When Assisted Living Doesn’t Make Sense (And What to Do About It)

Transcript

00:00:00
Today in our live um today we are going to be talking about when it does not make sense to do assisted living when it's just like a bad deal. You should stay away um and and and avoid it. Uh so I wanted really wanted to dive into this. This is something that um we had I had somebody comment about this on on a YouTube uh on a YouTube video uh and said, you know, I don't think this makes sense. Here's here's a scenario for you. So, I wanted to play that scenario out for you so you can see uh the numbers

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that they were talking about and and in their scenario makes they're they're totally right. Um it assisted living does not make sense in that scenario. But I want to share that with you, share what that looks like and show you how you can actually take that and um make it work. Um because there are ways to to kind of adjust that and um and and make it so that it will actually work for you in in a way that um you know all of a sudden uh you know it makes sense. And assisted living can be an incredible

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opportunity for for you to to make money and make a difference uh with people. And you know that's that's something that is really exciting about assisted living. And I that's one of the reasons why I love uh love being in assisted living and and helping people along that path and and helping them understand how they can, you know, make progress and uh reach their goals and uh and get to where they want to be where they're they're having that time and that financial freedom um so they can can

00:01:34
make the progress that they want to make and have the success that they want to have. So with that um again, my name is Brandon Gustafson. For those of you who don't know me, um I own uh and operate two assisted living facilities. Uh and I do that out of state. So I I live in Utah. I have a facility in Colorado. Uh and I'll have an update actually for you on that next week. Um so stay tuned. U make sure you like the video, subscribe, and ring the bell so you get notified uh because I have a fun and exciting update

00:02:01
for everybody next week. Um and I have one in Idaho as well. So, make sure you uh are, you know, doing all those things so you can uh get some of that that breaking news from me. Um, but yeah, I've been doing this since 2020. Uh, I've secured over $1.5 million in SBA funding. Um, I know this process. I've been doing it for a while. I also have a masters in healthcare administration, so I have worked in the industry since 2011. Um, have a lot of experience just kind of in the industry as a whole. um

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just healthcare uh not necessarily assisted living but uh broadly uh inside of this industry and uh something I'm very passionate about. I love working in healthcare and being able to help people along that path. So um yeah, with that uh let's hop over and I want to share this scenario with you. So, this is a scenario that that we had somebody comment um on on on a video and I want to show you how this makes absolutely no sense and how somebody could look at these numbers and say, "God, man,

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assisted living seems like a horrible investment. Why would I do this?" So, um, if you put four to five residents in a house, uh, for your assisted living facility and you are, uh, they're they're paying $3,200 per month, um, and you pay your caregivers for shifts that cover 24/7 because you're going to have to do that if you're in a licensed facility. If you're unlicensed or you're just going to do kind of a care home, um, you might have a little bit of leeway um, in in the evenings and not

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have to do that coverage. But in a licensed facility and in most facilities, you're going to want to have that um that full 24/7 coverage. And so you're paying $20 an hour, which is I would say is pretty average. Like um I we pay a lot of our staff between I would say $18 and $23. So $20 on average seems pretty average. Um you're going to have $14,400 just in wages, right? So where's the business opportunity? Um, and we're going to run through some simple math here so you can see exactly how this

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works. Um, but in in this scenario, this is why I have a video where I tell you um, six beds or less, like it it's money is really tight. It it's hard. I have one of my most popular videos on the channel is can you do this with a three bed like a two or three bed care home? The answer is yes. It's just the profitability. Um, it's not it's really hard to get there. Um, so we're going to show you exactly how that works. And so I just want you to be aware of this because for those of you that you want

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to do on license, you have a a relatively big house, has four, five bedrooms, you're thinking assisted living is great. This is what I want to do. I want to convert the house. I want to show you numbers here so you know exactly what you're getting into because it it's not as good as other people are going to tell you it could be. Um, so let's see. Running the numbers for residents, $3,200 a month. That's $12,800, right? That's it. That's income. Or five residents at 3200. That's $16,000 in

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income. Your staffing model, you have 24 hours times $20 an hour at times 30 days. Um 30 days in a month. So this is assuming you only have one staff member ever on on site at any given time. You have no overlap. Um you're you're only paying like the bare minimum of what you uh can pay. You're not paying your administrator or anything extra. This is bare minimum right here. $14,400 is is your expense just in that. So, you are clearly underwater already. Um, and that's without your other big expenses.

