The Truth About Unlicensed Facilities
Oct 08, 2025
Starting an assisted living business can feel exciting but also overwhelming. Where do you even start? What steps should you take?
Good news—you don’t have to figure it all out on your own! This guide will walk you through the hidden risks of unlicensed care homes and what you should know before stepping into the assisted living world. From legal consequences to safety concerns, we’ll break it down in a way that’s simple and clear.
Let’s dive in! 🚀
Check out this video, too:
Why This Matters
Unlicensed care homes might look like a shortcut to saving money and getting started faster (and in some cases that's true). But you'll want to be aware of some of the risks that can hurt you, your business, and—most importantly—your residents.
Here’s why this topic is so important:
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Families trust you with the care of their loved ones.
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States have strict rules you must follow (even in an unlicensed care home).
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If you run an unlicensed care home improperly, that can lead to fines, shutdowns, or worse.
Running a safe, licensed, and professional care home sets you apart and protects you in the long run.
The Dangers of Unlicensed Care Homes 🚫
If you’ve heard people say “you don’t need a license” or “you can operate under the radar,” here’s the reality:
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Legal Trouble – Running an unlicensed home can bring lawsuits, fines, and even criminal charges in some states. If you don't go through the process correctly, it may not be worth the risk.
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Resident Safety – Without proper oversight, training, or inspections, residents can be put in unsafe situations. That damages your reputation forever.
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Low Trust – Families do their homework. If they learn you’re unlicensed, they may choose a licensed competitor instead because it gives them peace of mind.
What might feel like an “easy path” today can turn into huge roadblocks tomorrow.
Why People Try to Avoid Licensing
Let’s be real. Licensing takes time, paperwork, and money. You may be able to skip the licensing process, but you do have some limitations:
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You can only have a few residents.
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You're limited in the care you can provide.
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You'll have stiffer competition from "licensed" facilities.
How to Stay Compliant ✅
Here are some clear steps to avoid falling into the trap of unlicensed operations:
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Know Your State Rules – Rules for operating an unlicensed care home vary by state. Some states are strict, others more flexible. Start by checking your state’s health department or regulatory agency; yes, even though you're unlicensed, you'll still need to check this information with the state.
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Check Your Zoning – Even though you're unlicensed, you'll still need to make sure your home is propertly zoned and permitted for a care home - don't skip this step, it can shut you down!
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Stay Up to Date – Rules can change quickly in the world of assisted living, so while you may be okay as an unlicensed facility today, that doesn't mean the regulations won't change tomorrow. Join state associations, attend trainings, and stay connected with others in the industry so you can stay up to date.
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Document Everything – Keep clear records of resident care, staff training, and inspections. This makes you audit-ready and safe from legal issues - you're not regulated as an unlicensed care home, but this is still a best practice and will likely be needed when you try to get insurance for your home.
Free Resource to Help You Get Started 🎁
Want to make sure your business plan covers everything you need to get started? Download the Business Plan Checklist. It will guide you step by step so you can feel confident you’re on the right track.
Let’s Build Your Assisted Living Business the Right Way
Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
Show full transcript 👇
Transcript
00:00:08
Hey friend, I'm Brandon Gustafson. I help beginners like you launch their assisted living business in the next 12 months. Excited to have you here on our live today. We're going to be talking about unmasking, unmasking the risks of an unlicensed care home. This is something that I see a lot of, a lot of people asking these questions about unlicensed care homes want to get into that. Some of the risks that you're going to take on as you get into this world. I want to make sure you're aware of what those are so that, um,
00:00:35
you know what you're getting into. It's not that you shouldn't be doing this at all. It's just, I want you to be aware of what you're getting into. So you don't go into this blindly. I want to make sure I help you out there. For those of you who are new and need some help, if you get over just over here, you're going to see our business plan checklist, go to assistedlivinginvesting.net slash BP checklist. And for those who don't know me, my name is Brandon Gustafson. I
00:01:00
help beginners like you launch their assisted living business in the next 12 months. So super excited to dive into this topic with you today. So let me get this one last thing over here. We want to try to get this thing onto our Facebook group.
