The REAL Cost of Starting a Residential Assisted Living in 2025

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Starting a residential assisted living (RAL) home in 2025 can be a profitable and rewarding business—but it’s not cheap. The big question is: How much does it actually cost to start?

The answer? It depends.

Your startup costs will vary based on location, property type, renovations, and financing options. This guide breaks down what you need to budget for, so you can start strong without unexpected surprises.

Check out the video, too:

Understanding Startup Costs: What Affects Your Investment?

Three major factors determine your total startup costs:

🏡 Real Estate Costs – Whether you buy an existing facility or convert a home, real estate is the biggest expense.

📈 Business Valuation – If purchasing an existing business, the price depends on cash flow, occupancy rates, and property condition.

💰 Financing Type – SBA loans, traditional mortgages, or private funding will affect your down payment and monthly costs.

Now, let’s break down the numbers so you know what to expect.

The Major Expenses of Starting an Assisted Living Home

1️⃣ Real Estate & Business Purchase

If you’re buying an existing facility, the price is mostly tied to real estate value rather than business revenue. Here’s what to expect:

Small RAL homes (6–16 beds): $500,000–$1.5M
Larger facilities (20+ beds): $1.5M+

📌 Pro Tip: If you already own a home, you can convert it into an assisted living home and save on purchase costs, though you'll likely still need to do some renovations, so make sure you account for that.

2️⃣ Renovations & Compliance Upgrades

If converting a home, you’ll need upgrades to meet safety and accessibility standards. These include:

Fire sprinkler system: $30,000–$80,000
Accessibility upgrades (ramps, doorways, grab bars): $10,000–$50,000
Emergency call systems & security: $5,000–$20,000
Kitchen & bathroom renovations: $10,000–$50,000

💡 Total renovation costs: $50,000–$200,000 depending on the home’s condition.

3️⃣ Licensing & Compliance Fees

To operate legally, you must obtain a state license. Costs vary by location, but you should budget for:

License application & processing: $5,000–$20,000
Training & certifications: $500–$5,000
Business & liability insurance: $3,000–$10,000 annually

📌 Pro Tip: If you’re buying an existing facility, you may need to pay a change-of-ownership fee to transfer the license which can actually be less expensive than getting an original license.

4️⃣ Operating Capital (2–6 Months of Expenses)

Before you open, you need cash on hand to cover payroll, supplies, food, and utilities while you fill your beds.

Estimated operating costs:

Small homes (6–10 beds): $10,000–$30,000/month
Larger homes (10–20 beds): $30,000–$60,000/month

💡 Total operating capital needed: $50,000–$150,000

📌 Pro Tip: It often takes 3–6 months to reach full occupancy. Make sure you have enough cash to cover expenses while you grow.

How to Fund Your Assisted Living Business

SBA Loans (Most Common)

✅ 15–20% down payment required
✅ Lower interest rates
✅ Ideal for first-time owners

💡 Example: For a $1M property, you need $150,000–$200,000 upfront.

Traditional Mortgages

✅ 25–30% down payment required
✅ Lower monthly payments
✅ Best for owner-occupied properties

💡 Example: For a $1M property, you need $250,000–$300,000 upfront.

Private Investors or Hard Money Loans

✅ Flexible financing options
✅ 0–30% down payment (depends on risk factors)
✅ Higher interest rates but faster approvals

What If You Don’t Have Enough Capital?

If you don’t have the $100K–$300K down payment, don’t worry—there are other ways to fund your business:

👨‍👩‍👧‍👦 Partner with investors – Find people willing to invest in exchange for equity or profit-sharing.
🏡 Use home equity (HELOC) – If you own a home, you can borrow against your equity.
📈 Roll over retirement funds (ROBS) – Use your 401(k) or IRA tax-free to invest in your business.
🤝 Seller financing – Some sellers finance part of the deal, reducing your upfront cash needs.

📌 Pro Tip: A strong business plan makes it easier to secure investors and loans. Download our Business Plan Checklist to get started!

Final Thoughts: Is Starting an Assisted Living Home Worth It?

