The True Cost of Running an Assisted Living Facility
Nov 12, 2025
Starting an assisted living business is exciting—but it can also feel overwhelming. One of the biggest challenges you’ll face is understanding your expenses and planning for them. If you don’t get this right, even the best ideas can fail.
Good news—you don’t have to figure it all out alone! In this guide, we’ll break down the biggest expense in your assisted living business, how to calculate it, and tips to manage it effectively. Let’s dive in! 🚀
Check out this video, too:
Why Understanding Costs Matters 💡
Every successful assisted living facility starts with a clear understanding of what it takes to run the business. Misjudging costs, especially your biggest expense, can lead to staffing shortages, unhappy employees, and stressed residents.
Knowing exactly what you need to pay staff, how many staff you need, and accounting for taxes and fees sets you up for long-term success.
Step 1: Identify Your Biggest Expense—Wages 💵
Wages are going to make up 50 to 80% of all of your expenses. Most new assisted living operators underestimate how much staff costs can add up. The first step in budgeting correctly is to figure out how many staff members you need.
How to Calculate Your Staff Needs 📊
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Check your state’s resident-to-caregiver ratio
🔍 Search for “resident to caregiver ratio for assisted living in [your state]”
Some states provide a specific number, like 1:8, while others simply require “adequate care to meet resident care needs” -
Determine coverage requirements
🕒 Do you need 24/7 coverage? For most licensed assisted living facilities, yes. Independent living or unlicensed care homes may not need around-the-clock staff; check with your state for specific requirements for your situation. -
Calculate shifts
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Example: 8-hour shifts → 3 shifts/day = 24 hours
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Facility with 10 residents, ratio 1:8 → 2 caregivers per shift
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3 shifts × 2 caregivers = 6 total daily shifts
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Weekly: 6 × 7 = 42 shifts
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Convert to Full-Time Equivalents (FTE)
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One staff member working 40 hours/week covers 5 shifts
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42 total shifts ÷ 5 shifts per employee = 8.4 FTEs
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This is a realistic way to calculate your staffing needs before you set wages.
💡 Use the free Underwriting Calculator to run these numbers automatically.
Step 2: Determine Realistic Wages 💸
Once you know how many staff you need, it’s time to figure out what to pay them.
Tips for figuring out wages:
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Check local job postings – see what similar facilities are paying.
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Consider facility size – smaller residential homes generally pay less than large corporate facilities. For example, an administrator in a smaller RAL may earn $50–$65k instead of $80–$100k.
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Offer slightly higher wages to retain staff – paying a little more can increase loyalty and reduce turnover.
💡 Think about bonuses, perks, or small incentives. Happy employees = happy residents = referrals and smoother operations. 😃
Step 3: Track Taxes and Fees 🧾
Payroll isn’t just paying your staff—it also includes taxes and fees.
Things to consider:
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Federal, state, and local payroll taxes
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Employer contributions for Social Security and Medicare
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State unemployment or disability insurance
Tools like Gusto can make this process simple. Just enter your employees, their rates, and hours worked. Gusto calculates taxes and processes payroll automatically.
Step 4: Understand the Value of Your Staff 🌟
Your team sets the culture, interacts with residents, and directly impacts satisfaction. By understanding your biggest expense—wages—and investing in your staff, you’re also investing in your facility’s reputation and growth.
Tips for creating a positive work environment:
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Offer competitive wages and perks
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Provide ongoing training and support
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Recognize and reward contributions
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Foster a positive and inclusive culture
A happy team creates happy residents, which leads to better referrals, lower turnover, and a thriving assisted living business. 😃🏡
Step 5: Use Tools to Simplify Budgeting 🛠️
Here are my recommended tools to help you figure out wages:
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Underwriting Calculator – helps estimate staff needs, wages, and taxes
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Payroll Vendor (Gusto) – simplifies paying staff and tracking taxes
Using tools keeps your finances organized, helps you underwrite realistically, and frees up time to focus on growing your business.