00:01:19
and hope that the link works this time because it hasn't been working recently. All righty. Let me shift over and share my screen. Unmasking the risks of an unlicensed care home. Let's get into it. We are for those of you who don't know me, my name is Brandon Gustafson. I have owned and operated assisted living facilities
00:01:37
since 2020. So I've been doing this for quite a few years now. I also have a master's degree in healthcare administration, have worked in the healthcare industry for, geez, since 2011, I think. So a long time working in the healthcare industry, have a lot of experience with that. I have secured over one and a half million dollars in SBA funding and I operate out of state as well. So I do this where I live in Utah and have operated in Colorado and Idaho and
00:02:05
I also do a lot of work with Medicaid and government programs, which this was a question that somebody had, and I might get into this. I can't remember. It's been a few days since I kind of prepared for this for this live.
00:02:17
But you cannot do Medicaid in an unlicensed care home. The reason why is with Medicaid, one of the ways that you get Medicaid certified is you have to have a licensed facility. So in an unlicensed facility, you cannot serve a Medicaid population. So that's something I want you to be aware of. That's one of those big risks that you need to be aware of as you're trying to get into this world is that's going to take that entire population, which is a big population. It's growing. And I think there's a lot of positives. I actually really enjoy working with a Medicaid population.
00:02:46
But it's something I want you to be aware of that if you go the unlicensed route You're not gonna be able to do that. Okay, so Let's dive into it for those of you who are new here. Also type in newbie love seeing the new people that are hopping into into these calls and you know reaching out if you have questions go to assisted living investing dotnet go to our contact page and you can reach out with questions there and
00:03:09
now i do want to give a quick disclaimer here when i say unlicensed i do not mean that this is something that is illegal there are still specific guidelines when you're becoming a life's unlicensed facility there's still rules that you have to follow
00:03:24
So you always are going to want to check your local laws and consult with an expert as you go through this process. So just because we're talking about unlicensed care home does not mean this is the Wild West of caregiving. There is still a process, still rules you have to follow. So make sure you do that and check with local. I would honestly talk to an attorney as you get into this and check your local laws and consult with an expert to help you out with this and navigate things.
00:03:52
let's get into it let's talk about what an unlicensed care home is an unlicensed care home is assisted living like services it is most similar to assisted living in the way the way that you are providing care so i'm going to define that here in just a little bit to help you understand exactly what you can and cannot do inside of assisted living and and same with unlicensed care homes so we'll hit on that a little bit and if you want to dive a little bit more into that uh just type in
00:04:22
assisted living what you can do um down below because i'd love to dive into that i know that's like a little bit longer than uh than normal it's like longer than one word but it will help me understand um what you want to look at there and we can hit on that um usually in assisted living or in unlicensed care homes you are getting up to four to six beds it depends on the state depends on the local zoning what you can do in that area so even though you're unlicensed you still have restrictions and how many people you can have inside of the home
00:04:50
So you want to be taking that into considerations. I've actually seen in some states you can only get up to two people. So it just kind of depends on the state and what you can do in those areas. So you want to make sure you understand what the rules are in your state before you get into a really bad situation.
00:05:05
um and typically an unlicensed care home is going to be in a residential setting this is because you only have four to six people in there uh so if you were doing this in a big box type of a you know motel hotel big place it wouldn't make any sense because the amount of money that you have to pay for that um just isn't gonna align with with the amount of residents that you can have in there unless you're charging people hundreds of thousands of dollars uh per month to be in there like it's just not gonna make sense okay so
00:05:34
Assisted living like services, usually up to four to six beds, and it's going to be in a residential setting. That's what an unlicensed care home is going to be. So what you cannot do in an unlicensed care home. This is where it kind of differs from assisted living a little bit. I'll try to delineate that for you. But in an unlicensed care home, you cannot administer medication. This is because you are unlicensed. You don't have the ability to bring in a nurse and do those types of services for you as a business.