Starting an assisted living home in 2025 takes planning, funding, and hard work—but it can be highly profitable if done right.

Here’s what you need to budget for:

✔ Buying or converting a home – $500K–$1.5M
✔ Renovations & safety upgrades – $50K–$200K
✔ Licensing & compliance fees – $5K–$20K
✔ Operating capital (2–6 months) – $50K–$150K
✔ Total startup costs: $100K–$500K+ (varies by property and financing)

💡 Next Steps:

✅ Download our Business Plan Checklist to make sure you’re ready to apply for funding.
✅ Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.

🚀 Let’s turn your dream of owning an assisted living facility into reality!

▶️ Watch on YouTube

🎙️ Listen to the podcast

Show full transcript 👇

Transcript

00:00:00 - 00:00:48
hey friend I'm Brandon Gustafson I help beginners like you launch their Assisted Living business in the next 12 months in today's video we're going to be getting into how much startup cost can you expect for a residential Assisted Living business in 2025 if you're interested in that stick around for today's video and make sure you also go grab the free underwriting calculator Assisted Living investing. net big blue box in the top right corner and with that let's get into today's

00:00:22 - 00:01:14
[Music] video hey friend welcome welcome back to Assisted Living investing excited to have you here on the Channel with me today today we're going to be talking about how much does it cost to start a residential Assisted Living business in 2025 so if you've been wondering exactly you how much money do I need what's it going to cost me to start and I see this question all the time this is the video for you so make sure you stick around like the video as well and give me some of your questions down below and type in

00:00:52 - 00:01:47
startup costs it will let me know that you are paying attention and and ask me whatever questions that you have so I can really give you some extra feedback and guidance in the comments or doing a live for you in a future session so again startup cost and then give me the questions that you have as we go through the video want you want to get you primed up for that now the the quick and easy answer for this what are the startup costs for assisted living in 2025 it depends that's that's a quick and easy

00:01:19 - 00:02:06
answer so it depends it really does it's going to depend on a few things number one it's going to depend on the value of the real estate it's going to depend on the value of the business and also is going to depend on the loan type that you're going to be getting so we're going to be talking about the loan stuff here a little bit later in the video but the business and the real estate value are the biggest ones that can drive the the startup costs for your Assisted Living business a lot of lenders are

00:01:43 - 00:02:41
going to say I need a percentage of x amount down for you to get this business and a lot of that value when you're purchasing a million dooll Assisted Living business is related to the value of the real estate I would say almost 90 95% of the value that you're doing this with the residential Assisted Living business is the real estate and that's because all these businesses they do cash flow well and they can provide you with a really good income they're not throwing off billions of dollars in cash

00:02:12 - 00:03:02
so the value of the business is not a ton but it is a really good cash flowing asset for you to help you out so that's why but also it could depend on the business value and how it's working how long it's been producing you can have see valuations on the business or if you're just going to buy a business and not buy the real estate then obviously you're looking at buying just the business and that can really be the amount that you're going to be looking at when you go that route the other

00:02:37 - 00:03:30
thing I want to point out to you is I know there are several of you that are watching this who have a home and you're thinking of turning it into assisted living and you want to know what those startup expenses are in that case what you're going to want to do is spend some time underwriting go grab the business planning guide Assisted Living investing. netb PG in there there's a bonus that has my financials for my assistant living businesses so you can go and grab those and you can see

00:03:03 - 00:03:54
exactly how much it costs us to operate our facility and that's going to give you an idea of exactly what that costs from an annual basis you can back that into a monthly and then what I really suggest that you do is have two to six months worth of operating capital in the bank to help you get started so it's going to tell you exactly what that is and then the other big things that you need if you're doing this conversion type of an opportunity is the renovations so that's what you're going

00:03:29 - 00:04:17
to get from contractors and people like that talking with the fire department to figure out what type of fire suppression system you need in the home is also going to be key so there's going to be potential Renovations and fire suppression system those are going to be your biggest expenses everything else is relatively not that high and then the other thing that I want everybody to be aware of is there's going to be a licensing fee whether it's a change of ownership or a brand new license there's