Next Steps: Take Control of Your Assisted Living Costs ✅
Understanding and managing wages is crucial to running a successful assisted living business. By knowing your staff needs, offering competitive wages, tracking taxes, and investing in your team, you’ll have a clear path to profitability and operational success.
🚀 Take Action Today
✅ Step 1: Download the Business Plan Checklist to map out staffing, wages, and expenses.
✅ Step 2: Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
Take it step by step, stay consistent, and your assisted living business will thrive!
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. And today's video, we're going to be talking about what is the biggest expense for your assisted living business. So, if you need help with that and understanding exactly what that is, make sure you stick around for today's video. And welcome to assisted living investing. Hey friend, welcome back to Assisted Living Investing. Before we get started in our video today, I want to remind you
00:00:29 - 00:01:17
to hop over to the website assistedlivinginvesting.net. In the big blue box in the top right corner, you can grab your free underwriting calculator. It's going to help you understand these expenses, including the biggest one, which is what we're going to be talking about today. There's an entire tab on that calculator that is dedicated to our topic today, which is the biggest expense that you need to be aware of as you are launching your assisted living business and getting into this a little bit deeper.
00:00:53 - 00:01:48
So, with that, let's hop into it. The biggest expense that you need to be aware of as you are trying to launch your assisted living business, and we'll do a little bit of a drum roll, is wages. Wages are the biggest expense. You need to be aware of this. Wages are going to make up 50 to 80% of all of your expenses. Like, they're huge. They they're a huge number. You need to understand exactly how wages are going to impact you and what exactly that looks like. The first thing that you
00:01:21 - 00:02:12
need to understand as you are trying to figure out wages and what that's going to look like for you in your facility is understanding the resident to caregiver ratio in your state. You can usually find this very easily by doing an internet search for something like what is the resident to caregiver ratio for assisted living in my state. And especially now that we have AI kind of answering a lot of these questions for you as you put that into a Google search engine or something like that, you're
00:01:46 - 00:02:32
going to get an answer that that tells you what it is. Now, I want you to validate that information. Make sure it is correct. But if you do that, you're going to understand exactly what that's going to look like. Now, for some states, they're going to give you a specific number. They're going to say, you know, 1 to 10 or 1 to 8. Like, that's the bare minimum. Other states are going to tell you that you just need to make sure that you are providing adequate care, that you're meeting the
00:02:09 - 00:02:58
care plan needs of your residents, and that's going to be the requirement. So figure out what that looks like for your state and then from there you're going to be able to back into exactly how many staff you need to be covering your shifts. You also want to determine, you know, do I need 24/7 coverage? Now, if you're doing assisted living, chances are yes, but if you're doing like an unlicensed care home or if you're independent living, you may not need to have this 247 coverage. So, you want to
00:02:33 - 00:03:24
understand exactly what that's going to look like for your state, what the requirements are, and figure out as well. I know there's some of you that watch this that want to do kind of like a live-in caregiver or live-in administrator model. You want to make sure that can one of these staff be living at the facility. In most states, it's not a problem, but you want to be validating that information as well to make sure that's going to work. And does that one person count as a resident to
00:02:59 - 00:03:46
caregiver ratio? Do they need to be in the same part of the house? they need to be on duty or if they're sleeping and they have a monitor or they have like an alarm system that goes off as somebody pulls something, is that sufficient? You need to understand exactly what that's going to look like for you in your home. So, the first step to understanding your wages is figure out exactly how many staff you need. If you need that 24/7 coverage, what you're going to need to be looking at is considering that
00:03:22 - 00:04:21