00:06:04
there may be a little bit of gray area if you were to bring in somebody that does home health and they were administering medications but that's going to increase the cost of of your residents by quite a bit having that home health person coming into the facility coming into the home and caring for them so it's something you want to make sure that you're aware of no medication passing in an unlicensed care home you can do that in assisted living though this is a really big differentiator between unlicensed care homes and assisted living
00:06:30
Next is handling medical devices. You cannot handle medical devices because you're unlicensed. You don't have the ability to do that. It can put you in a lot of trouble if you do that. Providing any form of clinical care. Now in assisted living, there's a bit of a gray area there with what you would call clinical care. You can do some of these things inside of assisted living. But when it comes to like hardcore clinical care, when you're providing nursing type care, you're actually...
00:06:58
as an assisted living person not not allowed to do that that should go up to skilled nursing or you bring in like hospice nurses or home health or somebody like that to provide that level of care that's more clinical in nature and like i mentioned you cannot serve a medicaid population when it comes to when it comes to this so you want to make sure that you if you are interested in working with a medicaid population i know a lot of you are because it is a population that needs a lot of care
00:07:26
You cannot do this inside of an unlicensed care home. And that is simply because you cannot become Medicaid certified as a provider unless you are a licensed facility. It's part of the application process. You have to provide your facility license.
00:07:40
So you're going to need to do that. You're going to have to be a licensed provider of some kind. That's kind of a stipulation of working with a Medicaid population. So if you want to serve a Medicaid population, an unlicensed care home is not the route that you want to go. If you are thinking of doing an unlicensed care home and you were thinking, oh, cool, I'll just fill this up with Medicaid residents. That's not a route that you can go because it's just not going to work. You can't become a licensed Medicaid provider. So you will be doing private pay when it comes to an unlicensed home. All right. So I just want to make sure that that is very clear for you.
00:08:10
Now, this is the type of care that you can provide in an unlicensed care home. So when you're thinking through this process and what you can do, I want you to keep these things in mind. Non-medical assistance, like helping with groceries or errands, meal preparation, laundry, those types of things you can do in an unlicensed care home. It's totally fine.
00:08:32
social activities that prevent isolation. So think, you know, you could have little get togethers and parties and reading groups and, you know, those types of things. You can do fun activities together with them. You could take them out. You know, we at our facility, we went to a local county fair, a
00:08:50
few weeks ago and so doing something like that that's totally fine you can do that you can get get together and do some activities and i mentioned this already briefly but providing meals ensuring a clean safe living environment so you can do cleaning you can do laundry you can do meals
00:09:06
Those things are totally fine in an unlicensed care home. It's just the more clinical aspects of things. Anything that is involving medication, medical devices, or clinical, you're not able to do inside of an unlicensed care home. So that's a big differentiation between unlicensed care homes and unlicensed.
00:09:25
a residential assisted living or a licensed care home okay so i want you to understand what that looks like now let's talk about legal structure and what that's going to look like because when you do this this is what i was talking about you you're going to want to you're going to want to be kind of getting into this a little bit and and working with people and and you need to protect yourself
00:09:47
I'm not an attorney, suggest you talk to one. So anything here is is not to be taken as legal advice, but I would highly suggest that you do set up an entity. An LLC is probably OK, but talk to an attorney about your specific situation. You want to be looking at that LLC is a great one. We have videos on the channel that talk about different structures. If you want to learn more about what an LLC is and how it can benefit you and your assisted living journey type in LLC down below.
00:10:16
you're going to need to look at zoning laws so you need to make sure that the house that you want to turn into an unlicensed care home is going to kind of fit in that that parameter that it that is zoned properly that it has permitted use for assisted living unlicensed care home that you can have a certain amount of unrelated individuals living in a home
00:10:39
Those are the types of things that you want to be looking at when it comes to zoning. You have to make sure you have zoning. Zoning will shut you down. Even in an unlicensed care home, if you don't do that and you get reported, you could have your business shut down and get some hefty fines. So you want to make sure that you understand the zoning process for your location and make sure that it is an allowable decision.
