The ULTIMATE Breakdown of Assisted Living Expenses
Nov 14, 2025
The Big Five Expenses: WAGES, INSURANCE, FOOD, ENERGY (UTILITIES), DEBT SERVICE
Starting an assisted living business is exciting. It can also be pricey. If you want to make money and do good work, you must know the big costs. This guide breaks down the top five expenses you need to track. It also shows simple ways to save.
Most of your costs come from five things. I remember them with an acronym: WIFED (wages, insurance, food, energy (utilities), debt service). These five make up 80–90% of your bills. Know them and you’ll know your business. 👍
Check out this video, too:
1) Wages — the biggest cost
Wages are the largest expense. They can be 50–80% of your total costs.
You must figure out how many staff you need. Check your state rules for the resident-to-caregiver ratio. If the rule is 1:8 and you have 10 residents, you need two caregivers per shift. Think in terms of full-time employees (FTEs) too. Do the math for all shifts and days.
Also, find local pay rates on job boards like Indeed. Pay enough that your staff stay. Turnover costs a lot. Give small perks and bonuses. Happy staff = happy residents. 😀
Tips:
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Plan for taxes and payroll fees (estimate 15–20% extra).
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Use a payroll tool like Gusto (it saves time and mistakes).
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Pay a bit more to keep staff — it often saves money in the long run.
2) Insurance — protect your home and people
You need at least three kinds of insurance:
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Property
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Liability
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Workers’ comp
New homes can be tricky to insure. Many carriers avoid new assisted living businesses. Use an insurance broker who knows the field. They will shop carriers and get the right coverage.
Good insurance could save you hundreds of thousands of dollars when big problems hit. Don’t skimp here.
Tip: Ask your broker for a “certificate of insurance” — states and funders often want that.
3) Food — feed your residents smartly
Food shows up every day. I like to use a PRPD number (per resident per day). A good range is $8–$12 PRPD. To be conservative: use $10 or $12 if you want a safety cushion.
Example:
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10 residents × $10 PRPD = $100/day → $3,000/month.
You can buy in bulk (stores like Costco, Sam’s Club, etc.) or contract with a wholesaler. Elderly residents often eat less than you think. Bulk buying helps you keep costs down.
Tip: Make simple menus that reuse ingredients. Buy in larger packs to get discounts.
4) Energy (Utilities) — small wins add up
Utilities include gas, power, trash, internet, and TV. They are easy to forget. But with a few tweaks, you can save hundreds a month.
Look for:
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Better internet or TV deals (streaming vs. cable).
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Trash contracts you can negotiate.
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Energy-saving bulbs and thermostats.
Tip: Call vendors and ask for a business rate. A little time now can cut costs year-round. 💡
5) Debt service — your mortgage or lease
Debt service is your mortgage or lease payment. This is the number lenders care about most. They will check your ability to pay this from your revenue.
Use an underwriting tool to model this. If you know the loan amount, term, and interest rate, you can calculate the monthly payment. That tells you if your income will cover costs.
Tip: Look at DSCR (Debt Service Coverage Ratio) loans if you you're struggling to find a traditional lender.
How to check if your home will make money
Do simple math:
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Estimate your monthly income = monthly rate × number of residents.
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Add up WIFED expenses + 20% cushion.
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Income − Expenses = Net income.
Be conservative. Plan for 80–90% occupancy, not 100%. Know your break-even point (how many residents you need to cover costs). If the break-even is close to your max beds, the risk is high.
Small levers that change margins
Once you know the big five, you can test small changes:
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Add one more resident → how much more net income?
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Raise PRPD food to $12 and re-check profit.
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Negotiate trash or internet to save $200/month.
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Pay staff a little more to reduce turnover.
A few small wins add up fast. 📈
People matter most
Your staff are the face of your home. Treat them well. Pay fair wages. Give perks and good culture. When staff stay, residents are happier. Referrals rise. Your house fills faster.
Next steps
👉 Download the Business Plan Checklist.
👉 Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
Show full transcript 👇
Transcript
00:00:00 - 00:00:45
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 talking about understanding the top expenses for assisted living to help you become more profitable in your business. So, if you're interested in that, make sure you stick around for today's video and welcome to assisted living investing. Hey friend, before we get into the topic for today's video, I want to remind you
00:00:27 - 00:01:13
to go over to the website assistedlivinginvesting.net And in the big blue box in the top right corner, you can grab your free underwriting calculator for us. And it's going to help you out as you're trying to figure out what those expenses are, which is exactly what we're going to be talking about today. So, make sure you go grab that free underwriting calculator. Again, it's the big blue box at the top right corner. You cannot miss it at assisted livinginvesting.net. Now, let's hop into our topic for today.
