Commercial Real Estate News / Investing / Key Factors to Consider When Investing in Senior Housing

Key Factors to Consider When Investing in Senior Housing

Published: 02-27-24 Category: Investing

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

As our society ages, more investors are taking a closer look at commercial real estate (CRE) tailored for residents nearing retirement age. This type of CRE is also described as “over 55 properties”. It's an expanding and underserved market with opportunities for investors and owners/managers.

During the next six years, the number of Americans reaching 65 years of age will continue to grow. In 2024, around 4.4 million Boomers will reach this age. Just seven years down the road (2031), all Boomers will have celebrated their 65th birthday. This means that 20% of the nation's population will have reached retirement age.

Another reason for the growing demand for over-55 housing: improved life expectancy stats.

If you're currently considering joining these investors or seeking an owner/manager opportunity within this sector, there are several steps required before you break ground on your new facility.

First, let's look at the states that offer the best lifestyles for seniors, as they may be an ideal location for your investment.

Where Are Boomers Headed?

While there are plenty of seniors headed to Florida for retirement, others are headed to other states.

After collecting data from financial and health-related sources, financial experts recently recommended these states as best for retirees:

Florida;
Colorado;
Virginia;
Delaware; and
Wyoming.

All offer attractive financial incentives to over-55s, including no estate or inheritance taxes. They also offer better health- and socially-related options.

While building within one of these states may add up to a “full house” and higher ROI, it isn't mandatory. This is because many retirees will prioritize their families and move into a community near their children and grandchildren.

Next, we'll review how senior lifestyles evolved from the “rest homes” of the post-war era to the active communities of today.

From Convalescent Homes to Independent Living

Before today's assisted living facilities became popular, housing options for retired adults were limited.

Retirement communities offered independent lifestyles similar to assisted living but minimal on-site healthcare.

Some areas, with the help of Federal agencies, created congregate public housing for seniors with limited incomes. These provided housing, meal programs, and basic cleaning services.

Today's assisted living industry offers a growing variety of housing options, amenities, activities, and services. Many feature recreational centers where residents can enjoy anything from art classes to continuing education.

Newer facilities place a bigger emphasis on fitness. Popular amenities include pools, fitness centers, tennis courts, onsite spas, and healthy meal choices.

These combined trends translate into plenty of options for investors. They may customize their project depending on their level of funding and whether they plan to manage the property. You may also opt to provide a level of medical care.

Here are details of the different levels of medical care you may be required to provide.

Will Your Retirement Property Provide Medical Services?

Over the years, definitions for several types of over-55 properties were created.

Properties such as over 55 condos and neighborhoods are described as the housing model, while assisted living properties generally follow the hospitality model because of the amenities and activities they offer residents.

Facilities that offer 24/7 medical care, including skilled nursing and rehabilitation, follow the health model.

Depending on your investment model and your state's Department of Health requirements, these may or may not apply to your retirement property:

Provision of health monitoring, medical evaluations, and assistance with prescription medications.

Coordination of home health visits.

Nursing staff to be on-site for a minimum number of hours daily.

Professional assistance with vision and mobility aids, incontinence and ostomy care, and injected medications.

When preparing your initial business plan, you may want to bring in a consultant to assist you with preparing financial estimates for medical services and staffing.

Here are other items that a business plan for an over-55 property may require.

Specialized Planning and Analysis for Retirement Properties

As most of these properties are under the jurisdiction of a state's zones, regulations, and codes, a comprehensive business plan is essential.

Your initial plan should include:

A detailed market analysis of local area demographics tied to its aging population and its needs, together with predictions of out-of-state retirees who plan to move to your state. A study of competing facilities is also essential.
A facility plan that includes the number of rooms, amenities, and services that will be provided, together with a mission statement or care philosophy. Projected staff levels and management roles can be added here.

A legal overview of the type of care you will be required to provide, together with details of local zoning and state health laws that protect seniors. Consider consulting with an attorney when completing this section.

Specialized insurance estimates that cover medical and non-medical claims.
Operation schedules that include daily protocols, safety programs, and the preparation of policies and procedures.

Other sections of your business plan should include a blueprint of your property's ongoing maintenance and safety schedule.

Why Property Maintenance Is Vital for Your Residents' Safety

A professional maintenance schedule should include daily cleaning and inspection duties, together with regular checks of all electrical and water utilities. If your facility will have medical staff onsite, their equipment and supplies will also require attention.

Maintenance should always be planned and carried out with an emphasis on your aging residents' safety. Clean floors and well-maintained walkways help prevent falls, while high standards of hygiene in communal areas help limit the spread of disease.

Hiring permanent, on-site staff to manage and/or carry out maintenance is one option; so is bringing in contractors and commercial vendors. For example, your facility's landscaping can be managed by weekly visits, while HVAC systems can be subject to monthly maintenance by a licensed specialist.

Win Commercial Projects & Outperform Your Competitors by Knowing What's Happening in Your Area

MyEListing.com provides commercial vendors looking for new projects with up-to-date market intelligence on which commercial property owners need construction work, when they need it, and where they need it.

Make finding new commercial real estate projects easier than ever with MyEListing's Vendor Client Connection Program.