\n<\/p>\n
Assisted living investing<\/strong><\/a> isn\u2019t your typical type of rental property investing. When someone thinks \u201cI want to get rich in real estate,\u201d they\u2019re often not considering setting up a home for seniors, those in medical decline, or medical patients. Investors almost prematurely dismiss any idea of RAL homes (residential assisted living) <\/strong>if they have no medical background and no personal need to do it themselves. This can become a costly mistake, especially when the evidence adds up on why assisted living could be the most <\/strong>recession-proof real estate<\/strong><\/a> investment out there<\/strong>.<\/p>\n Isabelle Guarino-Smith<\/strong> is one of the investors that decided to go down this path. Without any medical experience of her own, she led her family business to become a successful assisted living brand throughout the state of Arizona<\/strong>. When her grandmother needed care many states away, Isabelle\u2019s father realized that building not only a better facility, but a more profitable portfolio, was a smart move to make. And this risk has paid off significantly, as Isabelle now takes home a five-figure monthly <\/strong>cash flow<\/strong><\/a> from each of these properties<\/strong>.<\/p>\n She knows that the \u201csilver tsunami<\/strong>\u201d is coming in quickly and that capitalizing on this niche<\/strong> now could mean even great profits in the future. But, this isn\u2019t all about the money for Isabelle and her team. She\u2019s seen how much better care seniors can get in smaller facilities<\/strong> and that this type of investment doesn\u2019t just pay itself back in profits, but in knowing that you\u2019re making a difference in the lives of those who need it most.<\/p>\n David: Isabelle: David: Rob: David: Rob: David: Isabelle: David: Isabelle: Rob: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: David: Rob: David: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: Rob: Isabelle: David: Isabelle: Rob: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: Rob: Isabelle: Rob: David: Rob: David: Rob: David: Rob: David: Isabelle: David: Isabelle: David: Isabelle: Rob: Isabelle: Rob: Isabelle: David: Isabelle: Rob: Isabelle: David: Rob: Isabelle: Rob: Isabelle: Rob: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: Rob: Isabelle: Rob: Isabelle: David: Rob: David: Isabelle: David: Rob: Isabelle: David: Isabelle: David: Isabelle: David: Rob: David: Rob: David: Rob: Isabelle: David: Isabelle: Rob: Isabelle: Rob: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: David: Isabelle: Rob: David: Rob: Isabelle: Rob: Isabelle: David: Speaker 4: David: Isabelle: David: Isabelle: David: Isabelle: David: Rob: David: Rob: Isabelle: Rob: Isabelle: Rob: Isabelle: David: Isabelle: David: Rob: Isabelle: David: Rob: David: Rob: David: \u00a0<\/p>\n \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/em>sponsor page<\/em><\/a>!<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets Podcast show, 671.<\/p>\n
Nothing is recession proof, but this is probably as recession resistant as you could get. Because when money gets tight, you know what you pull back on is those high end items, that Euro vacation, that Disney trip with the kids. You stop going to Airbnbs. You stop buying nice items, but you\u2019re not going to stop paying for your loved one\u2019s care. You just don\u2019t do that. This is probably as recession resistant as you can get.<\/p>\n
What\u2019s going on there, BiggerPockets listeners? This is David Greene, your host of the BiggerPockets Real Estate Podcast here today with my co-host, Rob, the STR specialist, Abasolo. We\u2019ve got a great episode for you today. We are interviewing Isabelle Guarino, one of the industry experts in residential assisted living facilities. This is a new strategy of investing in real estate that is relatively unknown and not talked about very often, and we bring you a ton of information that would help you decide is this an investment strategy that you should get into? Isabelle\u2019s family is one of the premier experts in this space and she does not disappoint. One of the things that we should highlight about today\u2019s show is this is a strategy that becomes a hybrid of business with real estate. We see in the industry this is becoming more and more popular.
Short-term rentals are actually a good example of this. You\u2019re not just buying a house, you are running a business and the real estate becomes a part of that business. This is similar to cattle ranchers. A lot of people don\u2019t realize a lot of cattle ranchers don\u2019t make a ton of money on the actual cattle, but they usually do on the land. I think in the future, we\u2019re headed towards a world where real estate and business are more closely tied together. The real estate element supercharges the business. It\u2019s becoming a little less passive, but you\u2019re able to make a lot more money. My personal opinion, this is a great strategy if you are in the healthcare industry, you know someone in the healthcare industry, your family works in there, your spouse works in there, and you want to get out of that W2 world and into real estate, but you\u2019re not sure how. Rob, what are some of your thoughts?<\/p>\n
Oh man, this is a good one. I remember listening to this show long time ago, and we brought in someone else in this niche and I was just so fascinated, I don\u2019t know, by the asset class of residential assisted living. I just remember at the end of that episode, I was like, \u201cOh, there\u2019s so many questions that I wish they would\u2019ve asked,\u201d because I was just so fascinated. Today, I ask all those questions. I ask all the questions and things to consider and caveats, and I\u2019m still really fascinated by this. I\u2019m very entrepreneurial. Wheels are always turning when I really start uncovering new business models. One thing to keep in mind, not necessarily the most passive way to get into real estate. It\u2019s very hands-on. But if you\u2019re entrepreneurial, if you like hiring staff and building out systems, and like David said, if you\u2019re in the healthcare industry, I think it\u2019s going to be a good one. I think you\u2019d be real fascinated and very curious as to what Isabelle has to say.<\/p>\n
If you just heard us talk about this but weren\u2019t really sure what this phrase meant, after today\u2019s episode, you will know at a very good level exactly what goes into a residential system, living facility, and if this is the right option for you. Before we bring in Isabelle, today\u2019s quick tip is real estate is different in the ways that it works, and it\u2019s a great way to play to your strengths. Different asset classes work for different personalities or level of resourcefulness, so don\u2019t try to follow somebody else\u2019s blueprint. What works for Brandon, what works for David, what works for Rob, don\u2019t just copy and paste what you see from us. Ask yourself, \u201cWhat are my personal strengths? What are the competitive advantages I have, and which asset class works best for what I\u2019ve got?\u201d Build your portfolio that way and you will like it a lot more. Our guest today, Isabelle, mentions that if it\u2019s not a hell yes, it should be a no. I think this applies really good into the type of real estate that you invest in. Rob, anything before we bring in Isabelle?<\/p>\n
This is a good one. Like I said, we ask a lot of questions and I think by the end of it, you\u2019re going to have a very clear picture on what this asset class has to offer.<\/p>\n
All right. Isabelle, welcome to the BiggerPockets Podcast. Tell me a little bit about how your family and you got started in real estate.<\/p>\n
Yeah. For me, it really started with my dad. He was a real estate investor his whole life for 40 years since he was 18 years old. He was in this industry and his mom, so my grandmother fell, broke her hip and the doctor said, \u201cHey, she needs 24\/7 care.\u201d She was living in Upstate New York. We were in Phoenix and it was just like, \u201cOkay. What do you do?\u201d Whether you have or haven\u2019t dealt with this, at some point, you will, a loved one needing care and assistance, and especially if you are the wealthy one in your family, this is a big reality that a lot of times they\u2019re calling you to say, \u201cWhat\u2019s going to happen? Where do we put mom or dad?\u201d At that time, we flew up to Upstate New York to look for something suitable for her. Everything was disgusting. Everything was super expensive.
