The 5 Biggest Expenses in Assisted Living (And How to Budget for Them)

Transcript

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hey friend it is Brandon with Assisted Living investing excited to have you here on our live today today we're going to be talking about breaking down the top expenses in Assisted Living this is a question I get from a lot of people um and they want to know what that looks like and I had an email um from somebody uh a couple months ago and I have not gotten back to him so if you are watching this I think your name was Steve I apologize for not getting back to you uh this is kind of a video that

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is in response to a little bit of of some of your questions there um I do this for a lot of people so if you have questions make sure you email me or get over to the Facebook group and uh make some comments there and you know we can create some videos for you before we get started with the topic of breaking down those top expenses in Assisted Living want to remind you to get over to the website Assisted Living investing. net we're going to have a ticker going down below and uh that will get you access to

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the business plan checklist um so assistant living investing. netb checklist again links down below and everything um and so I'm going to put my screen up here there we go um with the with so you can go get that as free resource for you you can also get the underwriting calculator to help you out along your investment Journey um so excited to help you out with that uh let us get over here and give you a quick intro of who I am and and why I'm teaching you and and my background so you know know exactly where I'm at um so

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my background in Assisted Living I own and operate two assisted living facilities I live in Utah one of my facilities is in Colorado the other is in Idaho so we are marketing those uh you know I operate those both remotely and have the the opportunity to do that and have been doing that since 2020 so uh coming up on four years here in the next few months I've secured over1 and A5 million dollars in SBA funding as well uh on three separate Acquisitions uh have operated out of state as I mentioned and have a MERS in healthcare

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administration with over a decade of experience working in the healthcare industry for various um companies so have a lot of experience and background if you're new here U make sure you type in newbie and if you are an operator you've been here uh and you're just kind of wanting to get some clarity then type in operator and for those of you who are live make sure you type in those questions um so I can get to them here at the end of the call and if you are not live that's totally fine as well

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type in the question questions uh because I'll do my best to answer them um either in comments or create a separate video for you so make sure you have put your comments in here if your questions and we'll get to those so let's talk about the top five uh expenses for your Assisted Living business and if you purchase the business planning guide which is Assisted Living investing. netb PG we'll have links Down Below on the YouTube um in the YouTube video for you to do that you will actually get access to one of

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the tools that I have and it is going to give you an a background of exactly what it cost me to operate my facilities um last year the year before and for both of my facilities I'm really transparent with it and you can see exactly what our finances look like uh it's a question that a lot of people have but the five main expenses that you need to be aware of as you are getting started with Assisted Living are number one Staffing and it is the biggest expense by far it is is a huge expense uh probably 30 to

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50% of all of your expenses are going to be Staffing so we're going to get into that really deep here in just a a couple minutes next is your debt service so your mortgage your lease your your whatever it is that you're paying to have the property that you um need so you can run this business that is number two number three is insurance and your insurance is you're going to need a few different basic types we're going to get into that here in a second but um insurance is going to be a big expense

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and it is necessary expense for you you want to have that insurance in place number four is your utilities so this is gas electric water um TV you know those types of things we'll get into that here uh in a few minutes as well and then food you got to pay not yet not pay you have to feed your residents and make sure that they have the food that they need um that's part of the service that you're providing so those are the five things that we are going to be talking about I have another video that I did a

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while back uh so if you get on the YouTube channel and search for um you know I think it's like assisted living expenses if you just search in YouTube for that it should pop up and you can get an overview of that this one I'm going to go pretty deep on that one gives you another view of what this looks like so if you're just trying to figure this stuff out these two videos will be really valuable for you and helping you understand what it what it's going to cost to operate that that

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facility so let's talk about uh Staffing so Staffing as I mentioned it's probably 30 to 50% of of what you you are going to be dealing with from an expense perspective I was actually working with one of my coaching clients earlier uh this week or late last week late last week and we were doing the underwriting and what we found is the the amount of money for the opportunity that we were looking at specifically that she was going to have to pay for um Staffing was just not going to make sense like it

