Unlocking Financial Freedom: A Comprehensive Guide to Starting Your Assisted Living Business
Jun 24, 2024
Today, I'll be discussing a crucial topic for aspiring assisted living facility owners: How much does it cost to start your own assisted living business? You're in the right place if you're eager to achieve financial freedom through this venture.
Options for Starting an Assisted Living Facility
There are various approaches to kickstarting your assisted living journey, each with its financial considerations. Let's explore two primary methods: assisted living arbitrage and purchasing an existing facility.
- Assisted Living Arbitrage: A Cost-Effective Approach
Assisted living arbitrage involves renting a property and subletting the space as an assisted living facility. This method is less capital-intensive, making it an attractive option for newcomers. You could allocate $50,000 to $80,000 for initial expenses, covering rent, staff payments, and other startup costs.
However, the downside is that you won't own the real estate. If your goal is not just financial gain but also acquiring tangible assets, there might be better routes than this. Nevertheless, this approach can be a viable starting point for those eager to enter the industry. For a detailed breakdown of operating expenses, visit Assisted Living Investing and explore the free underwriting calculator.
Purchasing a Facility: A Long-Term Investment
If you want to own the real estate and build a lasting asset, consider purchasing an existing facility. While this method requires a more substantial initial investment, it provides ownership and potential long-term financial stability.
Utilizing an SBA loan can ease the financial burden. With a down payment of 10% to 20%, you could secure funding for the facility's purchase and negotiate additional capital for operating expenses. Brandon Gustafson shares his experience and insights into this process in a dedicated video.
Calculating Upfront Costs: A Practical Example
Let's break down the costs using a hypothetical scenario. If you're purchasing a $1 million facility with a 20% down payment, you'd need $200,000 upfront. By including an extra $60,000 for operating expenses in your SBA loan, your total loan amount would be $860,000. This way, you get started with $200,000 out of pocket, securing an asset and operating capital.
Choosing Your Path to Financial Freedom
Ultimately, the best approach depends on your financial situation, goals, and aspirations. Whether you opt for assisted living arbitrage or the facility purchase route, success is achievable. Brandon Gustafson's 12-week program at Assisted Living Investing offers comprehensive guidance on securing SBA loans and navigating the assisted living business landscape. Subscribe to the newsletter for weekly tips and tricks to accelerate your journey.
Conclusion
Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
Show full transcript ๐
Transcript
00:00:00
hey friend I'm Brandon Gustafson and I help new and aspiring Real Estate Investors start their Assisted Living business in today's video we're going to be talking about the different loan types that you can use to start your Assisted Living business welcome to Assisted Living [Music] investing hey friend it's Brandon gust ofon I wanted to just quickly remind you to get over to the website Assisted Living investing. net I have a ton of resources up there including our underwriting calculator which is what I
00:00:33
use to secure over $1.5 million in SBA funding so make sure you get over to the website again Assisted Living investing. net we will link that down below to get access to that free underwriting calculator now let's get into the topic of today's video we're going to be talking about what are the different funding types that you can use to start your Assisted Living business a lot of people have this question funding is one of the most difficult things that I see as I talk to people it's one of the
00:00:59
biggest barriers to letting you really start that business U because it feels hard if you're new to this you're new you're an aspiring real estate investor it's hard to just learn the ins and out and try to figure things out on how you're going to do this there are multiple ways though and I'm here to tell you you can do this so let's jump into it the first one that I teach that I really coach people because I've been able to do $1.5 million in this type of funding is SBA funding SBA stands for
00:01:28
the small business administration it is a federally backed program there's a lot of banks and Credit Unions that are certified as SBA lenders and what that means is they have worked with the government to get access to this federally funded thing and really they're protecting themselves because they're offering this funding and it is backed by the federal government by by their funds uh but they are the administrators of of this type of funding and so that that's kind of what they do so who are those SBA lenders
00:02:01
they could be National Banks they could be local banks or they could be Credit Unions I am partial to working with small local banks and Credit Unions I think they have better terms they're better customer service they're easy to work with but if you need to go up to a National Bank you could certainly do that you could work with a Chase or something like that and get access to these funds but there are a ton of SBA lenders if you're trying to find one in your area just do a simple internet
