What Does It Really Cost To Start An Assisted Living Business
Dec 08, 2025
Starting an assisted living business can feel like a big undertaking, but breaking it down into clear steps and choices can make the process much easier. In this blog, I’ll walk you through the four main paths to getting started and what each one typically costs so you can pick the right fit. Want the full breakdown? Watch the video below.
Option 1: Start with rental arbitrage — fastest, lowest cost
Rental arbitrage means you lease a house and operate the business there. You don’t buy the property. Your rent might be around $2,000 to $5,000 a month. You'll also want to plan on 3–4 months of operating reserves so you can pay payroll, food, insurance, and bills until revenue steadies.
I recommend $50,000 to $80,000 as a good startup cushion for this path. You can often get money from a bank in the form of a small business loan to help with working capital. The big benefit is fast start-up. The downside is you don’t own the real estate.
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Rent estimate: $2k–$5k / month
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Reserve idea: 3–4 months of operating costs
Option 2: Buy an existing facility — faster profit, higher down
Buying a licensed, operating facility usually gets you residents and staff day one. That speeds revenue and cuts startup headaches. Lenders often suggest an SBA loan and 15–20% down. For a $1,000,000 purchase that means $150k–$200k down. Add about $60k for operating cash.
So plan for around $200,000 in upfront funds to get the loan. You can sometimes include the operating capital in the SBA loan if you are able to justify it in your business plan. This route costs more up front but often helps reach profitability faster. Check out the Profit Path tool to see if this is a good option for you.
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Down payment guide: 15–20% for SBA buys
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Add operating cash: ~$60k
Option 3: Buy and convert a home — flexible design, medium cost
Buying a home to convert into assisted living gives you design freedom. But it comes with renovation costs and a licensing timeline. If the home is $500,000, expect 25–30% down for an investment loan — roughly $125k–$150k — plus renovations and reserves. All told, this path often lands around $200,000 in startup costs in the example I use.
You also may end up needing two loans (a mortgage and a small business loan) unless you bundle renovation and working capital into one package. The trade-off is control over layout vs. time to open and with no initial residents.
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Example total: roughly $200k in starter funds
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Benefit: renovate the facility to look how you want it to look
Option 4: Build from the ground up — custom but costly
Building a new facility gives you exactly what you want for care and compliance. But it is the most expensive and takes the longest. Construction costs often range widely, but expect $200–$300+ per square foot. A small custom build can be $1M+, and down payments for construction loans are commonly 10–30%. That can put you in the $300k–$500k+ range or higher depending on project scale.
This path is best if you want a long-term, custom asset and you have patient timelines and capital sources.
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Construction cost hint: $200–$300+ / sq ft
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Timeline: often 12–24 months to open
Quick summary to help you choose
Rental arbitrage: lowest barrier, $50k–$80k startup.
Buy existing: higher down (~$200k) but faster cashflow.
Buy & convert: about $200k in the example, flexible design.
Build new: $300k–$500k+ down and longest timeline.
If you want speed, rental arbitrage or buying an existing facility is best. If you want control of the design, buy-and-convert or building something new may fit better.
I’ve seen all four work when the underwriting is solid and the operator stays focused.
If you want help choosing, I run a LIVE 5-day coaching challenge (The Assisted Living Roadmap Challenge) to walk through which path fits you best.
Wrap Up
The right choice depends on your goals, timeline, and money available. Start by deciding how fast you want to open, how much risk you're willing to take on, and whether owning the property matters to you. Run the numbers, pick the path that fits you best, and take the first small step today.
