Quick & Easy Underwriting with My Calculator: Part 2 Guide
Oct 09, 2024
Welcome back! In Part 1, we talked about the basics of underwriting and how to use our calculator. Now, let's dive deeper into how this tool can help you figure out if an assisted living business is profitable.
Why Underwriting Matters in Assisted Living
When you're thinking about buying an assisted living facility, you need to know if it's going to make money. That's where underwriting comes in. It's like doing homework on the business to see if it's a good investment.
Our calculator helps you do this homework quickly and easily. It breaks down all the numbers so you can see if the business is healthy and if it can make money in the future.
Check out the video too:
Important Terms to Know
Before we jump into the calculator, let's learn some key terms:
- Profit and Loss (P&L): This is a report that shows how much money the business made and spent.
- Non-Disclosure Agreement (NDA): This is a promise not to share secret information about the business.
- Add Backs: These are costs that you might not have to pay when you run the business.
- General Partner (GP) and Limited Partner (LP): These are different types of investors in the business.
- Rent Roll: This is a list of all the residents and how much they pay.
Using the Calculator: A Closer Look
Now, let's explore the main parts of our underwriting calculator:
Past Financials Tab
This is where you put in the money info from the past few years. Here's what you do:
- Enter all the money the business made.
- Enter all the costs of running the business.
- The calculator will then show you important numbers like how much profit the business made.
Expense Tab
This tab helps you figure out future costs. Here's how to use it:
- Copy over the costs from the Past Financials tab.
- Add any new costs you think you'll have.
- Take out any costs you don't need
- Make sure to include some extra money for unexpected repairs.
Summary and Ratios
This part of the calculator gives you a quick look at how healthy the business is. It shows you things like:
- How much profit the business makes compared to how much money it brings in.
- How much it costs to run the business compared to how much money it makes.
- How much it costs to pay employees compared to other expenses.
These numbers can help you decide if the assisted living business is a good investment.
Real-Life Example
Let's say you're looking at an assisted living facility that made $500,000 last year. The expenses were $400,000. The calculator would show you that the profit was $100,000.
But what if you think you can increase the income to $550,000 and keep the expenses the same? The calculator would show you that your profit could be $150,000. This helps you see how changes you make could affect the business.
Wrapping It Up
Underwriting might sound complicated, but our calculator makes it much easier. It helps you understand all the numbers behind an assisted living business. This way, you can make smart decisions about whether to invest or not.
Remember, good underwriting is key to finding out if assisted living is profitable. It helps you spot good deals and avoid bad ones.
Ready to take the next step in your assisted living investment journey? We've got two great resources for you:
- Download our free Assisted Living Business Plan Checklist. It'll help you create a solid business plan as you start your investing journey.
- Want more hands-on help? Apply to join our Assisted Living Investing Mastermind program. We'll guide you through everything from creating your business plan to finding the right property and getting your facility license.
With these tools and our underwriting calculator, you'll be well-equipped to make smart investment decisions in the assisted living industry.
Happy investing!
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