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just made that deal impossible for it to work and um the way that Staffing is going to work there's actually a few different areas here um there's three wages is number one number two is your payroll taxes and number three is your benefits that you're going to offer so if you get into the um over to the website assist living investing. net and under you get that that free underwriting calculator it's going to have um some of those things in there you need to have budget LS for each one

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there are some advantages from a tax perspective in in doing this um which is which is nice and I don't claim to know all of those but if you work with an accountant they can explain to you why you want to own a business there are tax advantages to doing this when you're paying other people's wages and things like that but um as you get into it what you need to understand is your wages is such a big number for you and what you need to do to figure out what those wages are is you take the dollar amount

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per hour that they're making and you multiply that by the FTE that you're going to have FTE means full-time equivalent and so when you are um when you're doing this and and you're building out um some kind of a of a method of figuring out how many staff you need um you're going to track that so if you if you build out a calendar that says I need x amount of staff for for these shifts and you come out with it and you say I need five staff members I need five caregivers to come in here and and care for for my

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residents and I'm going to pay them each $15 an hour for example um let me see if I can pull up a quick calculator so you can see no not that one sorry let's pop over here this is the problem of doing things live where is my uh thing at oh man gotta love this okay hold on a second I'm gonna pull this down and uh let me go find my screen um try to do something on the Fly and make this really cool and uh just ruined it um there we we go and we'll add this back in here okay to avoid that from

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happening again I'm going to go over here on my other C uh computer and do a really quick math for you 15 * 5 that's 75 and then you have to multiply that by 40 hours a week so you're up to $3,000 per week for for those staffs that seems really low to me 50 $15 per hour let's see right here $15 * 40 That's 40 hours a week that's $600 then you have five staff in there that's 3,000 and then if you times that by 52 to get up to a year worth that's $156,000 which you're paying all of

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those staff then on top of that you're going to need to pay your administrator who is probably going to be between 40 and $70,000 depending on where you're at and what the market dictates it could be a little bit higher than that let's just say that it's plus $50,000 um and that now you're up to 2,6 $26,000 for your wages and then if you added in um a nurse who's getting paid something that that's a little bit lower maybe they're a 0.25 FTE they're at your facility 10 hours uh 10 hours a week but

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they are making um $40 an hour that puts them at 400 um um dollars per week 1600 um I'm doing quick math because I can't do it over here um let's see 400 times um 52 that's 20,000 plus the 206 you're up to 200 a little over $225,000 in just your wages um so this is huge uh it's a big number for you that you need to be aware of on top of that you're going to have your payroll taxes and that's you know probably going to be 10 to 15 20% um on top of that depending on the state that you're in

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that you're going to have to collect that comes out of that that is payroll stuff it is it's a large expense that you need to to be aware of as you get into this for sure um as you're trying to to figure things out what's really nice though is a lot of payroll software is going to figure all of this out for you and so if you get in and um you use a use something like gust stone I have a link down below for that and we'll make sure it's on the Facebook group you it will figure all of these numbers out for

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you so you don't have to about like factoring and figuring all that they do benefits Administration but you can see just from that quick number that I came up with with five staff members uh an administrator and a nurse you're at $225,000 for the full year um in doing that and for a small home that's a significant amount and the larger the home is the more staff you're going to need and it can really impact you and maybe $15 is too low and you've got to be up to $20 um we we end up paying

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between 16 and $21 an hour for our staff depending on which level they're at which state they're in um so it is a really really big expense I've got a comment here um so your sister's a a caregiver um um metch and you're a nurse being the admin being the administrator so that's good and I know we were we're chatting back and forth so um make sure you get your questions in here um with those expenses eliminated uh you're trying to come up with a good number to have saved up to start so yeah um I mean

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if you're if you're that person and you're you're one of those staff members and you're the administrator you're still going to want to pay yourself right so you need to make sure that that's in there now if you're in a spot personally where you can float yourself um for a few months and the business doesn't have to do it and you're the administrator and you're going to pay yourself 60 $70,000 you can reduce that number from these wages that we just went through um and you can see what