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Your insurance, your food, your utilities, your death service. Um, you're you're that's not including the big five. Um, what I call the the WEU um WFD WFUD uh wages, insurance, food, utilities, debt, debt service. That's not including all those you're already underwater. So, this is like this person, they brought up an incredible um incredible scenario where it does not make sense for you to do this, right? Just doesn't. So, let's talk a little bit about how you can fix

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this. Um there's a few ways that you can do this. Number one is to charge more, right? Uh so, if you're going to just charge up to 5,000, which I would say is still pretty pretty good for for the market. It's going to depend on your state. Um, but a lot of states I would say $5,000 a month, especially for a private type of a facility, private pay, 5,000 honestly seems like a deal. Now, there there may be states where just that that's not going to fly. It's not going to work, but also your wages are

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probably going to be a little bit less. Uh, your real estate costs are probably going to be a little bit less. So, there there's a little bit of trade-off there. But, I would say you could typically get between $6 and $8,000. That seems very reasonable um for private pay. Um, you can probably get even more than that. uh if you have something that's a little bit higher end, but let's just say you're able to up your wages to $5,000 per month. So, four residents, you now have $20,000 in income. Five residents

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at $5,000 a month, you're $25,000 in income. Your staffing in that scenario is not going to change. You're now at 14,400. So, money is still very tight, but there's probably some room for a little bit of profit there, especially if you had five residents. Four residents, you're probably not making much. You're probably losing money. Um, so that's that's something you'll be aware of. But at five, you're probably okay, but you're also assuming that you are always

00:07:18
100% occupied, which in my experience is probably not going to happen. Now, in a smaller five bed facility, it's it's probably more likely you can keep those beds filled. Uh, create a waiting list and those types of things, but it is something that you want to be aware of. Probably pump the brakes on a little bit because, uh, especially when you're doing your your underwriting, I I encourage you to be conservative. I would encourage you that if you are not um planning on being just 80% full, like if you're have

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rosecolored glasses, you're saying 100% full all the time, that's what it's going to be. Um it's probably not going to happen. I underwrite to make sure I'm going to be profitable at a consistent 80%. Like that's what I'm going to do because then I have every confidence that I can at least maintain that. Um and if I have dips underneath that, then then I'm going to be fine. So, that's something that I want I really want you to be aware of that um as you get into

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this. Do not plan on this being 100% um full that you really shouldn't. Uh if it does, then great. Um but you shouldn't plan on that. I have an underwriting calculator I give away for free. Um go grab just go over to assistedlivinginvesting.net. It is the big blue box in the in the the top uh right corner of the of the website. Just go grab that free resource for you. I also have um down here somewhere below me uh my business plan checklist that's going to help you build a business plan. Make sure you go grab

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that. I have a bunch of free resources just all over the place. Um make sure you go grab those tools because it's what's going to help you out as you're trying to to move things along and I'll I'll I'll continue to coach you and things through email, through the YouTube videos. Make sure you're doing that. I I want to be your coach. Um and that's how you can do it. just go grab those free resources and then just get on uh on the emails and I'm sending out stuff all the time uh to help you make

00:09:03
some progress on it. Okay, so that's that's number one. That's one way to fix it. You just charge more. Makes sense, right? And and you're not from 3,200 to 5,000. You're still market rates. This is very doable. Uh something that that can make a lot of sense. Um so that's that's one scenario. Next scenario is you just have more beds, which can be hard, but if you have big enough rooms inside of your house, um, typically what I see in a lot of states, and this your state could be different, is uh, for a

00:09:31
private room, it needs to be a 100 square ft, a 10 x 10 room basically. Uh, for a shared room needs to be at least 160 ft. So, it's a pretty big room. It's like a 16x10. It's big, but when you do that, you can have shared um, you can you can share rooms inside of that room. uh it's 80 square feet per resident is typically what you are going to be looking at. Check your state could be different there. That's a lot of what I see there. So let's say you have five bedrooms in in your home, but they're