The things that were decent had a long waiting list, it was just insane. We went back to Phoenix thinking, \u201cThere\u2019s a lot of old people here. There has to be something more,\u201d and stumbled into residential assisted living. My dad saw an existing property and he was touring for his own mom, but did quick math, \u201cWait, I\u2019m going to be paying five grand a month for her to live here, or I could own this property, own this business, be cash flowing 10 grand a month.\u201d He literally pulled the owner aside and was just like, \u201cHey, can I buy this? I want to buy the real estate. I want to buy the business.\u201d He got up and running right into it. Over the next coming years, we purchased two other single family homes that we converted into this, and I really just saw what he was doing and saw the changes it had made in his life.
I was a flight attendant at the time when he did this and I was like, \u201cWhat are you doing? What\u2019s going on? Why are you working with old people?\u201d I just kept asking more and more and pushing my way in and became his first employee. We grew to eight companies, three homes and 50 employees since then and had so much fun. My dad passed last year, so I\u2019ve taken over everything from there, but it\u2019s been the biggest blessing being left with three cash flowing businesses. Now, I want to give that to as many real estate investors and entrepreneurs as I can, that legacy.<\/p>\n
Okay. You own three of these facilities yourself?<\/p>\n
Yes.<\/p>\n
With being a flight attendant, that\u2019s a really awesome job. You get to fly anywhere you want if you have the right airline. It\u2019s fun. I\u2019m sure you\u2019re dealing with things, so obviously it\u2019s very secure as well. What was that like for you? Because you\u2019re doing that and then you\u2019re like, \u201cAll right. Maybe I\u2019ll do this residential assisted living thing.\u201d When did you actually jump from the stable job to going into real estate, which in a lot of people\u2019s eyes isn\u2019t really quite so stable?<\/p>\n
It\u2019s really interesting because growing up with a dad who was a real estate investor, I watched him go through ups and downs, but I just never had that fear. He never gave us that fear because many people listening who are real estate investors and entrepreneurs know that, the example you\u2019re leaving for your kids, it\u2019s like the Rich Dad Poor Dad book. I grew up with that mentality of a dad who was the rich dad basically saying, \u201cI\u2019m going to get through this. I\u2019m going to make it work. It doesn\u2019t matter what happens. We\u2019re going to make it go forward and have it be a really good thing.\u201d I was never fearful of entrepreneurship or owning and operating any businesses or being in real estate. I saw it as a great way to cash flow and make an impact on your community. I will say being a flight attendant is a pretty sick job.
It is so much fun except for the fact that you basically make nothing. At some point, I turned and looked at my dad and I\u2019m like, \u201cYou\u2019re making a lot of money. What are you doing? I want to follow suit with that.\u201d I think not only did the cash flow drive me to it, but honestly, I was on a missions trip out in Jamaica and I saw a retirement community out there and it broke me to see the conditions in other countries, what\u2019s happening with assisted living and I came back and I knew what my dad was doing, but his homes were upscale, luxury, gorgeous. When I saw how terrible the conditions were, I was like, \u201cWe have to do something.\u201d I actually really wanted to get involved to not only make more money for myself as a younger person getting involved in their career and starting their life, but also to be able to give back to other assisted living communities across the whole world because this is just a massive need that we\u2019re going to start seeing more and more.<\/p>\n
My understanding is there\u2019s several different levels of care. An assisted living facility in general is a place where typically older people are going to go that need in-home care, maybe the family is functioning as the caretaker and it puts a big strain on them or it\u2019s too expensive to stay at a hospital all the time, so you have to have some way to take the pressure off of the family, but there\u2019s different levels of care. Some people need a little bit of oversight, then there\u2019s like memory care. Can you break down how that framework works and then how much energy and attention has to go into the different levels?<\/p>\n
Yes. Okay. The lowest level would be independent living, which think Golden Girls. Right? For mature women living in a home, they need minor help with landscaping, changing a light bulb. It\u2019s really light. They\u2019re really just paying you rent, plus a little bit for you to basically be a property manager who swings by and make sure, \u201cIs everything okay?\u201d<\/p>\n
Would you be dropping off groceries, stuff like that or no?<\/p>\n
I\u2019ve never seen those homes run in a way that cash flows, so I don\u2019t pay attention to that market because it\u2019s just something that\u2026 You know what I mean? Maybe you do it for your own parents because it\u2019s like, \u201cOh, let\u2019s throw them all in a home and we\u2019ll help a little bit.\u201d Right?<\/p>\n
Would this be more when you see\u2026 It almost seems like an apartment complex, 200 units of older folks that are staying there, an old folks home is what we might call it. That\u2019s what you\u2019re describing?<\/p>\n
Yes. Independent living. They still have the salsa classes. They still have the pickle ball court, the pool, all that, because they\u2019re still\u2026 That\u2019s probably age 65 upwards to 85, but it\u2019s like you don\u2019t have to be that old to be there. That\u2019s independent living. You just need a little bit help.<\/p>\n
You can take care of yourself, but you need oversight. You need someone on site in case someone does fall and gets hurt.<\/p>\n
Yes.<\/p>\n
But mostly, you\u2019re providing amenities that make it a fun place for a senior person to live.<\/p>\n
David\u2019s really interested in this model because he actually owns all the box to The Golden Girls from the TV series. Hopefully, we can unlock this for you, David.<\/p>\n
Huge Golden Girls fan. Nobody knows that.<\/p>\n
It\u2019s a great show. It\u2019s a classic.<\/p>\n
Thank you for being a friend. Okay. What\u2019s the next level?<\/p>\n
Okay. Next level would be assisted living. That\u2019s what we\u2019re focused on. By the time you need this, you typically need help with three to five activities of daily living. In the industry, we call it ADLs. Right? That\u2019s everything you do from the moment you get up out of bed to the moment you go to bed at night, including getting out of bed, walking, bathing, showering, eating, taking medication, brushing your hair and teeth. You need help at this point. Most seniors move in when they need help with three to five. Some need seven, right? Some need three. That\u2019s where you\u2019re talking about the level of care ranging. Every person within your home might be paying a different rate to live there based on their level of care.