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that's going to do uh to give you a view of it but this 225,000 if I divide that by um 12 on a monthly basis that's $119,000 roughly and that $199,000 um per month you're going to split that into your pay periods um but it's about $10,000 per pay period that you're going to have to do that $199,000 um what I suggest that you do is you get two to three months worth of uh of expenses saved up to do it so if you're 19 $1,000 that's $38,000 in just wages for for two months um or if you're

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going up to three months that's $57,000 so hope I did the math right in my head um so that kind of gives you an idea just in Wages that's what you're going to to need to have set aside for two to three months of expenses um in this scenario where we went through with five staff members uh an administrator and a part-time nurse so kind of gives you an idea of what that might look like you can back that all into the numbers that you have based off of what you're going to get but that's and then you

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know if if you're the administrator you're not paying yourself anything for a little bit because you have personal reserves um and you want the business to get up and running and and get launched then if that's the case then you can reduce that amount by probably fiveish thousand per month um and so you're now at like 15,000 so that's um per month 30 ,000 for two months 45 for for three months that kind of gives you an idea hopefully of what that would look like um if if you're trying to figure that

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out so if you have other questions just type them in I'm going to move on to the to the next slide um so let's talk now about Debt Service so as far as Debt Service is concerned this is going to be your loan this could be your existing loan a new loan existing in the sense that you own the home already and you are doing a renovation on it or doing a conversion um um a a new one where you are buying something brand new whether it's a business or a home and you're doing the renovation uh could be

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something where you're leasing this is this is the amount that you are paying for the home for the property where you're going to be um running that that assisted living home so you need to factor in what this is now if you own the home this is going to be a really clear number and if you own the home and and you know you bought it five years ago and you have some really good rates this might be a really good option for you because your debt service number is going to be significantly lower and it's

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going to be fixed which is really nice if you're buying something new then you're going to be subject to these higher interest rates or possibly like a commercial style loan SBA loan which has higher rates than you might get if you had a a personal residence that you're now turning into an assisted living home so um this number is going to vary uh it it really does and it depends on the market it depends on the terms that you can get with the bank um all those things like you could be anywhere from I

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don't know let's say it's crazy and you have a $500 mortgage um all the way up to $15,000 depending on where you're at in that Spectrum um this number can fluctuate greatly um based off of the opportunity that you're looking at and really has an impact on the profitability when you are underwriting your Staffing number is going to be pretty set it's not going to change a lot um once you figure that number out it's going to be there the number that has enough variability ility in it to

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determine if this is a good opportunity or not is often times going to be this de service number and it's going to be dependent on the deal that you find and if you find a good one that's going to um you know make sense for you financially this is also where um really any real estate deal has a magic number you can figure it out you just have to you have to get to your number that makes sense for you from a Debt Service payments perspective and um and then just make see if you can get somebody to

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agree to the payment terms for that um is really what you have to do and it's a lot of negotiating and a lot that goes into that which is something that we teach um here at Assisted Living investing so um is just kind of getting that funding and finding the property and and all of those things um but that service is a huge one that you need to be aware of and can fluctuate quite a bit so um let's move on to the next one this is insurance so insurance is another thing that you absolutely want

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to have there's three types that you want to get there is liability insurance so this is somebody Falls or or something happens to a resident or staff uh really more so the residents um at the home you want to have that um second one is property you know you have hail damage you have a fire tornado whatever happens you know um a hurricane comes through you want to have that property um Insurance in place so that you have coverage for the house for the property excuse me um and the third one

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is going to be workers comp and the workers's comp insurance is going to cover if your staff member um you know falls down or cuts themselves or whatever happens uh while they are at work it's going to to cover them for that so those are the three basic ones and I did a video on the YouTube channel I think went out last week that was all about finding an insurance broker and the importance of finding one is they're going to help you find the right rates they're going to help you negotiate and

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the nice thing is you're not really paying them um they get pay they kind of get a cut out of the premium that you put in place um for that so they're great at helping out from an expense perspective what you could anticipate paying um let's see for our two facilities if I combine them it's four five that's probably about $5,000 per month maybe a little bit more for the two facilities and these are 16 bed facilities one in Colorado one in Idaho so take that for what it's worth yours