00:11:02
type of business to be run inside of that jurisdiction. Speaking of which, you may need to get a business license with your local municipality. This isn't on the list here. This would not be a facility license. This would just be a business license to operate in the local municipality. Typically, these are
00:11:25
Like a couple hundred dollars at most. They're not a lot, but it just says, yep, we have gone through the process. We're a business. We're running a business out of here. And the city knows it, basically. You're going to have to do that when you do a licensed facility as well. But what if they're non-licensed? You're going to probably want to learn what the business license application process is like and should you get one in your local municipality.
00:11:48
Insurance, you're still going to want to get insurance. Insurance may be hard because you're not a licensed facility. One thing that's going to help you out to get that insurance is to have policies and procedures, which is why it's on this list. You're not a licensed facility. You don't have to submit those to anybody for review and approval.
00:12:04
But having them is going to help you scale your business, have really good processes in place to help you launch a successful and profitable business. But also when it comes to getting insurance, they're going to ask questions like, hey, how are you going to handle these types of situations? Do you have a process for hiring your staff? Do you have a process for training your staff?
00:12:23
What do you do if somebody falls? The insurance company is going to want to see this. You're going to need to have your policies and procedures written, and you're going to want to have insurance in place. Going back to the LLC, that is going to protect your assets. Same with insurance. It's going to protect you, protect your home, and insurance.
00:12:42
in the event that something does happen and you hope it doesn't, but that's why you get insurance. It's going to help you out and make sure that you are covered. So those are the things that you want to have when it comes to having an unlicensed care home. There's still paperwork involved. There's still a bunch of things that you need to do.
00:12:59
It's just not going to cost as much because getting a license can be thousands of dollars. And then there's also hoops that you need to jump through and things like that. So make sure you understand this. When it comes to zoning, you may need to talk to the fire department, have them come out. I teach a five phase process to help you get started on your assisted living journey.
00:13:19
Number one is building a foundation. Number two is finding the perfect property. Three is obtaining the funding. Four is licensing. And number five is launching and scaling a business. My five phase process fits with an unlicensed care home. The only thing that you don't have to do is get the license, but you're still going to have to follow a lot of the processes there inside of the structure that I teach you. The framework that I teach is going to help you out through that. So I just want you to
00:13:45
be aware you're going to still need to follow something like that. And that's something I'd love to help you out with. We'll talk about that here in just a second at the end of the video. Now, common pitfalls and how you can avoid those. So you
00:13:59
You really should be understanding the legal requirements of running a business, an unlicensed care home, just a business in general. You want to understand the legal requirements, the protection that you should have in place. You want to know what that's going to look like. You should not be overpromising on the services that you cannot legally provide. So you cannot put anything on your website that says something like medication management.
00:14:24
You can't put that on there because as an unlicensed care home, you cannot provide that service. That would be false advertising. You can't tell people, oh yeah, we could help you out with your medication management. You're not allowed to do that in an unlicensed care home. So you need to make sure that you understand what you can do, what you can't do, and that when you are bringing people into your facility,
00:14:42
that you know what you can do, how you can serve them. And if you can't meet their care needs anymore, then you will need to refer them out somewhere else. Otherwise, you could put yourself in a really bad situation, fines, probably jail time, like there's a lot that could go into that. So you want to make sure you understand what you can provide and don't over promise with those services that you're going to provide. The next is
00:15:05
Do not underestimate the importance of having a clean and safe environment. Even though you're unlicensed, nobody's coming in and doing inspections on you regularly or anything like that. You want to make sure that you have this great environment. It's clean. It feels like home. Otherwise, you're not going to get residents that want to stay there. And number two, if somebody in the media gets a hold of it, it will become a news story and you will get thrown under the bus and people will shut you down. You'll never be successful in there. So you want to make sure you do this.
00:15:33
I saw a few months ago in the news, there were articles about places that were trying to do this and trying to stuff people into this in substance abuse type homes, recovery homes. But they were just packing people in. They weren't taking care of the home. 20 people living in a home. And that was very quickly shut down. So you don't want to put yourself in a situation where that's going to happen to you.