If they\u2019re a high level of care, they\u2019re paying more and if they\u2019re low, they\u2019re paying less. Assisted living, we can take care of a lot of different issues. Honestly, most people, they only live in assisted living. They don\u2019t increase to the next level, which would be a nursing home. Right? Doctors, gurneys, IVs, medical attention is needed at that point. Very expensive. A skilled nursing facility, a sniff, they call it in the industry. Both of those are\u2026 That\u2019s like the highest form of care, but in assisted living, that\u2019s what we focus on, that middle one.<\/p>\n
If I understand you correctly, you\u2019ve got the basic level, which is what you called independent living. This is more providing amenities. This is the shuffle board court, the salsa dancing, perhaps a van that might take them from the place to go shopping and bring them back because they don\u2019t want to have to drive?<\/p>\n
Bingo.<\/p>\n
Then, you\u2019ve got the middle ground, which you\u2019re saying there\u2019s various levels of care. They might need help getting out bed. They might need help bathing. Maybe they don\u2019t, but they need someone to drop off food or make sure they take their medicine, something in between. Those residents will have vary levels of care and maybe the facility classifies them and then lets the nursing staff know, \u201cThis is how you take care of him.\u201d Then, the last here, which you said like\u2026 Was it a nursing home that you said? It\u2019s almost like a hospital brought into a house.<\/p>\n
Not even in a house. I don\u2019t think you can have nursing care in a house. It\u2019s basically a hospital like setting because there needs to be doctors and nurses on call at all times. Basically, this person, it is very end of life by that point.<\/p>\n
Is that something that people can own a property and operate out of the nursing level of care?<\/p>\n
Not that I\u2019m aware of because the licensing would probably need to be so great that\u2026 Also, I don\u2019t know how many doctors would be down to just go to a home that only has six to 10 residents. Typically, those are big facilities that are very, very medical feeling.<\/p>\n
Okay. If we\u2019re talking about residential real estate, you\u2019ve pretty much just got the first two options that you\u2019re choosing between?<\/p>\n
First two options and I only focus on the middle option.<\/p>\n
I\u2019m curious. On the scaling side on that middle option, is that a lot tougher to scale than that first tier given the amount of customizations with each different patient?<\/p>\n
Interesting question. When we talk about residential assisted living, right? It\u2019s not a commercial facility, it\u2019s a single family home being used for this, scaling is a bit difficult because 80% of this industry is currently run mom and pop style, meaning the person who owns it might also live in it, might also take care of the residents themselves. It\u2019s very mom and pop. When we came into this industry, we said, \u201cThis isn\u2019t going to work. Let\u2019s run it as professional owners, so that we can scale.\u201d We really took the real estate play of it to the next level because everyone else was just focused on having one or two homes and not doing much or I will say some of our people that I work with, they want to have 50 or 100 of these, package them up and sell them to the hedge funds. That\u2019s not my personal goal, but that is a way that you could scale and exit this for sure.<\/p>\n
All right. One of the benefits of this is that it\u2019s a little less on the passive side. This isn\u2019t investing in real estate like most people get used to hearing. You are running a business. However, as cashflow becomes harder to find, as yields become smaller, more and more people are understanding that real estate is less passive income and is becoming a form of active income. Rob, you\u2019re familiar with this because running an Airbnb is much more work than buying a duplex and letting a property manager handle it. What are some things that people need to be aware of if they say, \u201cHey, this sounds good.\u201d Well, maybe let\u2019s take a step back. What are some of the numbers that someone can expect to make per rent and then what are some of the expenses that they should expect to have to pay? Because you\u2019re providing a lot more service than typical just real estate.<\/p>\n
100%. The national average to live in one of these homes is $4,500 per month per person. Now, there\u2019s a website, genworth.com\/costofcare. When you go there, you can type in the area where you live or your loved one lives and it will show you how much the national average in your area is. This cost has gone up 79% over the last 10 years and with the silver tsunami coming, it\u2019s going to keep going up hardcore. We are currently 1.3 million beds short and the silent generation is who\u2019s living in assisted living. There\u2019s only 46 million of them. The baby boomers, 76 million of them. If we\u2019re already that short, this is about to skyrocket in cost of care.
