What is the SECRET to Validating an Assisted Living Market Quickly? (The 5% Rule)
Dec 19, 2025
I want to show you a simple way to see if a market can support an assisted living home. It’s what I call the 5% ruleTM, and it makes the big numbers small and clear. Want the full breakdown? Watch the video below👇
Use the 5% rule to get a quick demand number
Start by picking the group you want to serve — for example, if you want to serve an elderly population, you might start with people 70 and older.
Once you've identified your criteria, you'll use data to find out how many people who meet those criteria live in the area where you're interested in starting your facility.
Then you simply multiply that number by 5%. That gives you an estimate of how many people may need assisted living.
I use this first because it turns huge population numbers into something you can work with. If a town has 20,000 people aged 70+, 5% of that is 1,000 people who might need care. That’s your baseline.
âś… Count the people in your target age group, then multiply by 5%.
Check how many licensed beds already exist
After you get your 5% number, find the licensed facilities and beds in that same area. State licensing sites often list every facility and how many beds each facility is licensed for.
Now compare supply and demand. If your 5% number is 1,000 and there are only 50 licensed beds nearby, that’s a big opportunity. If there are 1,200 beds already, the area might be too crowded.
Also, look at what kind of facilities those beds are a part of. Are they large “big box” facilities or small residential homes? That matters for your strategy.
âś… Pull the state licensing list and count licensed beds near your target neighborhood.
Match your facility type to what the market is missing
Think about the type of facility you want: a small 6–16 bed residential home or a large 50–100 bed community. If the market already has lots of big boxe facilities, a small home with a family-style feel can stand out. If it’s full of small homes, maybe build something bigger or move to a nearby town.
Keep in mind, though, that most families will not drive more than 5–10 miles to get to a facility, so these are very local, micro-market decisions.
âś… Decide your model (rent & rehab, buy & convert, buy an existing facility, or build new) and see how it fits the local mix.
Talk to residents and their families and use their words in your marketing
Numbers tell you if a market can support a facility.
Conversations tell you what will fill your beds.
Talk to potential residents and families. Ask: “What worried you most? What made you choose that specific home?”
After you gather that information, use their exact words on your website and ads.
If you’re a family-focused residential home, lead with family and personalization. If you’re a larger community, lead with access to services and fun activities.
âś… Ask new residents what mattered most when they were looking for a new home and write those phrases on your website.
Be willing to move your search area a little
If your first spot looks saturated, go a town or two over. I initially looked for a facility nearby, but after some market research, I ultimately decided to invest out of state. You don't need to be that drastic, but keep an open mind. You don’t have to go far. Often, the right spot is just outside the city limits or in a neighboring municipality where there are fewer beds available and the same resident base.
Wrap Up
The 5% ruleTM, is a fast, honest way to see if a market might work. Then dig deeper: count licensed beds, check facility types, choose your model, and talk to families. Do those steps and you’ll know where to buy, convert, or build, and how to fill beds fast.
If you need help creating a business plan for your assisted living business, check out the Free Business Plan Checklist.
And if you’re ready to figure out your next step, join me for the next Roadmap Challenge, where I’ll walk you through how to get started.
