As commercial real estate investors search for the next great niche market to invest in, many have chosen senior housing as their next big purchase. It is certainly not the first type of commercial property that comes to mind for beginning investors, which might be partly why those looking to distance themselves from the crowd view it as a bountiful opportunity. Senior living properties operate similar to multifamily ones, but they may not experience as many of the ups and downs that stem from vacancy rate swings and general market volatility.
This investment focuses on properties designed for a senior living business that offers independent or assisted living (inclusive of social activities, transportation etc.), memory care, or skilled nursing facilities.
By looking at both the pros and cons of senior housing properties, investors can determine whether adding this kind of real estate to their portfolio will be beneficial to their larger investment strategy.
Benefits of Investing In A Senior Living Property
Market trends suggest that senior housing will see a consistent demand in the years ahead. In 2016, 15% of people living in the United States were 65 and older. By 2030, experts predict a rise to 21% of the total population. According to a 2010 report by The Pew Research Center, 10,000 baby boomers will turn 65-years-old every single day for the next nineteen years. Currently, the senior housing market supports 22,000 properties and 2.9 million units. Only a third of the way through this cycle, there remains plenty of opportunities to take advantage of this growing market.
Demand will grow for senior living properties and if executed correctly, should provide a high return on the initial investment. The National Investment Center for the Seniors Housing & Care Industry values the senior living market at $250 billion to $270 billion.
Senior living properties might also offer more consistency than large, multifamily complexes. Most seniors are not moving from senior home to senior home. Most patrons instead take their time, do their due diligence on each home, and determine where they plan on living out their golden years. For this reason, a filled bed often stays filled in senior living properties. Even with larger economic swings, senior living facilities experience far less volatility than the traditional rental market.
Cons of Investing In A Senior Living Property
Most real estate investors do not buy senior living properties with the expectation of also running its day to day business. For this reason, one of the largest cons of senior living investment comes from a lack of autonomy and control over the operation of the facility. Many seniors and their families want high-quality facilities with the best doctors, nurses, and employees. Therefore, it is crucial to align an investment with an experienced business that will retain its clients.
Do not treat this investment as a hands-off purchase to drop into the portfolio. It will require an extensive interview process to find the right business, managers and medical professionals who will make the investment thrive. As mentioned above, most seniors are not moving from home to home. Due to this, it becomes paramount to be a senior’s first choice, rather than their third or fourth.
Although population figures suggest a growing population, they do not account for the fact that many baby boomers are not moving into homes as early as previous generations. The age for seniors that move into assisted living facilities has increased to 80-years-old and the larger baby boomer movement still won’t start for another decade. This can be a negative on the short term, as it might be harder to fill every bed. In the long term, however, investors might find a property below its marketable value, increasing its profit margin once it is a highly-demanded and sought-after enterprise.
Hunt Mortgage Group Understands The Senior Living Market
Still unsure of whether investing in a senior living property will be beneficial to your commercial portfolio? Contact the experienced lenders at Hunt Mortgage Group for more information, advice and investment strategies today!