What people are paying to live in these homes, let\u2019s just call it $4,500 is our national average. Every state varies greatly. DC is the most expensive at average rates of $6,978 per person per month. I should also say this. Average assisted livings, I don\u2019t want to leave my goldfish, let alone my mom. They are typically disgusting. They smell bad. The food is not good. The quality of care is not good. I really only like to do upscale, high end luxury assisted livings focusing on private pay or long term care insurance residents, not government funding, not Medicare, Medicaid. I want to go after that higher end market, not the tippy, tippy top, but the people who are making more money and willing to pay for the best of the best.
Within these homes, if you had 10 residents paying five grand a month, right? A little bit above average, you\u2019re bringing in 50K a month, your expenses, I know you asked about that. Expenses are high in this industry because you\u2019re paying for 24\/7 staff, caregivers and administrator. You\u2019re doing food for them, activities for them, all the regular house bills, plus your licensing and all these different things. Your expenses on that home that has 10 people might be running around 30K a month and then if your debt service, your mortgage is maybe like 5K a month, that means that home\u2019s bringing in anywhere between 10 and 15 grand a month to you, the owner. It definitely is a more active investment, more along the lines of Airbnb. This is not set it and forget it, but I like to show people how to be as hands off as possible.<\/p>\n
Is there a reason? Because this seems like a high\u2026 Cash flow wise, this is great. Is there a pros or cons of pursuing residential assisted living versus just going to traditional rental route or is it just like a preference type of thing?<\/p>\n
I think for me, it\u2019s a lot of intrinsic pros. You could literally have your loved one live for free. If you have a parent, a grandparent who is going to need assisted living care and you don\u2019t want to be paying for it, they could live in your home for free and you are still cash flowing. Right? We know that the supply and demand is off based on those numbers I just shared and it\u2019s only going to get crazier and crazier. If you\u2019re looking, nothing is recession proof, but this is probably as recession resistant as you could get because when money gets tight, you know what you pull back on is those high end items, that Euro vacation, that Disney trip with the kids. You stop going to Airbnbs. You stop buying nice items, but you\u2019re not going to stop paying for your loved one\u2019s care. You just don\u2019t do that.
This is probably as recession resistant as you can get because we know the supply and demand, because we know what\u2019s coming and if you\u2019re going after that higher end clientele, you\u2019re not dealing with as much riffraff. Also, providing a home for yourself. Right? Supply and demand, leaving a legacy for your own children, a cash flowing business. I always say like money in the bank is cool, a trust fund is cool, but the fact that you\u2019re changing lives, communities lives, these seniors get so much better care in these smaller homes than in the big box facilities. It is night and day. The caregivers as well. When you\u2019re a medical professional and you go into an industry, you go into it because you have a big heart. You want to care for people and then you get thrown into a big box facility where you\u2019re taking care of 15 to one, that\u2019s not okay. There\u2019s no ability for them to even be that good caregiver. Providing jobs and just making such a big impact is really what draws me to this and makes me say, \u201cThis is worth it. The extra effort\u2019s worth it.\u201d<\/p>\n
You make a really good point that you\u2019re going to be getting better care, but that is going to come at a price. The caretaker that is providing that care has to be managed by the owner if it\u2019s an owner operator of this deal. We have a couple clients that we\u2019ve helped in the Bay Area, literally buying these deals. I go through the MLS. I find one that will work and then we go through the process of getting it licensed. There\u2019s a lot of different ways you have to adapt the house. You need handicap access, fire sprinklers. There\u2019s a huge list of regulations. This is a highly regulated industry. The people that I\u2019ve seen do the best at it are the people that already work in the caretaker space. They\u2019re typically working for someone else or in the healthcare industry and then they combine it with house hacking.
That, to me, is brilliant. They\u2019re getting in and they\u2019re buying a house where they normally would be paying five or $6,000 a month to live in the Bay Area and they\u2019re actually making money because they run the facility out of their own house. I think that\u2019s a cool combination of these two strategies, but I want to ask you if someone is hearing this like, \u201cThis is good. I\u2019m in the healthcare industry. I\u2019d like to be an entrepreneur.\u201d This is a clear path that you can get into it and own real estate because it\u2019s kind of a hybrid of business, plus real estate investing, but the regulations make this very difficult. Can you share some of the regulations when it comes to the administrator that you have to hire? How many people can be overseen by an administrator and how that varies by the different markets as well as all of the modifications that have to be made to the home so that it will be approved for licensing?<\/p>\n
Yes. I completely second what you said in the beginning that it is a perfect marriage between potentially someone who\u2019s in the healthcare field and someone in real estate. I know you have a lot of male listeners and if they have ever wanted to be in a business with their wife or partner or spouse, this is one of the best businesses for couples to do together, especially that perfect mix of one abuse medical professional, one abuse real estate because sometimes it is hard to match those and that\u2019s where I do see a lot of our successful people come from where they have that perfect combination.