00:03:53 - 00:04:50
going to be a licensing fee depends on the state I typically see also depends on the size of the facility but between anywhere from 5 to $20,000 typically on the lower end but it does depend on the size of the facility so that's something you also want to be aware of those are the big expenses that I want you to be aware of but as I mentioned it does depend and one of those reasons why it depends a lot is the loan the type of loan that you're getting so we're going to talk about that here as as we move

00:04:22 - 00:05:16
along in this video so the three loan types that I really want you to be aware of are SBA conventional or traditional mortgages or private loans private hard money type of loans those are the three big ones that are going to allow you to get into assisted living and there's pros and cons to each of them and we'll link up a video where I've talked about this in previous videos as well so you can kind of really get a feel for exactly what that looks like those are the three big options that you have

00:04:48 - 00:05:53
available to you to start your Assisted Living business and each of them are going to have different down payments and loan terms that you should be aware of now when it comes to T the the down payment amounts when you're working with these different types of loans an SBA loan is going to be typically between 15 and 20% down so let's use Easy Math I I like to do easy math as much as I can million doll property you have a million dollar property you're going to buy on an SBA loan 15 to 20% down that's 150 to

00:05:21 - 00:06:15
200,000 that's going to give you an idea of exactly what that's going to cost from a down payment perspective now if you're going with a traditional mortgage million dollar property typically you're going to be looking at 25 to 30% down and this is because this is considered a investment property or or second home it is not a primary residence and so your down payments are typically going to be higher you can't really tap into FHA type of loans when you're doing this now VA benefits

00:05:49 - 00:06:38
they're going to be different I I'm not a veteran I don't understand all the complexities and everything with a VA loan could be very different there so if you're a veteran and you have access to that type of funding uh number one comment down below let me know cuz I'd love to learn a little bit more about that but number two talking with lenders is going to be your best option there now let's talk about hard money or private money this one really varies on the lender and their appetite for risk

00:06:13 - 00:07:14
and what it looks like and what you're doing with the house I've seen places that fund the entire project so 0% down or they'll ask you for a little bit of skin in the game but it's relatively low amount up to 30% down and it really does depend on how much work is being done how much whatever a risk it is for that lender and what they're willing to accept and so that's what you could be looking at there so 0 to 30% is 0 to 300,000 you know there's a very broad range there but typically I would say

00:06:43 - 00:07:43
you should be planning from a down payment perspective somewhere you know just let's ballpark at 20 to 25% 200 to $250,000 on a on a million dollar property that kind of gives you an idea what you're looking at there again this does not need to be your money so if if that's your mindset I don't have that much money I can't do Assisted Living then I really want you to change your mindset number one because you're not going to go far if you keep thinking that way there are people out there that

00:07:13 - 00:08:02
have money that want to invest I'm working on ways to kind of connect people like you know connect those types of people with those of you who need the money but it's something that's in the works and you know if you need some help and Guidance with that then type in funding Partners down below um that will let me know that that would be something that's super valuable for you funding Partners what I want you to chat down below speaking of which when it comes to finding partner or investor so if you

00:07:38 - 00:08:27
don't have that down payment I want to dive into a little bit of what you need to do in order to help you find that Pro partner that's going to give you the money and all of this comes back to kind of my five-phase Approach and if you need some help and Guidance with this go apply to The Mastermind program Alim mastermind.com I can help you out through the process free application lets me see if I can help you if I can I will send all the details and then you can decide if it's a good fit for you or

00:08:02 - 00:08:49
not so when it comes to this and finding that right partner there's a few things you need to do number one is you have to build this business Foundation you need to have your business plan you need to know what you're doing and be able to articulate it people want to see this they might not read it but they want to see that you have it they'll probably read at least the executive summary but you need to have it that they want to see it and if you need some help with your business plan I actually have a

00:08:26 - 00:09:19
workshop that kind of goes through all of this on exactly how to build this go to Assisted Living investing. netb FB for business Foundation Basics and watch that workshop and go through it and it will help you build a solid business plan that is specific to Assisted Living you need to have underwriting you need to have solid underwriting you'll get the free underwriting calculator Assisted Living investing. net big blue box in the right corner and if you do that and get really solid and on your