00:02:25
search and say SBA lenders in my state or in my city and it's going to come up with this huge list of banks that you can go and reach out and start contacting and the process is you talk to customer service and say Hey I want an SBA loan and they will connect you to the right department and then the conversation from there is hey I want to get an SBA loan to start an assisted living business is that something that you guys work with and from there if they say yeah give us your business plan
00:02:54
or let's look at your underwriting um that's where like my business planning guide is going to be a big help to you in in doing this cuz it's these are questions these are basic questions that all lenders are going to ask you they want to see this type of information so it's going to help you really move things along on your investment Journey so um they're going to ask you for those things and they're going to look at it and they're going to say yeah let's start the process here's the application
00:03:16
um this is what it looks like here's the paperwork um these are all the things that we need and they're going to ask for our everything taxes um bank statements business plans all sorts of things they're going to want to look at and if you're buying an existing business they want all that stuff from the seller as well so just something you want to be aware of as you get into it they're going to ask for a lot of paperwork but SBA is a great rout now with the SBA there are actually two
00:03:42
different loan products that you can look at there's the 7A loan and is the 504 and I have a video and we'll link that up above that really Dives deep into these and then in my accelerator course I really really dive deep into how those work and why each of them um might be a good option for you you um so make sure if you're interested in learning more about that get over to the website assist living investing. net to see if the accelerator course is a good fit for for you on your investment
00:04:10
Journey at this point so that's the SBA the the next one is going to be traditional mortgages and traditional mortgages are kind of what you would use to buy a house now you need to remember when you do this is not a primary residence this is a secondary or a an investment property and so it's not going to look the exact same as when you're buying a house for yourself but it's going to be pretty similar the process is going to be similar you're going to be working with banks the
00:04:35
advantage to this is nearly all banks and credit unions are willing to do something with real estate because it is such an incredible asset but when you're doing this they're likely going to be asking for more down SBA you're probably looking at 20% down when you go to the traditional mortgage you're 25 to 30% down SBA you're going to be able to get some operating Capital with that loan when you go traditional mortgage it is just for the house so those are a couple things that you want to be looking at
00:05:02
and and understand but the process itself is pretty similar you're going to want to get the house so you're going to want to do an inspection and an assessment on the house just to see how much it's it's worth and and things like that and move forward but this is another great option for you you still might need to work with the SBA to get funding for an operational loan if you don't have that money already um in the bank for you but that's okay I think you can combine those two easily enough and
00:05:27
get what you need to really start that that business now let's talk about the third option and this is hard money or private money and this is something that that people are a little bit standoffish about because it is it's new it's a new idea to them but when you get into the world of real estate investing this is actually very common typically what you'll see is you'll have interest only loan and so you will buy a house and you'll only pay interest on it for the terms of that agreement let's say it's 3
00:05:53
years and that's what the payment is you could do early payoffs typically depending on the lender they're going to ask you for an early payoff um if you do that if you go that rout but it's you know a viable option for you and then you can refinance that into more of a traditional type of a loan SBA or traditional mortgage the reason why you would want to do this is you have bad credit or you don't have the ability you just are told to no by every single bank that you have ever talked to about a
00:06:20
traditional or an SBA loan and so you go the route of private money and hard money and typically they like to be in first position um on the house which means they have lean against the property if something were to to go bad but that's not anything to be scared of either they're just more open to talking to you about it than a lender is because the lender does the exact same thing so you want to just kind of be aware that this is actually a really viable option when you're doing this you are working
00:06:46
with individuals or groups though and so you want to find good people to work with people that you can trust and people that you feel comfortable with in doing this because you are working with individuals so you don't want to just go find some somebody off the streets and do this I would recommend getting into real estate investment groups and having conversations and building out your network so you can find a good private or hard money lender that is willing to work with you typically those down
