel to help
00:00:31
people just like you learn the ins and outs of investing in residential assisted living facilities excited to have you here on the channel if you are new and haven't got over to the website yet get over to Assisted Living investing. netal we'll link it down in the description below and you can get our free underwriting calculator to help you along your investment Journey now let's get into the topic for today's video we're going to be talking about how do you get funding to do a conversion for
00:00:57
your residential assisted living facility now before before we get into the actual funding options I want to talk to you a little bit about understanding the costs that are associated with updating or doing a conversion on your residential assisted living facility I think it's really important for you to understand what those costs are so you have a better idea of how much money you're going to need through that process so we're going to go through several of these costs and kind of just kind of walk you through
00:01:25
the process here so the expenses that you could expect to see as you are doing that conversion on your assisted living facility number one big one is going to be Renovations on the house it you're going to have to probably do some renovations to get you know hallways or doorways at a certain width or um doing some ADA compliance things which is actually the second one you're going to need to understand what that's going to look like um you may need to put in a sprinkler system as well which is can be
00:01:52
extremely costly depends on the spot in in the nation where you're doing this on the Facebook group recently there was a conversation around this and I was seeing people quote anywhere from like 40,000 to 80 90,000 so that's probably going to be the range that you're looking at and it's going to depend a lot on the square footage of the home and then the state where you're working uh and and doing your conversion at so that's something you want to be aware of but it's going to be a huge expense for
00:02:17
you uh as you go through the process there of of doing the conversion on your facility there's going to be licensing fees and licensing requirements that you go through those are generally they're they're not too expensive I would I don't think you need to get extra funding for those but it could be thousands of dollars you know a low lower thousands like I would say between 1,500 and 5,000 is probably where you're going to be looking at there from that standpoint for how much the licensing
00:02:43
process is going to cost you again going to depend on your state how many beds you're trying to do um it's going to depend on that a lot of that licensing is here's a base fee and then um you do an additional fee for however many beds you have in the facility so that's kind of how that fee that fee structure is going to work as you're trying to identify how much that's going to cost you next is going to be Staffing um so as you are getting your facility up and running you're going to have to hire
00:03:10
some staff and in the beginning you're not going to have the income coming into your facility before you have to pay your staff um so you're going to need to have some kind of a buffer there that allows you to make payroll while you are waiting for that income to come in for your residents this is is especially true if you're doing Medicaid and I'll link a video up above that talks about the Medicaid process so you can kind of understand how that works it's a something I'm super familiar with and
00:03:36
and you can be very successful running a facility with Medicaid but just want to be make sure you're aware when you do Medicaid you're getting money that's coming in a little bit later so something you want to be aware of with that and then there's just going to be the initial operation costs of of running the facility and this could be uh getting beds it could be getting um Furniture throughout the house or just making other kind of tiny updates um getting uh a med cart uh getting the
00:04:06
food that you need to give to your residents all of those things these are all expenses that you're going to have to have as you get started running your facility I don't know exactly how much it's going to cost you to do that that's something you're going to need to probably figure out yourself get over to the website Assisted Living investing. net calculator again linked Below in the description and I've got a a list uh on the calculator is actually tab that kind of goes through the process of of what
00:04:32
I've seen with some facilities so you can get a a decent idea of what that's going to look like it's going to help you through the process um and if you get over as well to purchase a business planning guide you can actually get access to my historical financials and that one will link below as well Assisted Living investing. net BPG and that's a capital b capital P capital G uh and it will'll get you um there and you can get access to that course which is going to help you out through the
00:05:00
writing process now with all of that out of the way let's start talking about some of the funding options that you might consider as you're looking to get started with your assisted living facility I've got a handful of them here that are going to help you understand where you might be able to get some of this funding so uh try to follow me and and and think to yourself which of these is going to be the most applicable to me and getting things ready and getting things started for my own assisted
00:05:24
living facility I challenge you to do that okay so let's talk about the first one personal saving and Investments so if you have a chunk of change in your personal savings then that is probably one of the best and easiest ways for you to get access to the capital to get started um or Investments there are ways that uh you might be able to to look at doing this I would talk with a uh CPA to see how you could could do this um but you might be able to do like do your Investments with a with a self-directed
00:05:52
