Top 5 Business Expenses for Your Assisted Living Facility

assisted living business expenses assisted living debt service assisted living insurance expenses assisted living utilities residential assisted living budget staffing costs for assisted living starting an assisted living facility Feb 27, 2025

Starting an assisted living facility can be both fulfilling and profitable. But let’s be honest—it also comes with a serious financial commitment. Planning and budgeting for the major costs from day one is key to setting up a successful assisted living business.

In this post, we’ll break down the five biggest expenses you’ll likely encounter in the assisted living industry. Knowing what to expect can help you create a solid financial plan, avoid unexpected costs, and keep your business on track.

Check out the video, too:

1. Staffing: The Heart of Your Facility

When it comes to expenses, staffing is going to be your biggest ongoing cost. In the assisted living business, the quality of care depends on your team. You’ll need reliable, compassionate, and skilled staff members who can provide top-notch care to your residents. But finding and keeping good employees means offering competitive pay and possibly benefits, which adds up.

For most assisted living facilities, staffing costs can take up around 35–60% of the operating budget. Beyond wages, you also need to budget for payroll taxes, workers’ compensation, and other benefits. To avoid high turnover, plan for these expenses upfront and consider offering shifts that reduce burnout. It may impact your initial income, but it’s well worth the investment to keep residents happy and staff motivated.

2. Debt Service: Paying Off Loans

If you took out a loan to get your facility up and running, loan repayment, or debt service, will be another significant expense. Whether it’s seller financing or a bank loan, you’ll need to budget for regular payments, which can account for around 10–13% of your overall expenses. For example, Small Business Administration (SBA) loans often have adjustable interest rates, which means your payments can change over time.

With recent rate increases impacting operating budgets across the industry, it’s smart to keep an eye on your loan terms and adjust your budget as needed.

3. Insurance: Protecting Your Investment

Insurance is a must to protect both your business and your residents. Expect to purchase several types of policies, including liability, property, and workers’ compensation insurance. Most states and lenders require these policies, so they’re not optional, and they generally account for about 6-10% of your operating expenses.

Initially, insurance premiums may be higher, as new businesses often pay more without an established track record. As your facility builds a reputation for safe, quality care, your premiums might lower over time. Working with an experienced insurance broker can help you find the best coverage at competitive rates.

4. Groceries: Nourishing Your Residents

Providing healthy and tasty meals is essential to keep your residents happy and well. For many facilities, food expenses make up about 5–10% of the budget. To meet state regulations and your residents’ needs, you’ll need a well-stocked pantry at all times.

Food costs can vary based on factors like seasonal price changes or residents’ dietary preferences. So, it’s wise to plan for these fluctuations and regularly review your food budget to keep things running smoothly.

5. Utilities: Keeping the Lights On

Utilities are another substantial cost to account for. Your facility will need to cover the basics—electricity, gas, water, and internet. These essentials generally account for 5–7% of your budget. It’s wise to reach out to your utility providers and see if you can arrange a balanced payment plan to help manage seasonal spikes in usage.

Your residents rely on utilities for everything from staying warm to entertainment, so maintaining a steady supply is critical. Uninterrupted service keeps your facility comfortable and safe for residents.

Planning for Success

Together, staffing, debt service, insurance, groceries, and utilities make up around 75-90% of your operating budget. Knowing these major expenses ahead of time allows you to set up a realistic, workable budget for your facility. Remember, these are just the big-ticket items; other smaller costs will come up too. But if you start with a strong foundation, you’ll be ready to create and grow a successful assisted living business.

Ready to take the next steps?

For those of you just starting your assisted living investment journey, don't forget to check out our free Business Plan Checklist to ensure you have a comprehensive plan in place as you get started on your journey. Additionally, apply to our Assisted Living Investing Mastermind program to learn more about building a business plan, finding the property, securing funding, obtaining a license, and scaling your business.

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