00:07:12
payments though are going to be less when you go this route so it's that's a really good thing you're going to have slight you your turns are going to just be different it depends it's structured however you negotiate it uh but typically it's a really good way to get in and get started and then shift it over to something else now they are going to want to have something that is that's more real estate Centric they probably aren't going to give you some extra money for the operating Capital so
00:07:38
that's something that you might need to come up with on your own but if you're looking at just real estate and getting something in I've talked to a ton of investors and this is an incredible strategy for them and something they found to be really successful for them as they get started on their business now if you'd like to learn a little bit more about hard money and private money comment that down below cuz if if that's something that is of interest to people I'll do some research and and maybe see
00:08:01
if I can find some lenders that could come on and talk to us a little bit about it and and help you along your journey so comment that down below um just put in private money now there's a few other options here as well for Lending that are um not quite as common but they are still great options for you to consider one would be a construction loan so if you are building a brand new home you own the land you're building something from the ground up construction loans are a great option for that and oftentimes you can
00:08:28
transition them into a traditional mortgage again this is going to be more specific to just building the house but and not operating Capital but it's a great option for you to do and typically you're going to get some good rates and terms with it um maybe even better than going the traditional mortgage route that we talked about because it's an investment property so that's one that you would want to talk to uh a person about especially if you have the land or you found somewhere with land where it's
00:08:52
a good spot for an assisted living home and the next one is going to be HUD HUD loans are incredible if you can get into them um it's great there's a lot of regulations around it so you want to be aware of that it's a federally funded program kind of like the SBA but there's more rules and complexities to it there's audits regularly um by CPS I actually used to live next to one who this is what he did he would go and audit uh with his CPA firm assisted living facilities that were on HUD loans
00:09:20
and so I I'm pretty familiar with that process but has great long-term debt for you 35e terms with really low payments and but you just have to kind of structure things a little bit different than you would see in in other situations often times they want somebody that has been operating for a period of time I was actually getting opportunities in front of me um about 6 months into my journey up front I wasn't really getting that but after having operated for a little bit I was Finding opportunities that that came up so if
00:09:51
you want to get started and grow your portfolio there's actually a really good way for you to to be able to do that is going the route of a hutum so those are just a bunch of different options for you to help you get the funding that you need to start your Assisted Living business if you found this helpful we talked about SBA Loans traditional mortgages we talked about private money we talked about uh construction loans and HUD loans if you find one of those to be interesting to you comment that
00:10:17
down below I'd love to hear what is interesting to you and if you're new to the channel subscribe uh like and ring the bell as well so you get notified every time we're doing this I know there's a ton of you out there that watch this that are not subscribed but you are watching all the videos make sure you subscribe so you get notified because I'm putting out this content on a regular basis and we're keeping it up to date and making sure that it is the most current information to help you
00:10:40
start your Assisted Living business that's what I'm here to do to help new and aspiring Real Estate Investors start their Assisted Living business I want to remind you as well to get over to the website Assisted Living investing. net you're going to be able to get access to the free underwriting calculator to help you get started um you'll also be able to look at the products that we have have there we have the business planning guide which really just kicks you off and gives you all the guidance you need
00:11:04
to underwrite and build a business plan which is what you need to get this funding in place it's absolutely crucial for you to get that and then I also have my accelerator course which is a 12we path to ownership it's going to really kind of G guide you through what I did as I was getting started on my Assisted Living Journey it's going to help you out there quite a bit I want to remind you as well that you can do this it doesn't take a lot just a little bit but persistence and step by step by step if
00:11:29
you are consistent and persistent I promise you you're going to be successful I want to thank you for watching and have a great [Music] day
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