00:00:50 - 00:01:46
This is all about understanding the top expenses for your assisted living business to help you be more profitable. And I have an acronym that I like to use to help me remember these top five expenses because I always forget one of them. So I created an acronym because this is healthcare. The acronym is we w stands for wages, insurance, food, utilities, and debt service. These are the top five expenses are going to make up 80 to 90% of all of your expenses. So if you have a really good understanding
00:01:18 - 00:02:10
of what they are and how to control them a little bit better, you're going to be a lot more profitable with your assisted living business. All right, let's talk about wages. So wages are going to make up I don't know 50 to 80% of your expenses. It is a huge chunk and we have a video that we did and we'll link that up above that talks specifically about wages. It dove really deep into that. So make sure you go watch that to understand what it looks like. But wages will make up a huge chunk of all of your
00:01:44 - 00:02:40
expenses. So if you can hone in on what wages are going to be for your facility, you're going to have a really good idea of what your expenses are going to be looking like. And it also can kind of help you understand how if you pulled a lever, if you didn't need so many employees or if you had to pay somebody more, what's that going to do to your expenses? Because it's a huge number. It's a huge way of kind of adjusting things. I don't want you to skimp on your wages, though. I want you to pay
00:02:12 - 00:03:03
your staff a fair wage, if not a a higher than fair wage. You want to make sure that they are feeling valued, that they want to work for you because they will talk and word will get around if you're kind of a stickler for money. People don't want to work for that. But if you are paying them a a good higher than normal wage and you're giving extra bonuses, you're doing gift cards every now and then, those types of things, people like that. And it's going to endear them to you and make them want to
00:02:38 - 00:03:26
continue working with you at your facility. and it's a lot easier for you to keep your staff rather than having to deal with turnover. It's a headache when you have to deal with turnover. It's expensive. You don't want to do it. So, make sure you're doing what you can to keep your staff happy. So, don't skimp on your wages is what I want to tell you. Um, next is insurance. When it comes to insurance, you're going to need your property insurance, you're going to need liability insurance, and you're
00:03:02 - 00:03:50
going to need workers comp insurance. All of these can be a little bit tricky to get because assisted living, especially if you're a brand new facility, not a lot of insurance carriers will insure assisted living, number one, and when you're new, they don't they're not super comfortable with the risk. So, what I encourage you to do is get with an insurance broker, somebody especially that kind of works in a commercial space. They will be able to know which insurance carriers can
00:03:26 - 00:04:15
handle this type of risk. Uh, that's what you call insurance. That's what they call it in the industry is is risk. They want to know if if how that's going to go. You're probably going to have higher rates in the beginning, but those rates can come down as you prove that you don't have any issues in your facility. Finding a good insurance broker can help you make sure you have the best rates, have the proper insurance coverage, and then when you go for renewals, which happens on an annual
00:03:51 - 00:04:40
basis, they can help you out with that as well. They're also great when if you're working with the state or Medicaid or somebody else and they need what's called a certificate of insurance, they are great at helping you get all of that extra paperwork things, all of those extra things that you need to have. They're great for you to have in contact. So, insurance broker is a key person for you to kind of have inside of your network and somebody that I use all the time as I'm trying to
00:04:15 - 00:05:02
figure out how to obtain the insurance, proper insurance, and making sure that we are staying in compliance with any of the regulations that are out there. So, property liability, workers comp, you need to understand what those look like. Work with an insurance broker that can get you quotes and help you understand what those look like and see if there's any way for you to adjust your coverage or potentially reduce your rates over time, which is something that I would encourage you to do because insurance
00:04:38 - 00:05:32
can be expensive. Uh, but it's also necessary. You want to have it. We've had in instances where insurance has saved us tons of money, like hundreds of thousands of dollars. So, make sure you have insurance. Make sure it's it's good coverage and it will save you in the long run when something inevitably comes up. Now, let's talk about food. So, when it comes to food, food is going to be a pretty big expense for you. You've got a lot of residents that you're going to be
00:05:06 - 00:05:57
feeding. A metric that I really like to use is what's called PRPD, per resident per day. And inside of that, what you're going to say is most of the time, and I promise you this is a real number, $8 to$10 per resident per day is what you're going to be paying for food. And now, I know you might be thinking to yourself, there's no way you can't feed that many people on that little amount of money, but I promise you, you can. Like, I there's industry research out there. I have done this with my own
00:05:32 - 00:06:17
facilities. If you want to be conservative, use the $10 number. Or if you want to be super conservative in your underwriting and your numbers, use a $12 number. But you don't need to go more than that. You have to remember these are not teenage boys you're feeding. They're more than likely elderly or some other population, but they're not eating all day every day. And even though you have to provide them with three meals and snacks throughout the day, they're just not eating a ton.
00:05:54 - 00:06:44
Also, you're buying in bulk. You're buying for a lot of people. So, you get discounted prices when you are buying in bulk. Now, let's use a quick example so you can kind of see exactly what it looks like to pay for the food for your residents. Let's say you have 10 residents in your facility. Let's say your per resident per day rate that you're going to be paying for food is $10. That's what you're allotting for it. So 10 time 10, that's a h 100red. You're paying $100 per day for the food
00:06:19 - 00:07:12
for every single resident in your home. You want to multiply that by 30 30 days in a month. And that's going to equal 3,000. Boom. Now you know exactly kind of ballpark what you're going to be paying for food for your residents inside of your facility. $3,000 a month with a 10 bed facility. It's a pretty average number. we for our 16 bit facilities sometimes are around that number as well. So you can do this um you can figure out what that number is. It's a big expense. You're going to need
00:06:46 - 00:07:36
to do it. You need to feed your residents, but it's not going to be nearly as big as you think it is. That's an encouraging thing there. Now, let's talk about number four, which is utilities. Um when it comes to utilities, you're going to need to be taking into account your gas, your power, your trash, your internet, your TV. All of these things you need to have inside of your house. Some municipalities are going to combine things like power and gas and trash. Some of them are going to have separate.