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might be higher or lower depending on how many residents you have and which state you're going to be in uh which population you're going to be working with there's a lot of factors that go into it but if it's for me for two facilities $5,000 a month you could probably expect to be about $2500 to $3,000 for that for those all three of these insurances combined um for your home so that kind of gives you an idea of what that expense is going to look like for you as you're trying to figure

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out if something is going to be profitable or not um talking to an insurance broker explaining what you want to do if you have a house in mind all of these things are going to allow you to get quotes and quotes are free um and that will help you understand if you are looking at an existing business you can get access to their finances and you can see exactly what they were paying in insurance and probably equate that pretty well to what you what you're going to be doing might be slightly higher because chances are they've been

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in business for a while and have a track record of being good um with their insurance and not having issues so they premiums come down over time which is really nice to have with insurance but it's it's one of those things you absolutely you have to have it number one the state's going to require it if you want to have a license um to operate your facility but number two you want to have it because of the protection that it that it gives you as you are um operating your facility it protects your

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business protects you personally protects your home your residents your staff there's a lot of protection that comes into having insurance so you want to make sure you have that um next is utilities so utilities um if you already own the home you're going to have a pretty decent idea of what this is going to cost you but um if not then talking and you're buying from somebody that's that has own the facility they can give you an idea of what utilities are they're not going to change much they

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will um go up with inflation and there's also seasonality if you own a home you know this that there's some seasonality with the different utilities that that you have and you know in the in the summertime your power goes up and in the winter time your gas goes up and that's just kind of how NW works the ones that you want to be aware of are power um gas Water waste um internet and television or streaming what we have found um we use a service um and for anybody that's like in one of my coaching programs if

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you're interested in learning this um we use a service that has helped us save a significant amount of money on our waste contract at one of our facilities because I mean you have 16 residents you're going to have a lot of waste so we were using like waste management or something like that we went with a different one um that has allowed us to save quite a bit of money and we use a company that helps us negotiate some of those things um with television you could just go and and do something

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that's really Broad and get like an Xfinity or Direct TV or something like that that that's a little more broad or because everybody is Shifting over to streaming and um there's so many different options there you could consider doing that instead of paying for a high ticket um TV package and that might save you some money there as well and just figure out you know kind of create your own thing using Netflix and Disney and um Hulu or or whatever it is that you want to do you can put those

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things in what you want to make sure that you are doing is still meeting the needs of the residents and what they want and so if they want a specific show and it's not on a streaming service it's probably going to be better off for you to just pay a little bit extra per month to get the stream to get the service that has that channel that they want um to keep them happy so just kind of one of those things where it's like is it worth it to save $50 a month in this business um so that you know and and not

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get something that's going to make your your residents happy it's just one of those things you got to kind of balance back and forth and see what which way is going to work best for you so um yeah that that's what I would suggest there uh from that standpoint but utilities you want to make sure that you're understanding what those are going to be utilities can also vary depending on the size of the home and the utilization of those U of those utilities so you could be looking at anywhere from a few

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hundred dollars up to $2,000 um for your utilities and I'm sure um in California they're probably even higher than that so depending on your state you you could be spending quite a bit of money on utilities the nice thing about utilities is they are pretty set um they don't fluctuate all that much so uh you once you know what they are you're going to have a pretty good idea of what that looks like food um is the next one this is your fifth one and food is something that I like to use is is an acronym

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that's called per resident per day um I try to look this up online to see if other people use it because I've heard people say it but I couldn't find anything but per resident per day is basically um the amount of money per day that you spend per resident and then you would times that by the number of residents that you have so let's say that the number let's just do some really easy math because you know make it easy on myself let's say you've got uh your spending $10 per day and you

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have 10 residents that's $100 per day um no sorry 10 residents $10 per day per resident you have $10 10 residents per day that's $100 there um and yeah that's that's going to give you an idea $100 per day per resident um and then you multiply that by the 30 days in the month and that's $3,000 is your food budget um you can typically find this number for your state online um if you say what is like the average um cost per resident for food um and assisted living in my state you can

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often find that number actually there's a few websites that will um get that that number for you $10 seems high to me um I would say you're probably a little bit closer to like seven or eight depending on which state you're going to be in uh but that seems to be something that's a little more realistic the re and and you might be listening to this and be like there's no way nobody could live off of $10 per day um what you have to understand is you're buying in both you're buying for 10 residents you're