As far as the regulations go, you\u2019re 100% correct. They\u2019re state by state. There\u2019s no national rules on this. Some states are really hard and some states are not hard at all, right? Texas, the requirements to be an administrator is literally FAM, fog a mirror. Be 18, have a GED. It is lame. It\u2019s so bad. You have to, if you live in a state where has low regulations, look at a state with higher regulations and make your home suit that. California, like you mentioned, much higher restrictions and requirements. Arizona, one of the highest in the state. It\u2019s like 140-hour work that they have to do, hours of work that they have to do. They have to take a four-hour test every two years. It\u2019s just a lot more rules and regs on getting that license.<\/p>\n
Can you clarify what role the administrator plays in the business?<\/p>\n
In real estate world, the best way for me to correlate them is they\u2019re kind of your property manager. What they would be responsible for is far greater than that. They might be in charge of marketing the home, touring the home with the residents, filling the home, choosing which residents are coming, hiring and firing your caregivers, dealing with all your independent contractors. It\u2019s kind of endless and\u2026<\/p>\n
It\u2019s a form of getting the\u2026 What\u2019s the word I\u2019m looking for here? Not responsibility, but the liability off of the owner and onto the administrator. Because if a rule is violated, if you are your own administrator, you lose your license, you can\u2019t run the facility. But if you\u2019ve outsourced that, if a rule is violated and the state comes in and says, \u201cYou can\u2019t operate anymore,\u201d you could just get another administrator in there as opposed to you as the owner losing the ability to run the business. Right?<\/p>\n
100%. I do not suggest that anyone become the administrator. I always suggest you pay someone to do that. You hire someone to do that, put them in there because exactly that. If they\u2019re not the right fit, you fire them and you get a new one. Right? I want to encourage people to be the owner of the real estate and the business. Not working in it, right? Working on it, sitting in that owner\u2019s box.<\/p>\n
When you\u2019re establishing this business, how often are you taking on a green administrator, someone who\u2019s just getting started or if they come up to you and they say, \u201cIsabelle, I\u2019m down to do the training. That sounds like a great opportunity. Would you hire me?\u201d Kind of thing. Would you do that or are you always looking for someone that\u2019s cut their teeth in the industry already?<\/p>\n
Personally, I\u2019m always looking for people who have experience and I\u2019m just big on character and reputation. I will ask other people in the industry in the local area like, \u201cHey, what do you know of this person?\u201d Because it\u2019s a pretty tight knit industry. Everybody knows everybody and if they\u2019re scammy and slimy and doing the wrong thing, word gets around real quick. I prefer someone with experience who has a stellar reputation.<\/p>\n
Okay. One of the things that\u2019s interesting about this model is you\u2019re operating a home and you\u2019re operating a business which opens up doors to financing because those are valued differently. You can use a standard mortgage, buy a house, but you also have SBA loans and other options to get a business loan, which means you potentially have two sources of financing. Can you tell me from your experience how you\u2019ve seen people that are running these taking advantage of both sides?<\/p>\n
For sure. I would say the number one most popular ways to fund these is using SBA. They\u2019re very friendly to us. They understand this concept and that\u2019s got to be one of the biggest ways that people are funding these. The second one I would say that people are using the most is syndication or private money. A lot of people do like to raise capital on this because there\u2019s plenty of people who are intrigued by this industry, but they don\u2019t want to own the real estate. They don\u2019t want to own the business, but they\u2019re very willing to invest. I love teaching and training on this and sharing all across the country and when people have the mindset that. \u201cNo one\u2019s going to want to lend to me,\u201d it\u2019s like, \u201cYou\u2019ve got to be joking.\u201d Every day, someone comes up to me and says, \u201cI don\u2019t want to do this, but I want to give someone money to do this. Who do I give my money to?\u201d Money is out there. Literally, you might be one handshake, one conversation away. Syndication, private money, SBAs are all great ways to do this. Obviously, you can do bank loans, hard money. Really, it\u2019s endless. I would not suggest crowdfunding. Right? I would go with something a little bit more solid and stable. But truly, SBA is probably my preferred point of direction.<\/p>\n
I think the clients that we\u2019ve helped\u2026 Shout out to Stephanie Cruz. She\u2019s bought a couple houses with us and she\u2019s doing the same thing in the Bay Area. I believe the method or the strategy we came up with was that they used an FHA loan to buy the house. They put people and I think California limits you at six people per home or something.<\/p>\n
Six. Correct.<\/p>\n
Yeah. It was more strict. They got it filled up. They turned it into a profitable business. They had to rehab the house with their own money. They were then able to get an SBA loan which paid them back for their down payment and the money that they had put into the property and then made further improvement, so they could charge more per room. Then, that money that they got from the SBA loan became the down payment for the next facility. That became a way that this model is self-fulfilling as when you want to scale.<\/p>\n
I love that. That is a perfect way to do this.<\/p>\n
Isabelle, question for you on the syndication side, because I\u2019m getting into the fundraising world myself and when you\u2019re raising money for this, what types of, I guess partnerships or splits are you doing or what kind of returns can one expect from a syndication? Is it pretty comparable to other types of syndications like a 10% return, 8% pref?<\/p>\n
I would say typically, we\u2019re looking at 10 or upwards of 12% returns. We do have some people who like to go that route. Yeah. I would say between 10 and 12% and it\u2019s pretty competitive and aligned with what you\u2019re seeing probably for most other deals.<\/p>\n
Okay. David, this is getting me all jazzed up. We have our $3.25 million mansion in Scottsdale. It\u2019s a 6,000 square foot, six bedroom, eight bath place that has real luxury residential assisted living vibes.<\/p>\n
The sport court could be turned into a shuffle board court. Right? We wouldn\u2019t have to spend the full 25 grand.<\/p>\n
A jazzercise court.<\/p>\n
That\u2019s exactly right. We could make the pool a little more shallow and turn it into an exercise place for everybody. It would. That\u2019s a perfect property to do something like this with.<\/p>\n
You\u2019re already a jazzercise fiend, so that\u2019s kind of a fit.<\/p>\n
Huge. Huge. That\u2019s actually another page I have that people don\u2019t know it\u2019s me. It\u2019s like my pen name. You could follow jazzercise with Dave and see my morning workouts. It\u2019s exactly right. I still like to wear those ankle weights, those little sandbags that we used to put when our moms were exercising back in the day.<\/p>\n
Well, two pounders.<\/p>\n
Yes. Isabelle, I want to ask you, when the market\u2019s red hot and it\u2019s super hard to find properties at cash flow, there may be a property like this that will cash flow. What are your thoughts on if somebody can pay more for a property than what it would appraise as a typical house just off the comparable sales, if they could get more cash flow on it as an assisted living facility?<\/p>\n