00:15:54
It will not end well for you. So make sure that you are, even in an unlicensed care home, still respecting your residents and treating them and meeting their needs. That's going to help you out a ton as you get into this.
00:16:08
So I want you to be aware. Those are some pitfalls. That's how you're going to avoid them. That's how you're going to be successful. So should you do this or should you not? Remember, this is typically four to six beds. Like that's going to be the max. In some states, I've only seen two is all that's allowed. That means your ability, your pathway to profitability is reduced because you don't have enough residents in there. So you need to make sure that you understand the finances of the situation. You can go to assistedlivinginvesting.net.
00:16:38
Big blue box, top right corner, go get your underwriting calculator. It's going to help you out in determining if this is going to be profitable for you or not. But you need to understand, typically, less than four to six residents. You're still going to have high expenses. You still have to pay staff to come in and care for your residents. You're still going to have caregivers.
00:16:58
That's going to be expensive. So you have to, you have to take into consideration that plus your insurance, plus the food you're paying, you're, you're feeding your residents. Um, the debt service, even if you own the home already, you're probably still going to have a house payment on you. So you need to understand that. Um, and I feel like I'm forgetting one more. Um,
00:17:15
Wages, insurance, food, utilities, that's the other one, and then your desk service, meaning make sure that you're taking all of that into consideration so that you know what your expenses are going to be so that you can have this be profitable with the understanding that you are capped out at a certain amount of residence in an unlicensed care home.
00:17:33
So that means you have low profit margins. That means you better understand what your numbers are. You might be profitable. Let's say you can have four residents in there. Let's say that you're profitable at four. But what happens if you're only at three residents or what happens if you have only two residents? All of a sudden, your ability to be profitable shrink shrinks significantly. So you need to understand your pathway to profitability.
00:17:58
Make sure that it's going to work for you and do your underwriting. Make sure it's going to work. And if it doesn't, don't try to fit this into something and be like, oh man, I heard a video. Somebody said I can do it. I can make millions of dollars. I can make tens of thousands of dollars per month. Do the underwriting first. Make sure it's going to work for you. If it doesn't, then do not pursue this. It's not going to be profitable. Find a different way to do it.
00:18:21
Make sure you understand what you're getting into. Again, go to assistedlivinginvesting.net, big blue box, top right corner. Go grab the free underwriting calculator. We'll help you through the process to see if this is going to work for you or not. Don't put yourself in a bad situation. Make sure you understand the numbers before you dive too deep into this. Like, please do that.
00:18:40
All right. Now, if something that you would like to do is work with me directly, you can check out our basics community, go to assistedlivinginvesting.net slash basics. You can get in there. We're only going to have this open for just a couple more months. I'm working on
00:18:56
revamping a lot of the way that I do my coaching and how I bring you into and helping you through the process of launching your assisted living business. And a part of that is going to be having Haley basics go away for at least a period of time. And so if you want to get in there and get the benefits of being inside of that, now is the best time to do it. So go check that out. Again, it's assistedlivinginvesting.net slash basics. Go check that out.
00:19:22
And there was a question here. Do I have a WhatsApp group? The best way to do that is get into the basics community. There's a community in there so you can go in and chat with me there. So hopefully that helps you out.
00:19:35
With that, I want to thank everybody who has been here watching. I appreciate you being here and jumping on and participating. It's always fun for me to do these live calls. I hope you learned a lot. If you did, make sure you like the video, subscribe and ring the bell as well. So you get notified every time we put out content like this to help you along your journey and along your path to launching your assisted living business.
00:19:56
Make sure you go grab the free business plan checklist. It'll be over at the bottom of the screen over there, assistedlivinginvesting.net slash BP checklist. And does residential assisted living sound interesting to you, but you don't know how to get started at assisted living investing? I help beginners like you launch their assisted living business in the next 12 months. I love helping and coaching people.
00:20:14
I would love to help and coach you along your journey and help you make some progress. 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're going to be successful. Thanks for watching and have a great day.
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