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not eating out for every meal and you go and you buy Costco or Sam's Club um or something like that and you're buying large quantities of food and splitting that up amongst other people and so it really does get down to a smaller amount of per resident per day um as as you're trying to figure that out um it it is very realistic to to get there and there's like I mentioned things online where you can find this another nice thing is using a meal planning service um we use Grove menus

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and I don't have any you know referral links or anything like that they're great um they're really good at helping you determine um what you want to put into you know into the meals um help you plan those meals give you a recipe for it and and also give you a shopping list for it so you know exactly what you need to spend we use Walmart plus and Walmart plus allows it to get delivered to us so our staff our administrator doesn't have to go shopping because it just gets delivered to the house we probably pay a

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little bit more for it but it saves us ton of time so it it's also a little bit worth it so food is something that you need to make sure that you are feeding your residents and it's a number that can fluctuate but you can get pretty close to that um and and understanding what it is so those are the five base expenses that you need to be aware of so we talked about um I'm going to try to remember them Staffing huge huge expense um second one is going to be your debt service what you're paying for that

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property that where your facility is going to be third is going to be your insurance fourth is going to be um I'm going to go backwards because I can't remember utilities and fifth is going to be your food so those five things will make up 75 to 8 % of all of your expenses um they really will as I mentioned earlier if you get over to the website Assisted Living investing. net BPG you can get the business planning guide and part of one of the bonuses for that course is showing you my exact um

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my exact finances a year or two ago um and I'm really transparent with what that looks like so you can see how these things play out um as you're getting into that so any questions I know we've had a few people come in and and out um as we did things um and there was the the one question there I hope that answered um where you're at from the the question was around um they're starting a facility sister's the caregiver um and she's the nurse that would also plan to be the administrator um and with those

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expenses eliminated um trying to figure out a good number and we talked quite a bit about what that looked like for for them with the understanding that yeah you you still probably want to pay yourself um so you could maybe eliminate some of those expenses but you also need to pay yourself and so there's kind of this fine line um and then I tried to do a calculator for those that are watching this on the replay you you understand um but you know I ran a scenario five residents uh or five staff administrator

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and a part-time nurse and you're up to about $199,000 per month um based off of a $15 per hour with those five staff members um that's a significant amount uh you can cut down a little bit with the with what you're paying yourself out there but um it's still going to be probably at least 145,000 so big big expense uh probably going to take up close to half of of all of your expenses as you get into that um question here the website again for the plan um so yeah and I proba said this

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Assisted Living investing. net um BPG will'll give you the business planning guide um or if you want the free business plan checklist um that's Assisted Living investing. netb checklist that's along the ticker um and we'll have links in in there as well so you can get that one for free or the the planning guide uh goes pretty deep into that and that's Assisted Living investing. net BPG boy Paul guy I can't I can't do the you know phonetic alphabet for you there um but

00:27:48
yeah yeah no problem uh any other questions um make sure you while you're watching this make sure you like the video subscribe ring the bell uh as well and and in Facebook make sure you're um turning on notifications and things like that so you get notified we're doing these on Tuesdays and on Thursdays Tuesday is the live Thursday is a pre-recorded video that goes out to you and gives you some guidance if you have questions or anything like that make sure you're putting that on there and um

00:28:16
have some exciting stuff as well coming out here um I think we'll start announcing it next week so make sure you stay tuned um if you're on the email list or in the Facebook group we're going to have quite a bit of stuff um going out there to to give you some guidance so some really fun exciting new things that are coming to Assisted Living investing that I'm excited to share with you so make sure you stay tuned for that uh with that said get the free business plan checklist Assisted

00:28:41
Living investing. netb checklist and we'll have links down below for that as well uh I want to thank you for watching hopefully this was helpful make sure you like the video uh subscribe and ring the bell as well so you get notified and um 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 to help you launch that Assisted Living business so you can get that time and

00:29:07
Financial Freedom that you're looking for I want to thank you for being here with me excited to help you along your journey uh thanks for watching and have a great day