That\u2019s exactly what I tell people is that it doesn\u2019t really\u2026 I should rephrase this.<\/p>\n
I know where you\u2019re going with that.<\/p>\n
You are not in competition with your typical single family home buyers. Everybody wants the three, two that\u2019s on a nice street. I do not care if there are power lines in front of the house. I do not actually love if it\u2019s on a super busy road with a ton of traffic going by. I do not care if it backs up to a parking lot with a target in it or there\u2019s a bus station around the corner.<\/p>\n
An apartment complex right nearby.<\/p>\n
That\u2019s a pro to me because that\u2019s more busy people, that\u2019s more traffic coming by seeing it. A mom, dad and two kids doesn\u2019t want Johnny to kick the soccer ball in the road. Right? But for me, I\u2019m going to put a nice big sign out there and get a whole bunch more eyes and that\u2019s marketing dollars for me. I\u2019m already looking for something different. Other things like funky layouts, homes that\u2026 There\u2019s a lot of baby boomers who are already retrofitting their homes, adding ramps, guardrails, things like that. Those homes, then when that senior passes on, it\u2019s like a single family\u2019s like, \u201cWhat do we do with this home? It\u2019s kind of weird. It\u2019s kind of funky.\u201d I prefer already the weird homes, the big homes, the homes on weird streets. We do not compete in the same things we\u2019re looking at from so many other investors.<\/p>\n
Let me ask you this because one of the things that I deal with as a real estate investor is when I put an Airbnb in a neighborhood, everyone loves me. Right? Everyone\u2019s like, \u201cOh my god, that guy put an Airbnb in the neighborhood. That\u2019s going to make it better.\u201d Not really, no. Everyone\u2019s always mad that I\u2019m creating the parties that are going to ruin the neighborhood. I have heard similar sentiments with residential assisted living. What is that like? What kind of community outreach or backlash? Honestly, I don\u2019t know too much about this. What do you hear from neighbors? If you do buy a single family residence and you convert it, is there any pushback or is it usually smooth sailing?<\/p>\n
There is always nimbyism. Right? Not in my backyard. Everyone\u2019s always like, \u201cNo, not here.\u201d We have seen so many people just flip their lid over this happening, freaking out. Because of the Federal Fair Housing Act, it\u2019s discriminatory. It\u2019s against disabled persons to say that you cannot do this home in a neighborhood. That\u2019s a federal law which pretty much trumps any city state government, angry neighbor HOA. We did create the RAL National Association, which is the only association that represents the smaller care homes. The big boxes, they have their own associations and believe me, they\u2019ve got money and power fighting for them, but no one was fighting for us. People were getting told, \u201cHey, you can\u2019t do this,\u201d and no one was there to back them. We created that association and it has a whole legal team who\u2019s there to support people wanting to get into this.
It\u2019s a free membership, but it\u2019s really important for us that these are being allowed, that people understand the value that they\u2019re bringing to the community. It is not a million fire trucks driving by every day or old people running down the street. We are not destroying the value of the neighborhood by any means. If anything, our homes usually sell for more because if someone was to sell it, they\u2019re going to sell the real estate and the business. It\u2019s going to actually be a larger transaction and bring the value up. We also keep these homes so well maintained because if you can\u2019t take care of your front lawn, daughter Judy is not going to think you\u2019re taking care of mom or dad. It\u2019s vital that everything is perfect and clean. Also, there\u2019s 24\/7 staff there. Talk about neighborhood watch. You literally have someone awake there every day all the time. We\u2019re the best neighbors to have. You want us to take out your trash can, you got it.<\/p>\n
Yeah. That\u2019s awesome. Yeah, I\u2019ve got so many selfish questions here because we\u2019ve had episodes like this and I\u2019m always like, \u201cHow do I do this?\u201d Okay. Question, when you\u2019re trying to locate a house, is it best to\u2026 Because for example, our Scottsdale property, that is on a pretty secluded\u2026 All the homes on the lots are on five acres, for example. We\u2019re on five acres. It\u2019s relatively private to get in there. Is it a good idea to find a home that\u2019s maybe right outside the city in a suburb that is on a larger estate away from neighbors or is it the same success rate either way?<\/p>\n
I have seen these homes where, for example, one person I worked with, their home is on 19 acres. Right? Stunning property. It\u2019s beautiful. It\u2019s out in Tennessee. But then, my homes have neighbors literally right next door. It\u2019s a genuine neighborhood. They both can be successful. I will say this is not\u2026 You can build it and they will come. It\u2019s not the field of dreams. It\u2019s also not over the river and through the woods to grandmother\u2019s house, we go. No. You need to be located so strategically. By that, I mean demographics. Demographics are absolute key in this industry. You have to be in an area where there\u2019s a mass amount of 50 to 70-year-olds who are upper middle class making twice the median income who are typically homeowners because that is who we call daughter Judy who pays for mom or dad to live in your home. She does not want to drive 30 minutes away. She wants to drive five minutes down the road. Demographics is the number one key when it comes to location.<\/p>\n
I really like what you said there because it highlights a business and real estate principle, which is supply and demand. It\u2019s very easy when someone is learning real estate to hear what someone else does and just think, \u201cOkay. I\u2019m going to hit control C and then control V and I should get the same result.\u201d In many times when you\u2019re buying real estate, you are looking for a big plot of land, amazing views, the location to something people want to go to where wages are highest. Those are all factors that weigh in for a particular demographic of buyer or tenant that they care about that. What you\u2019re describing is it\u2019s different here. You could be next to the most amazing waterfall, but if you don\u2019t have an aging population of people, that is useless. What you\u2019re looking for here isn\u2019t necessarily the exact property\u2019s location. It is the demographic surrounding the property.
You go to where you\u2019re finding aging population, what you described as the silver tsunami in Arizona, in Nevada, some of these areas that are having\u2026 Populations like that Florida would be another one. Typically, that was always the stereotype as old people moved to Florida when they retire. Well, they\u2019re closer to needing care at retirement age than when they\u2019re 20 years old. They\u2019re very far away and you can find deals that normally would not work. It\u2019s on a busy street. That\u2019s a terrible, terrible house that I got to sell if I\u2019m a real estate agent to a traditional buyer. They skip it. School scores are terrible. That\u2019s a beautiful property. It\u2019s really big. A lot of square footage, can\u2019t sell it because the school scores are bad. All of these things that used to be hindrances to demand are taken off the board. They don\u2019t matter anymore. Right?