If you need help creating a business plan for your assisted living business, check out the Free 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 ๐
Transcript
00:00:00
Today we are breaking down one of the biggest questions that I get. What does it really cost to start up an assisted living facility? Hey friend, I'm Brandon Gustafson. I help first-time assisted living entrepreneurs launch profitable, purpose-driven businesses in 12 months, creating prosperity, purpose, and peace in their lives. Make sure you get over to assisted livinginvesting.net so you can learn a little bit about how I help people like you launch their assisted living business. And stick around until
00:00:24
the end of the video. I have a special invitation just for you to help you get started on your assisted living journey. All right. So, your startup costs are really going to kind of depend on which path you're going to choose as you start going down this path of, hey, is assisted living right for me or not? And I have four main options for you so you can see exactly what might be the best fit for you. Number one is rental arbitrage. And with that, it is the lowest barrier for you to get into
00:00:58
assisted living. Um, you're going to lease a home instead of owning it. And so, just it's going to cost a little bit less cuz you don't have to buy a house, which is great. Your rent could be somewhere between two and $5,000 a month. Kind of what I would say for you to figure out what that looks like is use your own mortgage or your own rent that you're paying now. And that's probably about what it's going to be. Maybe a little bit more because you're probably going to have to be charged a
00:01:22
premium to do this type of business in a house. but you're not doubling it. Maybe you're just going up by 25 to 50%. So, there's an idea for you for you to figure out what that lease amount's going to look like. So, $2 to $5,000 per month. You're going to want to have I would suggest three to four months in reserves. I would figure out what you want, what you're going to be comfortable with. Figure out how much those expenses will be. And you can do that. Go to assisted livinginvesting.net. It's a big blue
00:01:48
box, top right corner of the website. Go grab your free underwriting calculator so you can figure out what those expenses are going to be. But you're going to take those, figure out what your monthly expenses would be, multiply it by however many months you want for operating expenses, and that's the amount that you want to have as you get into this. You're going to need to also add in things like your your food and your staffing and and your insurance and how how you're going to figure out how
00:02:13
much your expenses are going to be so you can get to that amount that you want for your startup expenses. And when you add all of those up, let's say you want, I don't know, let's say you want four months of expenses, and you know that it's going to be $20,000 a month for you to do this. 20 * 4, that's $80,000. Okay? So, that's how much money you would want to have available to you to help you get started. You're probably not going to have to have any kind of a down payment. Maybe you're going to have
00:02:40
to do some minor renovations, but you might be able to negotiate that with a landlord. Uh, so you might not have to worry about that. I would say $50 to $80,000 is actually a really good amount for you to feel comfortable with uh in getting started on this path wi-i with a rental arbitrage route. Now, the other thing is I would suggest that you go and get a a small business loan. Could be an SBA loan, but doesn't have to be. Go talk to your local credit union, your local bank. Ask them what loan products
00:03:08
they have for small businesses. Um tell them what you have. Go create a business plan uh so you have it ready to go to them. Go grab that. Actually, I have a tool for you there, assisted livinginvesting.net/bp checklist. We'll link that down below. Make sure you go and grab that. But that's going to help you create a business plan and you go take that to a lender and you say, "I need $50,000. I need $100,000 for the assisted living facility that I'm going to be taking over or creating, however you want to
00:03:34
word that. What loan products do you have that are going to be a good fit for that that could give me $100,000 in operating capital so I can be a successful business owner?" So, you start from there and that's going to allow you to get into this and and help you reach your goals of time and financial freedom that you're shooting for. So, going this route, it's the fastest way to start, I would say, but you don't get any real estate ownership, which is kind of a bummer. So, you just want to be aware of that.
00:03:58
Um, the next option that I want to talk to you about is buying an existing facility. I think this is the best way to get into assisted living. It is a higher cost than rental arbitrage, but I would say it is less of a headache when you get into it because you already have residents in the home. You already have staff. You already have residents. Your pathway to profitability shrinks. And that's something that I want for you is for you to be successful and get into this. So, you have to kind of get out of
00:04:23
your mind and be like, how much does it cost for me to start and get into a frame of mind is how much is this going to make for me? And when you're going that rental arbitrage route, you can still be profitable, but you're not going to have residents upfront. You might not be able to have as many residents in it. When you buy something that's already licensed and existing, you have income coming in from day one. You already have the staff. You don't have to go hire them. The velocity to
00:04:47
create money, it just accelerates so much faster when you go this route. So, it's something that I highly suggest that you look into. They can be hard to find, but they are incredible when you can find them. So, when you go this route, I would suggest that you go with an SBA loan. SBA is a great option when you're buying an existing business. Um, typically you're going to see 15 to 20% down um, payment requirement there. So, if you're buying a million-doll property, let's keep it really simple.
