2024 Costs to Start an Assisted Living Business: A Complete Guide
Aug 12, 2024
This blog will discuss the costs of opening an assisted living business in 2024 and beyond. Starting an assisted living business is a substantial enterprise with financial advantages and the potential to influence the lives of seniors and their families meaningfully. However, determining the expenses is one of the most important components of this journey. From initial setup to ongoing operational expenses, understanding the financial situation can help you plan successfully and avoid surprises.
This comprehensive guide will break down the numerous costs associated with launching an assisted living business. Whether you want to develop a new facility from the ground up, buy an existing property, or convert a residential home into an assisted living facility, this blog will offer you essential information to help you make informed decisions.
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Funding Options and Initial Costs
The cost of establishing an assisted living business is mostly determined by your financing method. An SBA loan is a popular alternative, typically demanding a 10-20% down payment. In my experience, it has been around 17-18%. Another alternative is a standard mortgage, which often requires a 25-30% down payment on investment homes. Hard money loans may require a 0-10% down payment, depending on whether the loan is secured by an asset. You may also consider partnering with someone who has the funds, which will allow you to invest with little to no money down instead of relying on sweat equity.
Cost Breakdown
To help you understand, let's use a $1 million property as an example. An SBA loan requires a 20% down payment, which equates to $200,000. A standard mortgage requires a 30% down payment of $300,000. A hard money loan requires a 5% down payment of $50,000. If you form a partnership and contribute sweat equity, your initial investment might be $0. For a more inexpensive house, say $750,000, a conventional mortgage requires a 30% down payment of $225,000, whereas an SBA loan just a 20% down payment of $150,000.
Considerations for Existing Facilities vs. New Conversions
When purchasing an existing facility, the cost comprises both the real estate and the business, frequently resulting in a larger initial investment. However, transforming a residential property into an assisted living facility might result in large renovation and start-up costs.
Building Relationships with Lenders
Engaging with different lenders—SBA, local banks, and credit unions—is crucial to understanding their lending programs. Creating a solid business plan and underwriting will increase your confidence and chances of receiving money.
Overcoming Rejection
Expect to face rejections along the way. Persistence is key; different lenders have varying criteria, so keep reaching out until you find one willing to work with you.
To recap, starting an assisted living business in 2024 requires a significant investment, typically ranging from $0 to $350,000, depending on your funding method and property cost. Whether you're purchasing an existing facility or converting a home, thorough planning and lender relationships are essential.
Does residential assisted living interest you, but you're unsure how to begin? Grab our free underwriting calculator, which provides detailed insights into the costs of starting an assisted living business. Additionally, consider applying to the Assisted Living Investing Mastermind program. This comprehensive 12-month course is designed to guide you step-by-step toward owning and operating your own assisted living facility. With the added benefit of personalized coaching support, the program ensures you have the resources and guidance needed to succeed in this rewarding industry.
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