there's, let's say that you're doing 8 hour shifts. There's three 8 hour shifts in a day. 8 * 3 is 24. how many um shifts you're going to have to cover. Now, you need to figure out what your resident to caregiver ratio is. So, if it's 1 to eight and you have a 10 bed facility, then you're going to need to have two caregivers in a facility at all times for every single shift. And so, that's two * three for your three shifts. That's six staff members that need to be covering a day. And then you
00:03:51 - 00:04:54
need to multiply that by seven. So, you need a total of 42 shifts throughout the week. And if a shift is is eight hours, eight times five, five days a week, that's 40 hours. So that's going to give you a little bit. I'm going deep on math here, so try to follow me. I promise you it's going to probably make sense at the end of this. So you have a staff member that can cover five shifts. That's 40 hours a week. They can cover five. You need a total of 42. So 42, you divide that by five, that's going to be about 8
00:04:22 - 00:05:16
and a half FTE. Okay? But what you need to know is if you needed two staff members covering any one shift, then you're probably going to need about 8 and a half FTE full-time equivalent employees that are covering all of those shifts. That's what it's going to look like for you. We talk about that in our underwriting calculator. There's a wages tab in there. Make sure you go grab it assisted living.net. It's the big blue box in the top right corner of that website. And in there there's our wages
00:04:50 - 00:05:41
tab and you can do some of these calculations there to figure out exactly what you need. Okay, so that's number one. You've got to figure out how many staff you need. Number two, the second most important thing or maybe it's the most important thing is you need to figure out how much you should be paying your staff. Now, when it comes to paying your staff, I encourage you to do a little bit of research. So, assisted living wages, you can find a lot of this information on sites like Indeed or
00:05:15 - 00:06:09
Glass Door or just looking at job postings that other people have on job boards, Indeed or Simply Hired or something like that. You can go in there, you can look at the job postings and see what the wage range is for your specific say. It's a really good way to get an understanding of what that's going to look like, what a realistic wage is for you. I also want you to take into consideration, especially for administrators and paying your administrators, which are going to be your highest cost employee, if you look
00:05:42 - 00:06:38
at salary ranges on these websites, you go to glass door or something like that and you look at, you know, salary.com, you look at those wages, it will tell you a number, but you have to take into consideration that they are probably using big box facilities that are going to pay people more. as a residential facility, you're going to be on the lower end of those ranges because there's just not as many responsibilities that go into it. Smaller house, less staff, just there there's less that goes on inside of a
00:06:10 - 00:07:02
smaller facility. So, you might see a range that says, you know, it's $50 to $100,000 and that's going to be your salary range for your administrator when in reality you're probably closer to like the $50 to $65,000 range when you're looking at a a smaller residential facility. So, that's just something that you want to be looking at and taking into consideration. But, if you can find job postings, uh, what people are paying and offering people right now for those, it's the best way
00:06:36 - 00:07:31
for you to figure out exactly what your market is is paying people for this type of work. And the other thing that I would encourage you to do in two ways, one, underwriting and also when you're actually doing this work is probably plan on paying people just a little bit more to incentivize them to continue working with you. Or they're interacting with their friends and saying, "Man, this facility, they pay me an extra $2 an hour. Um, and it's great and I'm never going to leave there because they
00:07:04 - 00:07:53
understand the value that I bring into the company." So, when you're doing those things, you're paying slightly higher wages. you know exactly what that's going to look like for your facility. And then you know how many staff you need. Now you can back into exactly how much your wages are going to look like. Just the hourly rate, the pure number that you're going to pay them for the work that they provide you with. So I encourage you to use a tool like Gusto. Gusto is a payroll vendor.