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all huge. You know, they're they're just big and and you can get um eight to 10 residents. You can double the amount of residents there. just keeping it at 3200, keeping that that kind of very minimum basic um rate that that you will keep your beds pretty full because you know you're the cheapest one on the market. Um just doing that 8 time 3200 is 25,600. I'm going to go back really quick. We in in this scenario we did five residents at 5,000 that's 25,000. Just doing eight residents at 3,200. So

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we're reducing it is higher than that already. Okay. So, this is where having more beds makes a ton of sense. This is why I tell you that six beds or less is really hard to do. It's why I personally will not do something that is less than 10 10 beds unless I am getting just like a killer deal on a mansion where I can charge 15 $20,000 a month on something on a six bed facility. Like, I'm just not going to do this in a small facility. I need something that has more beds for it to make sense um financially

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for me. Okay. So, eight residents, 3200. That's 25,600. Um 10 residents at 3200, that's $32,000 a month in income, right? That's that's incredible. So, my staffing at this point is probably going to stay the same, honestly. 8 to 10 beds, I'm probably not going to need much more staff than that. I I really won't. Um there's a like in in Idaho, uh no, in Colorado, um which is the um the most prohibitive state I've I've seen. I've been working I I operate in two

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different states. I've talked to people all over the place. Um I Colorado uh the the resident to caregiver ratio during the day is 1 to8 and in the evening it's 1 to 10. So I can scale back a little bit um in the evenings if I need to. Um so in this scenario I might need to if I had 10 residents during the day I might have to pay a little bit more for staff because I'm going to have to have some double coverage. Um but in the evenings I I don't have to have that, right? So, wages might go up a little bit, but my

00:12:00
money situation in this scenario is getting much better, especially if I had 10 residents, $3,200 a month. Um, just looking at this, and I would say that that 14,400 um h for wages, that's probably a little low um for for this size of a facility, but it's it's not too far off. Um it's it's probably a few thousand dollars off over the course of the month, right? So, uh, but but I think this is this is something that is reasonable. Um, I'd say you're probably more realistically looking at between 17

00:12:34
and $20,000 um there. But like the these numbers are they're they're ballpark. Okay. Um, so that that works, right? And you can see the difference here. And just having more beds in your facility, this is where it starts to make a lot more sense. Even at that $3,200 um a month marker. Now, let's run another scenario where we have more beds and we're charging more. And we're just at that 5,000. We talked about this. $5,000 a month is very marketable. I I feel like in in most markets, you're going to

00:13:05
be able to sustain that amount, especially in a a pretty nice home. It doesn't even need to be like the the big goddy homes that are that are just like, you know, all tricked out and and all that stuff and gold everywhere. It it doesn't have to be like that. It just has to be a nice home. Um, even with shared rooms, I think you could do this. Um, you might want to have a few that are more private suites and maybe you charge those a little bit. So, we're talking about average $5,000 per month

00:13:30
uh for a room, but I think this is doable and and not like a super nice house. Um, a nice house, but not a super nice house, right? So, you're charging you have now 8 to 10 residents in there. You're charging $5,000 a month. Very doable. And you can see your income now. $40,000 at eight beds, $50,000 at at 10 at 10 residents. Um so that that that number is significantly higher. And you can see your wages um at that point, they're just like the scenario before, they're not going to change that much.

00:14:05
Um they might go up a little bit. Maybe you're providing a little bit more care. Maybe you're providing care to residents that need a little bit more. But you're not tripling your your wages here. You're like doubling it at worst. Um you're you're probably only going to to be getting up like an extra 50 50%. Um so bump it up to $20,000. You still have a lot of room for all of those other expenses. Uh you can cover all your wages, insurance, food, your um utilities, and your debt service very

00:14:36
easily. So this is how you can see how this starts to make sense. there's a lot more room in case you need to hire more staff um if you need to take care of all those other expenses. Um gives you options to do that. gives you a lot more just opportunity to cash flow on the business and have it make sense for you financially and that gives you more space and more brain capacity to think of ways that you can add more streams of income or uh do research on how to increase rates uh for people and do all

