Should you Invest into Senior Living Facilities?
by Christopher Levarek
“The Opportunities that everyone cannot see are the real Opportunities.”
- Jack Ma
I remember being at a meetup once and I heard someone mention their strategy was investing in senior living facilities. Now, up to that point, I’d heard of mainly either single family housing or multifamily (duplexes, quads, apartments). The idea that you could also invest into a project that was supporting seniors and those needing day to day medical assistance sounded quite foreign to me at the time. How does one even find these properties for sale, let alone manage one?
Interestingly enough, I’ve returned to this topic throughout the years and now have seen firsthand many of these assisted living investment models. If you’ve been following us for a while, you know we talk value-add multifamily weekly, if not daily. Today, we are going to look at assisted living and see whether they make good investments. Let’s dive in!
What are Senior Living Facilities?
Like it sounds, assisted living facilities or residential senior housing are communities where people aged over 55/65+ are living. These properties are seeing an influx of demand as people move out of single family residents to find community or in need of medical assistance.
Unlike, the common image of a nursing home, these newer communities and properties aim to provide a thriving place for people to connect, live and enjoy together.
There can be varying forms of senior living models but most fall into four categories :
Memory Care Homes - Residences to help those with forms of dementia live in quality care.
Assisted Living - Communities offering support and assistance to residents through daily activities, cleaning, medical assistance, etc.
Nursing Facility - More commonly known as nursing homes but necessary for extensive medical care, bathing/feeding assistance, etc.
Independent Living - Large retirement like communities for even 55+ aged residents centered around living into retirement, enjoying time off, playing golf, entertaining family and other daily activities.
Why is Demand Booming?
Senior living facilities or communities are in high demand. There is even a large shortage of these residential living spaces at present to meet this demand. So what’s driving the high demand?
There are a few reasons for the increased demand in this sector, but to put it simply, life expectancy has increased dramatically. In 1940, the average American had a life expectancy forecasted at 63 whilst in 2010, that same life expectancy rate was increased to 78 years.
It is now expected that the population of people aged 65 and over will double in the next 25 years.
Even with these forecasts however, in present day, many attribute rising demand to the “Silver Tsunami”. This term or nickname represents the retirement of all the baby boomer generation and the upcoming demand for senior housing facilities as this generation moves out of long held single family residences.
In fact, many of these baby boomer two story homes are just not worth maintaining once the kids have gone or taxes make them too costly. Perhaps, medical assistance is needed or simply some help with daily chores or as is the case many the time, a community or network of friends is desired and senior housing communities just fits the bill.
Regardless, with baby boomers age ranging between 57-75 years old in 2021, it’s expected that this demand will only increase.
So Is It a Good Investment?
Of course, it depends! It depends on you, your goals and your preferences. However, senior housing facilities represent an opportunity. The opportunity is to be on the forefront of major demand in a asset class while providing quality care for a growing population sector.
Personally, I always try to look for the growing opportunity whether in a market or an asset class. Typically I look for rent growth and population growth all representing high demand. In assisted living, this is most assuredly the case with a clear future poised for growth.
This is why Valkere Investment Group is adding an assisted living facility to our investment portfolio for 2021. Although we have long been in the multifamily space, assisted living facilities are another method of finding opportunity and too good to pass up for our partner investors. Check it out!
On a side note, not only is senior housing a massive market, it represents another asset class with differences in profitability and risk when compared to multifamily. As discussed in our investor diversification article, an investor can also diversify investments even staying solely in real estate by market regions or often by assets classes. This can be a valuable strategy to any portfolio.
Perhaps you too will choose senior housing as your next investment and ride the Silver Tsunami into the future. Either way, I wish you much success and happy investing!