00:07:29 - 00:08:18
We use them. I've used them for years now. We're going to link down below a link where if you go and use Gusto, you're going to get a free $100 Visa gift card when you run your first payroll with Gusto. So, make sure you go check it out. They're a great tool. It's a great vendor to work with. I've been very impressed with them. Love working with them. We're going to continue working with them for forever until they stop working because they are such a great vendor to work with when it comes
00:07:53 - 00:08:44
to small businesses like Assisted Living and helping you secure and helping you run your payroll and making it really easy for you to do that. So, inside of a a payroll vendor like Gusto, you just put all your employees in there. You put your rate um that you're going to pay them. Then when it comes to pay periods, you just put in how many hours they work. It does all the calculation for you and it will send out the the checks to them. Very simple process, very intuitive. So make sure you go check out
00:08:18 - 00:09:09
Gusto at the link down below. In addition to your wages, though, you're going to want to be tracking taxes and fees. So taxes and fees, you're going to have to pay these as an employer. You've got to make sure that these things are taken into account. So you're going to get tax forms that you give people when they first start working with you. is going to tell you how many dependents they have and all of those things. You're going to put that in and then based off of that information when you
00:08:44 - 00:09:32
run payroll using a tool like Gusto link down below, then you are going to it's going to calculate what those taxes and those fees are and everything is going to process it for you. It's great. Um you don't have to worry about it. So that's something you have to be aware of and I want you to account for when you're doing your underwriting. So on there on the calculator again, assisted livinginvesting.net, big blue box, top right corner, go grab your free underwriting calculator. go to the wages
00:09:08 - 00:10:02
tab. In there, they're going to be the the type of staff member that you want to be hiring. If they're full-time employee, if they're not, if they're salary, if they're hourly, you want to be looking at that. And then there's also a field in there that helps you kind of project exactly what the taxes for that person might look like. Oftent times, we're looking at about 15 to 20% in taxes. Is a good number to kind of just gauge off of. that keeps you conservative in your underwriting and
00:09:35 - 00:10:30
helps you understand what that looks like. You could also do a little bit of research in your state to figure out how much needs to be withheld for those taxes so that you are getting a good number with it. So do a little bit of research, account for that to say, okay, if I'm paying somebody $1,000 on a weekly basis to do the work, how much extra is going to need into going into a tax fund? And so that's going to probably be $170 or something like that. gives you an idea of what that might
00:10:03 - 00:10:52
look like. You want to be taking all of that into consideration as you're trying to just work through all of this because these are expenses you need to be aware of. They make up the amount of money that you're going to be paying for wages and that budget line. And so, you need to understand what this looks like. If you can hone in on your wages expense, you know how many stacks you need to have, you know how much you're going to pay them, and you understand kind of what those taxes and fees are, you are
00:10:27 - 00:11:15
going to be more than halfway there with understanding your expenses. They really are that big. They're that important. And so you need to understand what that looks like when it comes to running the business. Now, the other thing that I want to point out to you is people are your most important resource. They are they're the group of people that are the face of your business. They're the ones that are interacting with your residents, with their families. People get to to see and and feel what that
00:10:51 - 00:11:43
looks like. They kind of set the culture inside of your home as well. And so you want to have happy employees that are confident and they feel appreciated in their work. And a lot of that comes down to how much they are paid. And so you want to account for that and you want to be offering them little perks and bonuses and you know activities and those types of things to make sure that they are happy in the work that they are doing because when they're happy, your residents are happy and their families
00:11:17 - 00:12:10
are happy and it just makes it so much easier to operate the business. And then when you have openings in your facility, you're getting a lot of referrals because people want to be in a spot where everybody's happy and engaged and and having a good time. So encourage you to do that as you really get your business up and running. So we talked a lot today about wages. They are the biggest expense. You need to be aware of what they look like. We talked about understanding what the resident to
00:11:43 - 00:12:27
caregiver ratio is in your state and how it's important for you to understand what that is because it tells you how many staff you're going to need to have in your facility. We also talked about how much you should be paying your staff and how you can go and do the research in your area to figure out what that's going to look like for you. And then we talked about the importance of running payroll and taking into consideration the taxes on fees. If you found this video helpful, make sure you like the
00:12:05 - 00:12:50
video, subscribe, and ring the bell as well so you get notified every time we put out content like this. We go live on Tuesdays. We put out content on Thursdays as well. I love helping and coaching people. This is how I do that and would love to do that for you. If you are needing help as you go through this process, make sure you go check out our community. Does residential assisted living sound interesting to you, but you don't know how to get started? At assisted living investing, I'm here to
00:12:28 - 00:13:12
help beginners like you launch their assisted living business in the next 12 months. I love helping and coaching people, and I would love to do that for you. And remember, it doesn't take a lot, just a little bit. Just keep going step by step by step. And I promise you if you do and you are consistent and persistent, you are going to be successful. Thanks for watching and have a great day. [Music]
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