00:15:06
of that type of uh kind of market research and and how you're going to do that which can increase your income even more. So, this is where um I I tell people this all the time. People People want to know, you know, I've got this house. I think it's perfect for assisted living. And I ask them, well, how big is it? Oh, it's three bedrooms, two baths. That's is not going to work. It's it's four bedrooms, two baths, five bedrooms, two baths. Like, now you're maybe getting into a scenario where it starts

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to make sense. Uh, but you're going to have to charge higher rates. In assisted living, residential assisted living, you want something that has a lot of rooms. My my homes, my my home in Colorado, my home in in Idaho, each have 10 to 12 bedrooms. Okay? So, you want something. The more rooms they have, the better. Um, the better off you're going to be. It just makes your life that much easier. Uh, so you want to have more rooms. You want to have more beds. And you want to find ways to be charging

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more money. I And I know there's there's some of you out there that are just like, man, it's so expensive. Like, how how are we go how how are people paying for this? Uh, they can pay for it a few ways. They can pay for it with Medicaid. they can pay for it. You know, if they did a reverse mortgage or like a retirement or long-term care benefits, like there's a lot of ways that people can pay for this or their children make a lot of money and they're going to pay for it. Like, I I I get it. It's it's a

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totally different um type of of thought process that goes into this. Um and and you almost feel guilty charging people, but you have to remember you're providing them a place to live. You're giving them all the food. You're providing them with all of the care. and if they were to go and get some home health um to to come into their home or or other programs like that, they're charging as much or more than that and they're not there 24/7. Um they're they're just not they that would just be astronomical

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to to try to cover that. And so there are ways that people can do this and it gives people it gives families peace of mind to know that their loved one is is in a home that is receiving that is providing them with the care that they need so that they can live a happy and healthy life. So um it it's hard like looking at those rates like it I I I get it. Um and for those of you who are watching this and you are trying to understand like how much is it going to cost me to to be in assisted living?

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It's expensive, but that's be that's what the market dictates. And it's also because of the the amount of care that is provided. And when you compare that to the amount of time that you would be caring for your loved one or how much you would be paying like a a home health nurse or somebody else to come into into the into their home to care for them a few hours a day, it it it comes out in the wash. It really ends up not being that much. Um, so I just want people to understand that that it seems like a

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large amount. $5,000 a month man. I don't that's like double triple my house payment, right? It's it's the amount of care that you're providing, the services you provide, the attention to detail that you are providing to people. It is it's so worth it. Okay. Now, if you um if you want to succeed in this and you want to make it work for you in assisted living, there's a few things that you need to do. Um, you need to build a solid foundation. Go grab the free business plan checklist. I

00:18:23
think it's down here. Let me see if I can like point to it. Nope, this way. Um, so it's down there. Uh, go grab that free business plan checklist. Uh, it's a free tool for you uh to help you build your business plan. That's part of your foundation. You need to have a business plan. You need to do underwriting. Go to assistedl livinginvesting.net, grab our free underwriting calculator. Um, you need to do market research. We're actually working on our annual update of our market research guide um, right now.

00:18:48
So hopefully in the next month or two, we'll have that available for you. So if you already have the launchpad, you can you'll get that that free um update um to your market research guide, which is going to be awesome. If you want to to learn more about the launchpad and get that update when it comes available, go to assistedlivinginvesting.net/launchpad. Um and you can get that. Um it's it's what I have to help you build the foundation. Okay. Um you need to do your research. You need to find ways to get

00:19:14
more beds. That could be buying bigger houses or looking at doing renovations on your home to add extra bedrooms. Uh making sure that it's within zoning and you're you're doing everything that you should be doing to to keep the house um kind of compliant uh from that standpoint to to allow for more bedrooms, but see if you can get more beds in the home. Um and you need to be charging higherend market rates. The $3,200 a month I would say is low. That that in my mind is not a market rate.

