Real estate investing in senior housing refers to investing in a physical structure where the people living in the building are over 62 years of age. These facilities offer services such as social and recreational activities, help with daily tasks like dressing and bathing, entertainment and dining options, housekeeping, and even transportation for appointments. There are commercial investment firms like Nelson Partners and others that specialize in investing in these facilities.
It’s important to note that there are two primary forms of senior housing. One is the assisted living facility, where residents are given access to skilled nursing care as needed. The other option is a retirement home, which can be either independent or assisted living, but doesn’t provide medical treatment as an ALF would.
Commercial real estate investing in senior housing may include acquiring or developing property that has long-term agreements for occupancy.
1. There is a virtually unlimited supply of potential new residents
According to the National Investment Center for Seniors Housing & Care (NIC), as of 2012, about 35 million people were living in senior housing facilities. That number is projected to increase by nearly 15 percent within a decade.
2. Obtaining financing is very straightforward
There are several financial institutions that specialize in financing commercial real estate. Your returns may be used to offset the cost of borrowing and reduce your risk profile because you’re diversifying your portfolio by investing in various properties.
3. Real estate investment usually provides great returns
As with any real estate investment, senior housing investments can have a high cap rate since senior housing facilities have low operating expenses.
Strategies for Beginning Investors
If you’re a beginner at real estate investing, keep in mind that senior housing properties typically have a multi-decade tenancy. This means that more of your return will come from the appreciation of the property than it would with other types of commercial real estate investments.
Many investors have achieved excellent returns by investing in facilities for senior citizens located throughout the United States. The number of people in the U.S. aged 65 or older is expected to grow 70 percent by 2030, according to the NIC, which makes investing in senior housing facilities a wise long-term decision for your portfolio.
Getting started in commercial real estate investing in senior housing can be intimidating, but if you follow these steps, you’ll have a good chance of succeeding.
- Determine how much money you can afford to invest – Do your research and select a few properties that meet your criteria, then focus on the ones that offer the best returns for your investment amount. This helps mitigate risk since it’s unlikely that all of your investments will fail at once, provided you research each property carefully.
- Determine how much risk you can handle – Since senior housing facilities offer guaranteed returns, they don’t pose as high of a risk as other types of investments. They shouldn’t be higher than 10 percent of your portfolio at any given time. This means that $1,000 may be the most money you want to invest in senior housing properties at once, but it’s up to you.
- Obtain your funding – Some investors begin by investing their own money. Others use the help of friends and family members to invest alongside them. Commercial real estate is an excellent way to generate passive income for yourself and your loved ones, so talk to those close to you about investing.