IRA or something along those lines or tap into um this is not professional advice at all I'm talk to a professional um but tapping into your retirement in some form or fashion uh to help you get access to those funds and then paying it back over time so that is that is one way that you could get some funding there next is through traditional business loans and this is happening so I I talk a lot about SBA um and kind of walking through that process SBA is what I would call a traditional business loan
00:06:23
it's going to help you get access to those funds that you need to operate the facility the cool thing with the SBA is are a few different options the 7A is probably one of the best ones for you to be looking at though and with an SBA 7A loan you can do this with two ways you can do it one to help you uh get operating capital and two to purchase the facility or you could just do it one way where you're getting the operating Capital it's kind of flexible that way and so going with that traditional
00:06:49
business financing is a really good route for you and again I talk about that in the business planning guide so if you're interested get over and talk about get over and and take a look at at that um that tool there it's going to help you out through the process the next one is going to be a home equity line of credit or a HELOC you may have heard it called that and that is actually how we purchased our facilities with a down payment we kind of combined the HELOC with the SBA funding and we
00:07:14
were able to purchase our to assisted living facilities so if you have home equity through your personal residence or through an investment property and you can tap into that Equity that could be the down payment or it could be enough to fund you if you're doing a conversion um on on the house and get you the money that you need to kind of start going through that process next is government grants and programs so we've talked about this and I'll link this up above about grants and grants are
00:07:41
they're kind of a little fuzzy I would say um everybody wants to get a grant but they're really hard to get and I I have some experience doing grant writing I've received over a million dollars in Grants for our Colorado facility through some grants that were made available to us through the arpa program in in the state of Colorado so I'm very familiar with that Grant process and how it works and you might be able to find some on there if you go to grants.gov or granto for.com those are some great resources
00:08:10
and I'll link up above a live video that I did a few weeks ago that was talking about this process and how you can go and find grants and find ones that are applicable to you and if you go to Assisted Living investing.com Grant you can get and we'll link this down below you can get access to my free grant writing template is going to help you out through that process as well um and kind of get you down that path to potentially receiving a grant that's going to help you do the conversion on the house and help out a
00:08:41
population thing you want to know about grants though is you need to have it for a specific thing in mind and so it needs to be for a specific population it could be the elderly it could be an underserved population it could be anything um but the more specific you are with what you're trying to obtain that grant funding for the more successful you're going to be in obtaining those grants those Grant funds for you in in your Assisted Living investment journey and doing the conversion on the house so you can start
00:09:10
serving that population is how that would work the next one is going to be private um Partners uh that have money so this could be going and finding somebody that has you know a rich Uncle a rich cousin could be any of those you know any Rich friend whatever it is go and talk to that person and build your business plan and your financial modeling and say I want to do this assisted living facility uh this is how much it's going to cost me these are what the returns are based off of what I'm seeing in my underwriting and I I
00:09:41
need x amount of money are you interested in working with me or do you know anybody that's interested in working with me to successfully um do the conversion here on this facility and I'll give you ownership we'll work on this for three years and then I'll convert it into an SBA loan and then I'll pay you back all the money plus interest or whatever it is whatever structure you want to work with getting in front of people and finding Partners um whether they're passive or active is
00:10:06
something that's going to be key this is why I had to work with my parents on purchasing my facilities I didn't have that Capital that was available to me so I needed to work with somebody that had access to the capital so that I could reach my dreams and so you can do this you just need to kind of build a business case you need it to be a successful Venture um but you can make it look that way and and kind of articulate that through using the tools that I have available for you on the website so go make sure you get over to
00:10:32
Assisted Living investing. net to get access to some of those tools next would be crowdfunding and Community Support so this would be you know if you have access to a bunch of people um or the community uh wants to do this I'm not familiar with this process but you might be able to find a group of people that are really interested in doing this if you're part of a Real Estate Investment Group uh or something like that you might be able to find a bunch of people that are willing to go this route and
00:10:57
help you out through the process if you're doing a smaller conversion like this chances are you're going to need just one or two investors that have the amount of money that you need um you're probably not going to be able to do something like a syndication deal on it the returns just aren't going to be there in this type of a small house but it's a route that you could look at going um if you really wanted to and finding multiple people to kind of help you get the funding the more I talk
00:11:22
about Assisted Living to my friends and my family the more people are like hey I want to know when is the next one that you're going to do cuz I might want to invest with you and I talked to some of these people some of them don't have a lot of money but some of them do and some of them are willing to do that and work with me so that we can create a successful Venture together and then the the last one is going to be looking at Specialized Assisted Living loans i' I've not actually come across many of