You\u2019re not going to have your population played football in the front yard where a busy street could be a problem when you\u2019re a mom with six-year-old kids. It\u2019s actually a way if you get into this that you can use some of the deficiencies of other properties against them. The house sits on the market longer. You can get it at a better price because those things that would hurt its value don\u2019t apply.<\/p>\n
I couldn\u2019t agree more. I will say it\u2019s the opportunity that matters, not the investment. I\u2019m not afraid to buy a house full price if it\u2019s the right house and I know that the numbers are going to work when you\u2019ve seen that it\u2019s working with another home in that area. Like your home in Scottsdale, I would search then the other homes right nearby, how much are they charging? What are they getting? If you know that your amenities are better, your location\u2019s better or whatever and you might be able to get a little bit more, it doesn\u2019t matter how much that house costs. If you\u2019re going to cash flow on it, it\u2019s all about the numbers at the end of the day. They have to work.<\/p>\n
One thing that would scare me here, and it sounds like maybe the success rate is usually relatively high, but let\u2019s say that you buy a property. Let\u2019s say you buy a five-bedroom place and you renovate it to make it up to code. You put the ramps in. You put the shower and the bath situation to be accessible. Is there ever any fear that\u2026 Let\u2019s say the business doesn\u2019t work out that now you\u2019re left with this retrofitted home that is tougher to sell or is that a rare scenario?<\/p>\n
A wonderful question. One way that I like to show people how to get into this is actually just on the real estate side. If you were to have taken a home just like you said, you retrofit it, you get it ready, you get it licensed and for some reason, it doesn\u2019t work out for you. You can lease that home to another operator, be charging them twice the fair market rent because you just did all the work. You just got it retrofit. You just got it licensed. You pretty much did all that hard work upfront. They\u2019re just going to pay you that lease or mortgage and then they\u2019re going to operate the business. You don\u2019t have anything to do with the operations. You\u2019re now just a landlord on that. That\u2019s one way that you could get out of that situation potentially. If you have done your research correctly and you\u2019ve run the numbers and what\u2019s happening in that area, you should not go wrong in this.
But I will say I have met plenty of people who listen to me on a YouTube thing or a podcast and they\u2019re like, \u201cOh, I went out and bought this house and now I\u2019m in debt because I don\u2019t know what to do.\u201d It\u2019s like, \u201cOh, my gosh.\u201d Education is key. You have to learn everything you can on this before you go into it because there\u2019s no HGTV show on this. 18-year-olds aren\u2019t jumping to get into this. It\u2019s a tough industry. There\u2019s a lot of things involved, a lot of rules involved, and you want to make sure that you do it right because it\u2019s a high cost to get involved to this.<\/p>\n
Yeah. There are certain things I\u2019m noticing that are becoming much difficult to run these businesses like caretakers, I think were a lot easier to find before. You\u2019re having to work a lot harder to find them and you\u2019re having to pay them more than before, which means now you have to pass that cost on to the end consumer and that becomes more difficult. I really like your model of, \u201cLook, you can get the benefits of this, which are the higher revenues without the headaches of this, which is running the business by using the arbitrage model.\u201d Like Rob, we know a lot of people that do this with short term rentals. They buy the house. They rent it out to someone else at double the rent and then that person has to do the work of actually running the short term rental. The acronym for these assisted living facilities is RALF, Residential Assisted Living Facility. What you\u2019re talking about is RALbitrage, which I would recommend for someone that doesn\u2019t have experience in the healthcare industry, RALbitrage would probably be a better way to get started.<\/p>\n
Are you able to actually renovate a place and do this arbitrage method? But once you\u2019ve put in\u2026 Because obviously, I imagine there\u2019s probably some capital intensive aspects of this. Do you know? Are you able to go out and just do a bur and does the appraised value of a property go up if you do upgraded in these capacities?<\/p>\n
It\u2019s not upgraded because when someone buys the real estate and the business for this, let\u2019s back it up to that, truly what they\u2019re paying for is those seniors in the beds. If the home isn\u2019t full, it\u2019s not worth as much as you think it\u2019s worth. It\u2019s just the real estate. Right? Depending on who you sell it to, if you\u2019re selling it to an operator who\u2019s going to run an RAL, okay, now it might be worth something or they might be willing to lease it for you for something more. But if you\u2019re trying to sell it as a regular home, no, and it\u2019s not that the bank is going to say, \u201cWow. You put in so much value.\u201d They don\u2019t see it that same way.<\/p>\n
Okay. That makes sense. I\u2019ve got one more question and then I want to jump into some actionable ways to actually get started in the residential assisted living capacity. But I imagine that there\u2019s probably a couple of deal killers, if you will, if you\u2019re looking at a home. One of those things that, to me, is popping up the most is if a house is seemingly perfect, however maybe it doesn\u2019t have a great parking situation, is that something that would deter you from purchasing that property or is that just another obstacle to get through?<\/p>\n
The seniors aren\u2019t driving, but your caregivers are and there\u2019s a lot of in and out throughout the day. Yeah. A lot of times, even some states have requirements where they say, \u201cHey, for every four residents, there needs to be one parking spot.\u201d There might be some requirements that you have to do. Yeah. Parking would be something that I would want to see. I would also want to see just density of the area that there\u2019s a lot of people, and I\u2019m not just looking for one year trends. I\u2019m looking for three, five, 10-year trends because if you\u2019re going to start a business, you\u2019re planning roots. You really want this to take off and have longevity. I want to see the density of the area. I also just want to know the story of what else is happening around this? Meaning are we having a lot of people who are moving away when they hit a certain age?