00:05:11
15% down would be 150,000. 20% down would be 200,000. So, that's going to give you kind of a ballpark for what type of down payment you're going to need when you go this route. Um, I would add in about $60,000 again in operating expenses. You want to make sure you have plenty of room there. But something that pro tip on this that you should be aware of is when you go this route and you're going an SBA route, you're buying an an existing business, you can add that operating capital in. You just have to
00:05:41
ask for it upfront. You need to make sure you jump in and justify it through your underwriting, through your business plan. Make sure you are doing those things. And then when you go and talk to a lender and you say, "I need a million dollars for this plus I want an extra 60,000 for operating capital." as long as you can justify it and say, "This is what I need it and how I'm going to use it." My experience and talking with a bunch of lenders is they'll say, "This
00:06:04
is actually a really good idea. Thanks for bringing this up. We're excited to work with you on it." And they're really happy to help you get that type of funding in addition to it. And $60,000 over a 25-year repayment term is nothing when it comes to like adding money to the amount of money for your debt service payment. um it's it's minuscule when you look at it. Just doesn't add a lot. So, I highly suggest that you go that route to make sure you get the operating capital that you need to run
00:06:32
this business successfully. When you go this route, it's already licensed, what's called the change of ownership, the chowo process. Um it's less money to change over a license than get a new license in place. And like I mentioned, you already have the residence in place. It's just going to allow you to get done quicker. So in total here, you're probably looking at around $200,000 down payment. Now, you can't get a second loan that's going to be the down payment there. So that's that's a little bit of
00:06:57
a drawback. So it will cost you more, but this is where you want to be working with partners, seeing what other types of ways you can invest, like could you use an IRA, a self-directed IRA? Are there other 401k options? What were some of those other things that you have? Can you tap into your own home equity through a heliloc and get access to those funds for the down payment? There's a lot of ways for you to get into this. If you are interested in learning about some of those options for how you can creatively get funds for a
00:07:24
down payment, type creative down below. I would love to create a video for you on on some of the options that are out there for you to get the funds that you need for a down payment when you're buying an existing facility. And the third option that I want you to be aware of is going to be buying and converting a home. And with this one, you get some flexibility with with more cash as well. So, example here, let's say you're buying a home that's a $500,000 home. Um, with this route, you're probably
00:07:51
going to be going conventional. If you're not going to live in the house, that means this is going to be a investment property. So, that means your down payment is probably going to be 25 to 30% down. Unfortunately, it is a higher amount. So, in an example where you're buying a $500,000 home at 30% down, that's $150,000 down payment. So, that's what you're going to look at there. You're also going to need to have renovations and you still want to have those reserves in place. So, another
00:08:15
$60,000 in reserves that can be financed potentially through some type of a loan. You may be able to get an SBA loan. SBA is not always crazy about working with you if you're buying a home, an existing home that you're going to renovate because there's no business attached to it. Doesn't mean they won't. It's just something you want to be aware of that, hey, if I'm going this route, I may need to do some traditional financing. you can still get a small business loan,
00:08:40
maybe an SBA Express loan, something along those lines that's going to allow you to get the funds that you need for the operating capital and the renovations, and you just have to put in a small down payment for it. Now, the the bad thing about that is you would then have two loan payments. You'd have your small business loan for your operating capital and your renovations, and you'd have your loan payment for for the home. But when if you do your underwriting correctly and you feel
00:09:05
comfortable in your numbers, it might be worth it to go that route. So that's something that I want you to take into consideration. So what I would say here, if you're going that route and you're getting some extra funding through a small business loan and you're trying to get something, you know, for renovations and for the operating capital, you're probably going to need maybe another $40,000 as a down payment. So in in all $500,000 home plus the renovations plus your operating capital, you're probably
00:09:31
looking at I would say in this example $190,000. So very very similar to buying an existing facility. Um so it's something you want to take into consideration. The advantages here is you can design this pretty much exactly how you want with the renovations that you're going to do. The downside is you don't have your staff in place. You don't have residents in the home. You're going to have to do a license from the beginning. Um, so just a little bit longer of a lead time. We actually have
00:09:56
a tool for you. If you go to assistedlininvesting.net/profitpath, um, it we'll link that down below for you. It shows you the difference between buying an existing home and renovating it and buying an existing facility and see which of those is going to to show you how to get there and your pathway to profitability there. So, make sure you go check out that tool. It's it's super helpful in helping you figure out which of these paths is going to work best for you. Now, the fourth option that I want
00:10:22
you to be aware of when it comes to this is building something from the ground up. And this is going to be your biggest investment. Um, as as you're getting started here, you're going to need to acquire the land. And there's going to be some significant construction costs as well that are associated with it. The new build for an assisted living facility, I would say, could run anywhere from $200 to $300 per square foot. So, that kind of gives you an idea on what that's going to cost you based
00:10:47
off of how big you want this facility. Um, so let's say a small 8 to10bedroom home is going to be a million dollar plus budget. So, if you want to get something that's bigger than that, it's just going to go up in in prices. Depends a little bit on construction costs, your location, and the cost of the land. There's a lot of things that can go into that, but you're probably looking at a minimum of a million dollar budget here. Now, your financing could be a construction loan, which is