00:08:53 - 00:09:42
underwriting comfortable with it you do some conservative underwriting when you take this to a partner or an investor they can see the numbers in the benefit that it's going to have for them so make sure you go and grab that calculator but also perform the underwriting if you need help with that go to Assisted Living investing. netb PG for the business planning guide after you have built all of this you've got that business plan you've got your underwriting you know exactly what you're going to say now you got to

00:09:17 - 00:10:06
present the the idea to somebody you could build a slide deck for this but I I don't think you need to building a slide deck is I would say something that's a little more professional than what what you're probably doing here this is more conversational hey I found this investment opportunity it's called residential Assisted Living I would love to share with you a little bit about it create some kind of an elevator pitch you know my name is Brandon I have been working in healthcare for the past

00:09:42 - 00:10:25
decade and I found residential Assisted Living I think it's a really great opportunity has really good returns I built a business plan and have done some underwriting so I know exactly the criteria that I have for getting a good facility but I need some funds is that something you could help me out with or do you know somebody you know that's that's what you want to that's the type of elevator that's just off the top of my head but you want to build that you want to practice it so that people when

00:10:03 - 00:10:52
you start talking to people they they get excited about it and start wanting to do this it's also going to help you fill the beds once you once you get that facility open is just opening your mouth word of mouth is such an important part of what you're doing I was talking with somebody in the The Mastermind program about this just the other night and they wanted to do something with this this tiny home that they have three-bedroom home that they would be working in from a numbers perspective the way that I

00:10:28 - 00:11:14
think they're going to do it might makes sense I have encouraged them to do the underwriting to make sure it does but the other thing that I said is you got to start opening your mouth now you got to start having conversations with people so they get excited about the deal and the opportunities that you have in front of you so that they can determine if it's a good fit for them or not now once you have built all of that you know business plans in place and you got the underwriting you've had the

00:10:51 - 00:11:44
conversations and you have found somebody that wants to work with you now you got to draft an operating agreement um I encourage people to work with attorneys when you're doing this you want this all to be very well placed but you want to outline who's going to do what work and and how much people are getting paid and ownership percentages you need to spend time building out this operating agreement because if you don't then you never know what could happen but you just want to avoid those options

00:11:17 - 00:12:06
those instances where something bad could happen and that all comes with solid legal documents including a a solid operating agreement and so I highly encourage you to do that I'm not an attorney but I would encourage you to work with one but if you do all of those things you're going to find a partner you're going to find an investor somebody that wants to work with you and really help you along your path and help you along your journey to launch that Assisted Living business so in today's

00:11:42 - 00:12:27
video just to quickly recap we've been talking about how much does it cost to start that Assisted Living business in 2025 we talked about some of those big expenses you need to be aware of we also talked about down payment percentages the types of loans that you could be looking at and how to work with and find partners and how to prepare for that if you found this video help helpful make sure you like the video subscribe and ring the bell as well so you get notified when we put out our live videos

00:12:04 - 00:12:53
on Tuesdays and our long form videos on Thursdays to really help you along the path type in your questions as well because that's how I really give you the feedback and and guidance that you need in those live sessions I have a ton of backlog but I want to serve you to the best of my ability so type in any questions that you have about these things go apply to The Mastermind Al mastermind.com free application let me see if I can help you if I can I'll send you all the details and you decide if

00:12:29 - 00:13:11
it's a good fit for you or not and go grab the free underwriting calculator Assisted Living investing. net big blue box in the right corner go grab that and it will help you along your path especially everything we've been talking about today does residential Assisted Living sound interesting to you but you don't know how to get started at Assisted Living investing. net I'm here to help beginners like you launch their Assisted Living business in the next 12 months and remember it doesn't take a

00:12:50 - 00:13:13
lot just a little bit just keep going step by step by step and I promise you if you do and you're consistent and persistent you will be successful thanks for watching and have a great day [Music]

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