By: Doug Fullaway
What is Senior Living?
- Age Restricted Apartments: Just like a standard apartment but you must be at least 55 years of age to live there.
- Independent Living Facilities (ILFs): Similar to age restricted or senior apartments, but offer several additional services, such as meals, housekeeping, transportation and organized group activities.
- Assisted Living Facilities (ALFs): Need assistance with daily activities, but do not require nursing home care. A cost-efficient alternative because they primarily provide non-medically intensive support activities.
- Skilled Nursing Facilities (SNFs): Hospital-like in nature. Highly regulated requiring state licenses. Medicare and Medicaid programs cover a large portion of these expenses.
The Senior Living Market
Between 2015 and 2030 the population of those 75 years of age or older is expected to grow by 14.5 million as the baby boomers age.
Equilibrium in market growth for senior living construction based on those calculations is approximately 50,000 units per year. As of Q3 2016, the rate of new construction in this space has slowed to approximately 35,000 units per year.
- Revenue/resident/day is almost 2x in assisted living as compared to independent living.
- Gross margins are highest in independent living (47%) compared to (31%) in assisted living.
- Labor costs as a percent of revenue are lowest for independent living (17%) compared to (39%) in assisted living.
- NOI is highest on a percent of revenue basis for independent living (47%) compared to assisted living (31%).
Assisted living is regulated by each of the 50 states separately. Some of the things that are regulated include:
- The temperature of bath water
- The number of days between a reassessment of the needs of a senior
- The hours of training of the staff
- The license held by the nurse
- The temperature of the food
- The number of fire drills held
- The reporting of major accidents
- The documentation of the services delivered
- The conditions under which a resident may be asked to move out
- The building code to ensure resident safety
- And more, MUCH more!
Senior Living Locator Service
Someone for the family or the senior to call to find a potential place to live and walk them through the process.
This is the best ROI of any product/service offered in senior living.
Having a human being answer 24/7 with someone who really understands what is going on drives u tours by 30 to 40%.
The 75+ year old population in the US is expected to grow by 14.5 million by 2030.
This book was written in late 2016. At that time, the senior living market needed 50,000 new units per year with demand growing to an additional 80,000 units per year by 2020.
Demand is growing and we aren’t building enough supply to house our older population.
Looking at all of the senior living types, the revenues are highest in the skilled nursing facilities, while the profit margins are largest in the age restricted. What drives this is the large amount of skilled labor needed in the assisted living facilities. The cost of that labor will continue to increase.
The added risk in age restricted apartments is that they are privately paid, while the government pays a substantial sum of the revenues in the various assisted living facilities. There are, unfortunately, trade-offs to government provided money. The regulations for the assisted living facilities are numerous and will continue to grow.
Where there is unmet need, there is opportunity. There are different risks and benefits to each of the senior living types. Just pick one and become an expert.