00:19:43
you should be charging higher. So, uh that that's something that I want you to be aware of. Um that those are the things that are going to allow you to succeed in this business. Make sure that you are doing your underwriting before you jump into a deal. Before you go and and find a lender and get a million-doll loan on something that you think and hope is going to work, you have to make sure the numbers are going to work. Make sure they tie out. Make sure that you are comfortable with them. Don't have

00:20:10
rose colored glasses on it. run scenarios, make sure that it really is going to work because I would hate to have you get into this, pay millions of dollars to get even hundreds of thousands of dollars to get into a home and then turn around and 6 months later you're losing tens of thousands of dollars per month. It's not worth it. Make sure you spend time upfront understanding what that looks like. Go grab the free resources going to help you out. If you have questions or you need some guidance as you're getting

00:20:38
into this, go join our ALI basics community. Um, in there you get access to me. I'm in there multiple times a day checking on chats, making sure you get answers to your questions. We do a monthly member onlyly call, uh, which we just did one last week, um, and getting all the questions answered for you, um, that that you need. You get priority answers here on our Facebook and and YouTube lives and and just a bunch of other resources. So, go check that out. It's the the least expensive way to to

00:21:04
work with me uh, directly. Uh, you can go check that out at assisted livinginvesting.net/basics. uh go check that out. Would love to to help you out, help you make some progress and and and have you join uh so I can help you get the answers that you need so you can determine, hey, is this going to work for me? What what do I need to do to get started? Uh this is the best way for you to do that. Again, assisted livinginvesting.net/basics. So, with that, I know there's a few of you here. Um if you have questions, go

00:21:32
ahead and type those in uh down below. I've got a few minutes here for for Q&A. uh would love to answer some of your questions uh as we get into this. Um while you're doing that, want to remind people to 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 out along your journey uh to launching your assisted living business. We do lives on Tuesdays. We put out content on Thursdays as well. Um and and a bunch of content on our social media feeds, our

00:21:58
blog, just all of the things. So, make sure you get inside of this ecosystem to to help you make progress as you're trying to to launch your assisted living business. It's one of my favorite things to do is helping people like you um get the answers that you need uh to help you make progress and actually launch your assisted living business. Um I did have a question inside of our um ALI basics I wanted to get to here in this recording. Um they were asking about um templates for using business plan. Uh templates

00:22:30
for creating a business plan. I have those. They are in my Launchpad bundle. Um or you can actually get it if you join ALI basics. You can go get there. It's in the the resources uh for you there. Um but in either of those spots, you can get access to my business plan template. So you can get the free business plan checklist by going to assisted livinginvesting.net/bp checklist. If you want uh to get access to the template and and how to build a business plan and and what that looks like, uh go check out the launchpad at

00:22:57
assistedlivinginvesting.net/launchpad. Um and they also asked um how do you pay your team members? So there wasn't a good clarification there. So I answered this question two ways. One is um paying your team members um you have to have money, right? So that that's number one. So how do you get the cash to to pay your team members? um you number one are going to bring residents into the facility um and you're going to get paid um by them. That's how you're going to get access to the cash if you need it

00:23:25
upfront. You're going to ask for extra operating capital from a lender uh as you get into this. The second way I took this was like how do you actually do it? Like how do you run payroll? And I use Gusto. Uh so we have a link down below. Um if you're watching on YouTube, make sure you go and grab that. Uh after you run your first payroll with Gusto, you will get a a $100 Visa gift card. to just give it to you uh if you use my link. So, make sure you go and grab that. I get something as well. I think

00:23:50
it the same thing, $100 gift card. Um so, use the link. Benefits both of us. Um Gusto is great. We've been using them for nearly 5 years now. Um and they are a great tool. Like I I just I love them. They they have great customer service. They take care of all the taxes and working with the state and and things like that. So, make sure you go and and check them out. Again, link below on on YouTube. So, go check that out if you're interested in working with Gusto. After you get after you run your first

00:24:17
payroll, you'll get a $100 gift card. So, go check that out. Um, but those were uh a couple of questions there uh that that we had inside of the community. Um, there was another one that was in an email and I don't have the email pulled up and it will take me too long to find it. Um, but hopefully that uh that helps. Um, now with that, I want to remind everybody uh you know, thank you for watching. I appreciate it. I appreciate you being here and being able to help you along your journey um

00:24:43
and and help you make progress. Make sure you go grab the free business plan checklist. Assisted living investing.net/bp checklist. Um I would love to help you out. 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. It is one of my favorite things to do. I I absolutely love it. I love it when people join my

00:25:07
programs and I can help you and give you access uh and and get you the answers that you need so you're making progress. So, make sure you go check out um some of those things 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.