Show full transcript 👇
Transcript
00:00:05
All right, welcome in everybody. Welcome to Assisted Living Investing. Today we are going to be talking about the 5% rule. So, if you've been struggling, I've talked about this a little bit the the past uh couple of of weeks. actually just kind of touched on it briefly and uh this was something I got a quite a few questions from questions about uh people wanting to know a little bit more about the 5% rule, what it is and how it can help you as you're trying to do your market research to identify if you've
00:00:34
got a good market or not for assisted living. So, if you're interested in learning more about the 5% method, the 5% rule for doing quick analysis for your facility to see if you got a good market, make sure you stick around for today's video. Hi, my name is Brandon Gustafson. I help uh first-time assisted living entrepreneurs launch profitable, purpose-driven businesses, creating prosperity, purpose, and peace in their lives. I love coaching people and giving them direction. Uh, and I have a few
00:01:01
different programs and I'd help people that are going from beginning, I don't know how to get started all the way to, you know, I' I've got multiple facilities or I want multiple facilities anywhere across that gamut. I have a 30- secondond quiz for you to take if you go to aliquiz.com. You can take that quiz um, really quick and it will show you which program is the best fit for you. Also, if you stick around till the end of today's video, I've got a special invitation for you to
00:01:26
work with me directly for a full week to help you build a roadmap that's going to help you launch your assisted living business. And then I want to remind you as well, get over to the website assistedlivinginvesting.net so you can get access to the free underwriting calculator there. Go there. It's it's a big blue box uh just right there at the top of the of the page, light blue box says get your free calculator. Go grab that. Uh and you can also take the quiz there as well. So, with that, let's hop into our topic for
00:01:52
today. Again, we're talking about the secret for validating assisted living quickly to make sure that the market's going to work for you. And this is what I call the 5% rule. So, we're going to talk about uh today what the 5% rule is, why the rule is not enough, and why you need to dig a little bit deeper. Uh it it's a great place to start, but it's it's not going to be enough. and how to dig deeper into your marker market as well to make sure you've got a really good fit for what you're trying to build
00:02:21
here. So, let's let's talk about what the 5% rule is. I I use a story uh and I actually talk about this in my book. Let me grab it for you here. So, I talk about this in the book, the the profitable assisted living facility. You can get it at thebook.com. Uh or you can go on website on on to Amazon and search for the profitable assisted living facility. It'll pop up for you there. There's actually a companion workbook as well that you can buy that gives you all the exercises. So, go check it out. The alibook.com
00:02:52
would love to have you use that. But I talk about it in the book. It's actually you saw right here this sticky note. Uh it's something that people ask me about all the time is the 5% rule. So, this is on page 138 where I talk about I'm going to use an example here from the book and I talk about how let's say that you have a population that you want to serve that uh it's an elderly care uh that's that's the population you want to look at. So, you're looking at individuals who are
00:03:20
let's say 70 plus. All right? So, if you have a population uh a group of a population uh 70 plus and in the area you want to do this in, there's 20,000 individuals that uh that are are fitting that base criteria, you know, they reach that that age mark and so they're are part of your criteria for what you want to serve. 5% of that population is going to need assisted living services. So, I talk about this in the book. That means 5% of 20,000 is 1,000 assisted living beds are going to be needed in that
00:03:54
area. So that's that's at its core the 5% rule. You want to pick your criteria. Now how many uh how many what type of resident do you want to be serving. Is it strictly elderly care? Do you want to be serving women only? Do you want to be serving a population that deals with disabilities? What population do you want to serve? figure out what that population size looks like and then multiply that by 5%. That's going to get you to to the amount of people that are going to be needing assisted living
00:04:26
services. And because the the the world of assisted living, like right now there are 10,000 people per day that are turning 65 and older. So if you're working in a an elderly care population, like that that's every day, right? there there are so many people that are aging up into into this population of needing it. So that number is always changing. So if you're at 5% today, that means there's probably going to be more people that are aging into that population in the future. There there's a huge demand
00:04:58
for assisted living services. So the 5% rule is going to be really helpful in just gauging, can I can I work with this? It gives you a baseline for what that demand is going to be. It's it's not perfect. uh nothing really ever is, but it does give you a baseline so that you know what you should be looking for. In the example of 20,000 individuals, we have a thousand people that's in our population that we can serve. Now, we need to be digging into that a little bit deeper to see, you know, is what
00:05:27
what's already out there in the market and are we going to be able to help meet the supply uh that that demand is is telling us that we've got. So, it turns these really big numbers. you know, you're when you look at a population, you look at the population of the United States, it's I don't even know how how many hundreds of millions of people takes that helps you shrink this down into small, manageable chunks of of people to then really start looking at it and helps you get some clarity for
