Real Estate Investing Opportunities in Assisted Living

The aging of one of the nation’s largest generations – the baby boomers – is a potential investment opportunity that has been on the radar of astute real estate investors for years.

The first children of the boomer generation (defined as post-World War II babies born between 1946 and 1964) began turning age 65 in 2011. According to a December 2010 report released by The Pew Research Center, boomers numbered 79 million, accounting for 26 percent of the U.S. population. Beginning in January 2011, the report estimates that about 10,000 boomers would be turning 65 every day for the next 19 years.

For investors who want a piece of the action in the large, institutional nursing and assisted living business models, they can participate as passive investors, buying shares in the many real estate investment trusts that specialize in multimillion-dollar health care facilities.

However, when it comes to the average real estate investor, who is used to either flipping homes or buying rental properties one at a time, there are much lower-cost alternatives that can deliver positive cash flow but stay in the comfort zone of their current business model.

Veteran real estate investor and certified financial planner Gene Guarino specializes in that smaller space: assisted living facilities, or ALFs.

From a business perspective, investors need to understand that they don’t have to wait for the boomers. They can buy and own a senior care facility now and be ready to service the boomer generation down the road.

“Most people would say, ‘I’m going to buy a nursing home.’ That’s a $20 million project,” says Guarino, president of the Assisted Living Facility Training Academy in Phoenix. “Most people can’t even picture themselves getting into this. But when you bring it down to the single-family home level, everybody can picture doing that. It’s about location, but it’s also about cash flow.”

To him, the ALF business model is much more attractive than a single-family rental for a number of reasons, especially the fact that the investor is meeting the housing needs of aging seniors while collecting rent from multiple residents in the same property.

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