00:11:15
probably going to be 20 to 30% down. I have seen people have success going the SBA route, actually, for new construction. I've seen people have more success going for SBA for new construction than people using SBA to buy a home and renovate it. Um, kind of an interesting dynamic there, and I'm not sure why. It probably depends on the lender, but I've just seen it more often where people can do this with construction. So that's something that you might want to take into consideration. You're probably for a
00:11:43
smaller down payment there, but you do have caps in what you can do with an SBA loan as well. So you want to make sure that you understand what that's going to look like. So let's just say million dollar million dollar budget. Let's say that you're doing a construction loan. It's 30% down. You're looking at somewhere around $300,000 as a down payment. Anything up, it's it's going to be a higher amount for a down payment. So your costs are quite a bit higher. Um depending on the scale of the project, 8
00:12:10
to 10bedroom home for me would be too small. If I'm going to custom build something, I want something that's bigger. I'm probably shooting for something that's like a $3 to5 million project. Honestly, in the way that I would look at it, if I'm doing that and I'm doing 30% down on a $400,000 project, that's $1.2 million down, right? I don't I don't have that. So, how am I going to do it? That's where type in creative if you'd like to learn a little bit more about some of those
00:12:36
creative financing options and how you can get access to those funds. Would love to create that video for you. Now, the advantage here when you build something from the ground up is obviously you get something that is completely customuilt. It is exactly how you want. It's perfect for assisted living. You have modern design. You've got easier compliance because everything is is how exactly how it needs to be. Your sprinkler system is you're not ripping down ceiling tiles and things like that. It is just built into the
00:13:03
home. Everything is is perfect. It does take you a long time. That is something you need to be aware of. Like you could be looking at a 12 to 24month timeline before you even get licensed and open the doors. Whereas the other three options we talked about, you can be up and running with people in your home in 2 months, like very easily. So that's an option that I want you to take into consideration is that pathway to profitability. Now, if you're doing something that's customuilt, you're
00:13:28
probably going to charge higher rates. And ultimately, you might be able to catch up to somebody that just b is renting or or buying an existing home and renovating it, but you need to take all of those things into consideration. And there's obviously the higher upfront cost risk of what if it just doesn't work. Um, what if you have contractors that make mistakes? What if there's and you have to restart the project? Like there could be delays, there could be issues, there could be zoning stuff.
00:13:52
There's a lot of risk that is involved when it comes to building something from the ground up. So, you need to make sure that you're aware of what that's going to look like for you. Now, quickly, let's summarize this. So, rental arbitrage, you're probably looking at somewhere around $60,000 down uh to get into this. Buying an existing facility, I would say $200,000. These are based off the examples we used in the video today. Buying and converting a home, buying and renovating it is 190,000. And
00:14:18
building from the ground up, $300 to $500,000 or more. Um, so really the driving force behind this is the cost of the real estate and and what it's going to cost you to buy. That's going to be the biggest driving force and how much it's going to cost you to get into this. I would say overall your range for getting started is $60 to $500,000 plus. It just kind of depends on what you're looking for and what is best. I don't know. It depends on your goals. I don't know what you're looking for. Are you
00:14:45
looking for something that's fast entry? Probably go with rental arbitrage or buying an existing facility. Do you want less headaches and a quicker pathway to profitability? Then buying an existing facility may be best for you. Um, do you want a little bit of flexibility in this? Buying and renovating a home is a really great option for you. But if you want your dream facility and you want everything perfect and fully custom, then I would suggest figuring out how you're going to build something from the
00:15:11
ground up. the right choice is the one that's going to fit your vision and help you reach your goals and what aligns with the resources that you have at your disposal at this point in the journey. Now, I mentioned at the start of the video that I have a special offer for you and it's actually related to what we've been talking about here. It is my roadmap challenge. Inside of the challenge, it's a 5-day live event. we work together and in there we actually help you decide which of these types of
00:15:37
facilities is going to be best for you and why it would be best for you and how you can start moving things along there. So if you would like to learn more about that, go over to roadmapchallenge.com. Go check out the information on the challenge. We have one that's starting soon. I would love to see you in there. Again, it's a 5-day live event. This is not a webinar or a sales pitch or anything like that. It is work. we are going to do it together and I am super excited to help you out as you're trying
00:16:01
to figure out how to get started on your assisted living journey and I want to help you make some progress. So go check it out roadmapchallenge.com. If you found this video to be 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 go live on Tuesdays and we put out content on Thursdays. And if you need some help moving along your path to launching your assisted living business, make sure you go check out the profitable assisted living book at the
00:16:27
alibook.com. We will link that down below for you. It's a book that I wrote that goes through my fivephase process of getting started. The focus framework is what I call it and it will allow you to know what what things you need to be doing to launch your assisted living business. So go check that out at the alibook.com. Curious about assisted living? At Assisted Living Investing, I help first-time assisted living entrepreneurs launch profitable, purpose-driven businesses in 12 months, creating
00:16:55
prosperity, purpose, and peace in their lives. 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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