00:05:56
better decisions. So, I have somebody in my success system program. We were working through this. she's in Virginia and um she had narrowed it down to um I can't remember the specific areas but uh we were looking at them very broadly. I said, "Okay, this is what I want you to do. I want you to go and pull this data. Do do your market research. Let's pull the data of the population. Let's let's look at that. Let's shrink this down. Let's go from I want to look at these
00:06:23
seven counties down to let's look at like five cities, right? So it's let's shrink it down quite a bit now. Let's look at those and see how many people based off the criteria you want are in that area. Then let's do our use the 5% rule. Let's get a a base number there. And now the next step of that is let's look at how many licensed beds and how many licensed facilities are in the area. That's really going to help us just kind of narrow this down a little bit. So she did that and what she found
00:06:51
is uh of the five or six that she looked at, there were two that it just didn't make sense. either there wasn't enough people there to to actually make it work for assisted living or it was already so oversaturated with the amount of beds that were licensed in the area that just didn't make sense to to pursue that. So, we took seven counties down to five or six cities down to three or four. And that has now let her really hone in on the specific neighborhoods inside of those areas. Now she's starting to work
00:07:22
on HOA conversations and uh zoning conversations to see what uh what what needs to happen there. And those are things that are a lot more valuable with the time and it all started with that 5% rule and getting down to that. So once you have your 5% rule in an area, the next step is to go and find there's going to be a database somewhere online. They can be hard to find. Sometimes they're easy, but the secretary of state or the licensing agency, licensing department in the state where you want
00:07:53
to do assisted living is going to have a list of all of the licensed facilities in the state. And on top of that, sometimes they actually make this really cool and like interactive on a map, sometimes it's not. Um, but it's going to have the address for where those um where those facilities are located. If it's licensed, you're going to be have it on this list. You're going to have the address. It's going to tell you how many beds are in are in that facility. How many beds it's licensed for. So,
00:08:21
you're going to be able to take that and then you can narrow this down and say, "Okay, I want to be in, you know, I live in the Salt Lake area. I want to be in Salt Lake City. How many facilities how many how many people are are in my age group of people I want to serve. How many facilities are are in that area?" And now I can see uh using the 5% rule, do these things align? Is there more demand than there is supply or or vice versa? What does that look like? And that's going to really help me hone in.
00:08:48
So, if I have determined that there's a thousand people that need assisted living services and I look at how many licensed beds there are and there's only 50 of them, I've got a great opportunity to be working in this area, right? There there's a ton of demand and very little supply. But if I look at it and I say there's a thousand people here and there's already 1,200 licensed beds. Uh now I might not want to to be looking at that. So this is where why the 5% rule just isn't enough and you need to dig a
00:09:19
little bit deeper and start looking at how many licensed facilities there are in a specific area. The existing facilities are going to change the reality of demand in that micro market. So you want to be making sure that you pay a lot of attention there. The other thing that I'll I'll tell you is the type of facility that those beds are licensed for are going to matter. So, this is where you really want to dig into that that number that you can find online for for your state and the licensed facilities because if
00:09:50
you find that let's use the example where we we know we have a,000 people using our 5% rule and there's 1,200 beds that are uh that are already in that area. But if we look at it and we find that the majority of those 1,200 beds are are from big box facilities, you know, 1100 11 1,150 of them are big box big box facilities. You've got a bunch of 50 beds, a bunch of 100 bed facilities and there's not very many residential small 6 10 16 15 20 bed facilities. There's not a lot of those. that can really allow you
00:10:31
to get a foothold in the market and market yourself differently because you are a small residential facility or let's say there's 1,200 licensed beds and you look at the data and the majority of these are 10 bed facilities there's you know 300 of them like we're we're in Phoenix Arizona area and there's just a ton of these little small assisted living homes residential style um that might be for us an indicator that is probably a little oversaturated maybe I shouldn't be looking at that.
00:11:00
What about doing a big box facility there? Or should I just go outside of that area and find somewhere where it's not so saturated where I can work with a specific population if I want to be in that area? The thing with assisted living is they are very microarket driven. Uh most people will not drive more than like 5 to 10 miles to get to a facility. So if you're in Arizona, doesn't mean that you're in a horrible spot. It just means you might need to go, you know, a little bit outside of
00:11:28
the city limits or choose a different municipality that's going to allow you to to find the the right demand for what you're trying to offer. That's what you want to be looking at. So, pay attention to if those licensed facilities when you find that database, if they are um if they're big box or if they're residential facilities, think about what you want to be doing and that's going to help you decide if it's a good spot for you. And don't be afraid to walk away.