00:07:11 - 00:07:58
Some of them are going to have private vendors. With trash, you might need to go get somebody that gives you a dumpster. Maybe you have a municipality that will get you a bunch of different garbage cans. We've experienced both of those situations. So, you kind of have to figure out what that looks like. Um, for TV, do you need to have traditional satellite or cable or can you go with streaming services? A lot of the times when you're working with an elderly population, they want TV. they want that
00:07:34 - 00:08:34
satellite and cable because they really just want the local news channels. So, if you can find a streaming service that does that, then maybe you're okay. But you want to be taking all of these things into consideration. Um, these are the really cool thing about utilities though is if there's anything that you can kind of negotiate and find some cost savings in pretty easily, it's going to be in your utilities. We've had a lot of success doing this with like our trash, with internet, and with TV vendors as
00:08:04 - 00:08:57
well. So, those are three big ones that you can find a few hundred extra dollars in savings over the course of of a month, and that leads to a few thousand over the course of the year, and that can really help you out quite a bit. So, you want to understand what those utilities are, who the vendors are, are there other options out there, can you negotiate, and putting in a little bit of time upfront to negotiate better rates and better terms with them can really save you quite a bit of money on
00:08:31 - 00:09:22
the back end. So, that's something that I want you to be aware of that you need to have these utilities, but you can find ways to get some cost savings in there with them. And the fifth one that I want you to be aware of is debt service. So, your debt service is basically your mortgage or your lease payment. So this is the amount of money that you're paying to be inside of the physical facility itself. So this, you know, if you have an SBA loan or you have a mortgage with a with a lender or
00:08:57 - 00:09:46
you're working with a private money lender or if you are just leasing a property from somebody, that amount of money that you're putting into that, that's going to be your debt service payment. You have to make this or else you could get evicted. You could get the house repossessed and you don't want to do that. You want to avoid that. And when you're working with lenders, they'll look at what's called a debt to income ratio. They want to make sure that the income potential or income
00:09:21 - 00:10:21
historically is going to be able to cover that debt. They are most focused on that. They want to make sure that there is nothing there that's not going to allow you to make that payment. As you get into other strategies for funding things, you could be looking at a DSCR, a debt service coverage ratio loan. Um, and when you look at those, they specifically are looking at what that debt is, that debt service to see if you're going to be able to cover that to purchase a building to to buy something to lend you the money. So,
00:09:51 - 00:10:42
that's another thing that you could be considering, but you need to really kind of hone in on what this number is. In our underwriting calculator at assisted livinginvesting.net, it's the big blue box in the top right corner and go grab our free underwriting calculator. Baked into that calculator is a mortgage calculator. So, if you know the rate that you're going to be paying, you know the terms, how long it's going to be, and the amount of money that you need to borrow, you can figure out exactly what
00:10:17 - 00:11:08
your debt service payments going to look like. So, go use that tool. It's going to help you out as you're trying to figure out what your debt service payment is going to look like, as you're trying to just gauge, you know, what are my expenses going to be looking like. If you have can figure out these five expenses, the weoot expenses, it's going to be 80 to 90% of all of your expenses. So you figure out your wages, insurance, food, utilities, and your debt service. Figure out those five things. You're 80
00:10:42 - 00:11:27
to 90% of the way there with all of your expenses. And it's going to really help you understand from an underwriting perspective, is this going to be profitable or not? And how can I back that in? You know, you take those expenses, add an extra 20% on top, and then you look at what your income potential is going to be, and if there's a gap there, boom, now you know what your net income is. Like, underwriting is that simple. There's a lot more that goes into it, and you want to make sure
00:11:05 - 00:11:56
you understand the numbers, you're being conservative in your underwriting, but it's not that hard at its core to figure out what these numbers look like and figure out what you have the potential to cash flow on these businesses. And once you are in the business and you're running the business and you're trying to figure out exactly what that's going to look like, if you can look and understand these five big expenses, your weed expenses, then you're going to understand what levers you might be able
00:11:30 - 00:12:18
to pull to or what happens if you pull a lever and prices increase, your expenses increase, or if you can pull some levers and decrease some of those expenses as well. So, hope you found this video helpful. There's a lot packed in here about understanding the expenses and what that's going to do for you and for your business. If you found it helpful, 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. We put we go live on Tuesdays
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and we put out content like this on Thursdays as well to help you out as you're on your assisted living journey trying to launch your assisted living business. 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 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 be a part of your journey as you're trying to launch
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your assisted living business. 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're consistent and persistent, you're going to be successful. Thanks for watching and have a great day. [Music]
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