00:11:49
these but I know that they're out there and if you do some research on the internet and look for and regularly look for these it's kind of similar to Grants but you might be able to find some specific programs that are doing loans that are for assisted living especially as this population is aging um you might be able to find certain things that are kind of like government loans U that would allow you to do it that are not SBA and they're not grants but they are loans that are specific to serving a
00:12:16
specific population we're actually seeing a little bit of this in Colorado now that is more for um kind of the sober living transitional housing space uh where they would be loans rather than grants or things like but there's just kind of this this in between that we might be able to find some of those opportunities and expand our portfolio through that process so that's something else that you want to keep in mind as you're going through it I would say your top choices here for getting the funding
00:12:43
are going to be your personal funds and savings finding a partner tapping into your home equity maybe on a conversion maybe doing an SBA loan um it depends on the amount and and what you can work through with a bank those would be my top four suggestions but there's a a handful of others there so I just want to make sure that you are aware of what those are and what they look like and how you might be able to access the funding through that process now I want to give you some tips for successful
00:13:11
Investments with other people as you're going through this process uh if you're looking to partner with somebody or looking to do the investment yourself I want to give you some tips that are going to help you be successful so you can feel confident in your decision to move forward with your investment and and move things along number one is going to be creating a business plan you want to make sure you're getting that information out there you're being specific and articulate with it I help
00:13:36
you out through that process using the business planning guide which again will'll link down below so you can go through that process and kind of get a feel for how to create a good business plan a solid business plan with a solid financial model it's going to help you out through the process the second one is going to be finding some professional help and I'm excited to kind of share with you that I am going to be rolling out a course here the Assisted Living accelerator program if uh you are
00:14:01
interested in it's going to be a 12we course that is your path to ownership it's going to help you get to that process and uh own your own assisted living facility I'm super excited to share it with you uh something I've been working on for a long time I have a lot of I put a lot of time into this and kind of walk you through the process of how I've purchased my own assisted living facilities we'll have a link down below where you can either purchase that or um register for it and pre-register
00:14:25
if it hasn't been released yet cuz just the timing of when this video is going to come out I I don't know if it'll be ready yet um but make sure you get down there uh click on the link to either register or purchase that it's going to help you out immensely through the process there and I'm so excited to share it with you uh but if you don't work with me that's fine go find somebody else that that you can work with finding somebody that has done this before is going to help you out so much
00:14:48
as you go through the process and help you understand what you need to do to reach your investment goals and the third one is just going to be compliance and Licensing you have to make sure if you're doing this you need to be talking to the municipality you got to be talking to the health department before you get really deep into this I I was on a coaching call with somebody um recently and they purchased the home and they even started doing some of the the renovations on the home but they hadn't
00:15:16
started the process of of getting the license and talking to the municipality and they found that some of the renovations they did weren't going to be compliant or they needed to have a certain type of permit or permission before they started the process so you got to make sure you do these things in order so you can successfully do this and not waste your time or your money uh as you're going through the process so make sure you're talking to the right people going through that process and
00:15:40
and just kind of doing what you need to do to make sure you can be successful in starting your own doing a conversion on your own assisted living facility so we've got a lot that we've talked about today U number one we talked about uh all the things that you might need funding for as you're doing the conversion then we talked about some of the funding sources and then I told you about uh the the things that you can do to be successful as you're trying to do this type of a conversion and get
00:16:06
started on your investment Journey if you found this helpful make sure you comment down below like the video subscribe and ring the bell so you get notified we're doing live videos once a week we're dropping um other videos once a week uh get over and and follow us on the Facebook group it is exploding right now we have some incredible people in there that are all on their investment journey and get over to the website as well Assisted Living investing. netal you can download your calculator we'll
00:16:30
link that down below uh so you can be made aware of all the incredible resources we are putting out there to help you along your investment journey I want to thank you again for watching for being here with me on our journey here to investing and does residential Assisted Living sound interesting to you but you just don't know where to get started at Assisted Living investing. net we are here to help you through the process start to finish thanks for watching and have a great [Music] day [Music]
Download Your FREE Calculator
Stay connected with news and updates!
Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.
We hate SPAM. We will never sell your information, for any reason.