00:11:56
Once you've identified that as well, you want to differentiate yourself through your marketing message. So, if you are in an area where there's a lot of big box facilities and you're a residential facility, you want to adjust your marketing to be very where family focused where uh everything's about family and and personalized experience and things like that. Whereas, if you're in a spot where there's already a lot of residential and you want to be doing a bigger box facility, you want to say,
00:12:23
"We provide a lot of access. We have all these extra amenities. Um, we we have this big uh kind of communal space for people to come. We have concerts coming. We we we do all these extra fun things." So, you want to figure out how can we market to our population based off of the type of facility that we're going to have. is going to really benefit you quite a bit as as as you are digging deeper into the type of facility that you want to have. And then further than that, you've got to start looking uh at
00:12:54
at your competition. So, um yeah, look at your ideal resident, see see what they need, see what their care needs are, make sure you're speaking directly to them, figure out what they need. This is really important and this is something if I want you to go, this is a little bit just like I don't know meta. Go to my website assistedlivinginvesting.net and just kind of scroll through it. And what you're going to see is what I if I'm doing my job correctly and I I know who you are who's watching this, you're
00:13:25
going to notice little things in there that they they call out specifically to the things the pain points that you have as you're trying to start an assisted living facility. I don't know how to get started. I don't understand the funding process. I don't understand licensing. I want time and financial freedom. I want to make an impact in my community. I want to leave a legacy for for my family. Like those are words I hear directly from people like you. And I'm I'm trying to pay attention to that so
00:13:51
that I can adjust my website so it talks specifically to you because I I know I can help you. I want to help you. But if I can't have a clear message in the way that I put things on my website, then you're never going to find it. you're not going to take it seriously. You're just going to watch my YouTube videos, which are super valuable, by the way. Uh, and I appreciate it and make sure you like the video. But, uh, if I'm doing my job correctly, I'm using words that that resonate with you. You have to
00:14:18
do the exact same thing with your assisted living facility. You need to go out and talk to the potential residents. And when you have residents in your home already, you need to be asking them like, "What made you come here? What what do you need? What what are your biggest needs? What are your biggest pain points? What were the things that you were most concerned with as you were coming into the facility? Those are the things that you need to have on your website. And if you do marketing, um,
00:14:41
like having ads and things like that, you need to be speaking specifically using the words of the people that you are working with. And that comes through conversations. So, if you're a smaller residential facility and you've identified that that's the thing that you need to be working on, um that's the population you want to serve and you've validated through the 5% rule that there's enough demand um to to meet the supply that you're going to be providing. This is how you can really
00:15:06
bring these people in and talk to them and get them into your home and and get your beds filled and and build a waiting list for the people that uh that are trying to come into your home. This is this is how you do that. All right. So, you need to make sure that you spend time understanding who your who you are trying to market to, who your ideal market is, and then start talking to them. Start seeing what they want, what they're looking for, and you're going to uh you're going to build your marketing
00:15:36
message around that. That's how you're going to differentiate yourself. You can't just you can't just put it out there and be like, "Oh, yeah. We know that you want this, so we're just going to put it on our website, our marketing materials." You actually have to follow through with it. But that's what's going to allow you to fill your beds quickly and make sure that that supply and demand that we've been talking about that it's going to be met. I would also
00:15:54
encourage you if you're looking at this and you use the 5% rule and you're just like, "Oh man, I really thought I wanted to be in this area, but I like there's just way too many people here." I would encourage you to look at a different area. I This is how I got into working out of state. I operate, for those of you who don't know, I live in Utah and I've operated in Colorado. We sold our facility a few months ago. I also operate in Idaho. And a lot of that came about through conversations um and doing
00:16:24
our market research and feeling comfortable. We couldn't find anything at the time in Utah that we felt good about. We found something in Idaho and that uh was a little bit scary in the beginning because it was out of state. It's far away. who are new to this, but it has been an incredible experience. Now, you don't have to be as drastic as I was and going out of state. Um, but you can do the next town over like we were talking about in the Phoenix area in that example. It's okay for you to
00:16:51
shift over and I'm not familiar enough with the geography of of of Arizona to tell you the specific area, but think to yourself, man, this area doesn't work for me, but is there somewhere that's pretty close by that that we can build our facility or set up our facility and and not have to travel a ton? It's okay for you to go outside of your market just a little bit. Don't get so caught up in I have to do it in this this one spot. There's demand all over the country. Um there's this huge demand for
00:17:25
assisted living. Like I mentioned, 10,000 people every day are aging into 65 and older. By 2030, all of the baby boomer generation are going to be over 65 years old. This silver tsunami that we've heard about for so long, it's it's here. It's it's and it's growing rapidly. uh by 2050 there's going to be between 50 and 80 million people that are uh that are in this age group that are going to need assisted living services. There's not that many beds available. Even if you go
00:17:53
5% of that, like it's it's still there's not enough beds to fill that. And so this is an incredible opportunity for you to get into it. Make sure you do your market research and understand where uh where you should be doing these things. And you're going to do that largely by identifying which uh there's there's four kind of uh homes that you can do this with. Right? So there's there's four methods that you can get into assisted living. So one is you're going to rent and rehab a home. So RNR,
00:18:23
rent and rehab. Uh you're going to basically lease a home. Uh you could also be looking at buying a home and converting it into assisted living. You could buy an existing facility or you could build something from the ground up. So, you need to decide which of these uh methods do I want to use to get into assisted living. Identify that. Then, you're going to start doing your market research and you're going to say, "Okay, well, I know I'm going to use the 5% rule. I'm going to get over to this
00:18:48
spot. I'm going to look at these like my like my student in the success system." Um, she she did this analysis. She narrowed it down to three or four cities. And now she's working with an agent, a real estate agent specifically. She wants to buy a home and convert it into assisted living. And so she's working with an agent saying,"I know I want to be in these three cities. Um, I want a home that will allow me to serve 6, 10, however many residents. Um, I need it to be ranch style. Um, so very
00:19:16
few stairs, if any. Um, and I I I need something that's that's that's pretty big. Um, and something if it's already kind of wheelchair accessible, that's a plus, right? you've narrowed your search down from nationwide to state to a few counties down to three cities with very specific criteria for what you're trying to look at. And that's what's going to allow you to to find the perfect home um as you're trying to get into assisted living and and start your own business.
00:19:45
So, those are the things that you need to do. Um I mentioned at the start of the video I have an invitation to work with me directly for a week. I'll hop into that right now. If you go to roadmapchallenge.com, you can get more information on this. But it is a week-long challenge coaching experience that I work with you and answer your questions. We we help I help you figure out which model you want to go through. I help you define your why. I help you understand the numbers that you're looking at, understand financing,
00:20:09
understand licensing, work through all of those things so that you have this clear road map that's very specific to you. The exercises we do in the challenge are things that you're doing yourself to make sure that this is work for you. So, go check it out. roadmapchallenge.com. I would love to have you have you in there. It is such a fun experience to to work with people. Uh we do a few of these a year. Uh would love to have you in the next one. It's it's coming up soon. So, go check it
00:20:33
out. Again, roadmapchallenge.com. what I hope you gathered here from today's video. And if you if you found this 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 to help guide you along your path to launching your assisted living business. Uh, and share the content with other people. But we've been talking about the 5% rule, how to quickly validate your market to see if it's a good fit for you, what that 5%
00:20:58
rule is, why that rule is not enough, and how you can dig deeper into the market, and how to really position yourself from a marketing standpoint to get people into your uh facility and build a waiting list. So, if you found that helpful, make sure you like the video, subscribe, and ring the bell as well so you get notified. Uh go grab go check out the roadmapchallenge.com. take the quiz aliquiz.com 30 second quiz. Would love to see if I can help you out there. And you can get the book the alibook.com
00:21:28
as well if you'd like to look at that and and check out the the 5% rule specifically. That is on page 138 in the book. So, uh if you want to look at that and dive a little bit deeper, go read the book. Uh it's super helpful and intuitive and in helping you figure out how to get started. Are you curious about assisted living, but you're not sure how to get started? At Assisted Living Investing, I help first-time assisted living entrepreneurs launch profitable, purpose-driven businesses,
00:21:53
creating prosperity, purpose, and peace in their lives. I love helping and coaching people. It's one of my favorite things to do. I help beginners I don't know how to get started all the way to people that want to, you know, scale to multiple facilities to figure out which one's the best, how I can best help you. Go take the quiz at aliquiz.com. 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
00:22:16
persistent, you're going to be successful. Thanks for watching and have a great day.
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