What did the other homes and facilities nearby look like? That would be a deal breaker right then and there. If someone is building a brand new big box facility, a brand new Brookdale Sunrise nearby, bingo. I want to put my home there because they did the internal feasibility study to determine that that is a prime place that\u2019s going to need a lot of beds, but if there\u2019s a really old 30-year-old assisted living building that\u2019s there and it\u2019s empty, that\u2019s telling me something too. You have to look at the story of the area, not just in regards to demographics real estate, but also assisted living. What\u2019s happening around?<\/p>\n
Love that. That\u2019s awesome. Yeah. I get a lot of people that will ask me, \u201cRob, don\u2019t you think Airbnb\u2019s oversaturated. Short term rentals are over, right? Everyone\u2019s getting into the game. Should I invest in this city?\u201d I\u2019m like, \u201cWell, are there hotels in the city? They\u2019re like, \u201cWell, yeah.\u201d I\u2019m like, \u201cAre there being new hotels being built every day?\u201d \u201cWell, yeah.\u201d Then, I\u2019m like, \u201cThey\u2019ve already done the research for you and they\u2019ve spent a lot more money than you\u2019re going to spend researching it, so you\u2019re probably going to be fine.\u201d That feasibility check seems to be a really good way to think through it.
Moving forward here, we\u2019ve addressed a lot of the pros, cons, things to watch out for, caveats, green flag, red flags. Can we talk a little bit about actually getting started? If you\u2019re someone at home and you\u2019re really excited and you\u2019re like, \u201cOh, my gosh. I want to do it.\u201d I know you have three steps to getting started in this business and I\u2019d love to talk about that from someone that\u2019s like, \u201cHey, how do I do this from step one?\u201d<\/p>\n
Yeah. I had mentioned one earlier when we were talking about just owning the real estate. Right? We call that being a preferred real estate provider. You are just going to own the real estate, possibly retrofit it, get it licensed, get it ready to go, and you\u2019re going to lease it to an operator. That is a more passive way to be involved in this industry and it\u2019s a great way to get started. Learning exactly what you need to know about where to put that home, what renovations need to be done? Like David was mentioning all the modifications to the home. In most states, it does not have to be ADA compliant, but you want it to be as close to that as possible. Putting in that work to make sure that the home is ready to go. The second way that you could get started is owning the real estate and operating the business.
Again, I would highly encourage you to get educated on this topic, especially if you don\u2019t have familiarity with it if this isn\u2019t your background or where you came from. It wasn\u2019t where I came from. It\u2019s not impossible, but it is important that you know everything involved with this, so that you can make sure that you\u2019re being the best owner possible. That way, it\u2019s probably one of the easiest or not easiest. That way, it\u2019s probably where there\u2019s the most cash flow, I should say. The third way to get started would be to just JV lend or partner with someone and just deploy your capital in this.
We do have a lot of people who I speak to who that\u2019s all they want to do. They just say, \u201cTake my money and I don\u2019t even want to see it back for another three to five years,\u201d and getting some good returns on that. Still playing a role in the silver tsunami because it\u2019s either going to be a mega crisis or a major opportunity and I want everybody to have a piece of this. I don\u2019t want anybody to get pummeled by this wave. We can all play a role and that might just be lending to someone who does this.<\/p>\n
I like that. There\u2019s three basic ways. There\u2019s the most hands-on, most active, and that would be owning the real estate and the business.<\/p>\n
Yep.<\/p>\n
Then, you\u2019ve got the hybrid model, which is owning the real estate and arbitraging it out to someone else who runs the business. Then, you\u2019ve got the pure passive way, which is a JV funding somebody else\u2019s deal, putting in the money and letting them run the business and getting a return.<\/p>\n
Yes.<\/p>\n
All right. Now, I wanted to ask you a question. If you\u2019re trying to figure out what would be a good market, like a long distance investor who says, \u201cI want to do this. I think I can run it long distance.\u201d They have experience with hiring and operating a different business. I\u2019m thinking like a Codie Sanchez. She\u2019ll probably start making videos on this. This is right up per alley. Would you look for an area with a very dense population, but a lot of it is urban environments like apartment complexes and condos where there isn\u2019t a lot of housing, so you\u2019ve got a family living in an apartment, mom or dad is getting a little bit too old. There\u2019s not a lot of space. Now, you\u2019re going to go find a suburb where there\u2019s actually bigger single family houses and they maybe drive 45 minutes an hour to go visit mom and dad because there isn\u2019t space within the big city?<\/p>\n
I would not necessarily put an assisted living home near a bunch of condos and apartments because of demographics wise, I\u2019m looking, I mentioned 50 to 70 upper middle class homeowner. Typically, where there\u2019s more homeowners than renters, there\u2019s more money. Typically, not always. Not every market, but a lot of markets, being a homeowner indicates primarily more wealth. I don\u2019t necessarily want to be where there\u2019s a lack of suburbia. I want to be right plop in the middle of upper class suburbia. That\u2019s probably my prime location, but I did love what you said in the beginning where you said, \u201cWhat if I wanted to do this somewhere else?\u201d I always say live where you want, invest where makes sense. 31% of ARL owners are remote owners. They do not live in the same state as where their home is. Right? That\u2019s fine. You can do that.
In that case, I would choose it somewhere that you don\u2019t mind visiting every so often because emergencies happens, stuff happens and you may have to jump on a plane and go visit and be there. If you hate Oklahoma, don\u2019t do a home in Oklahoma just because it\u2019s cheap. Do it somewhere you actually want to be, you want to go and that you\u2019re willing to do that. I want my homes to be hands off. I\u2019m about 45 minutes away from them and I visit every other month. I run it like I\u2019m an out of town owner because I don\u2019t want to be hands-on. That\u2019s not the role I want to play. I\u2019d rather have a Zoom call or a conversation with my administrator than be there visiting and getting more into the weeds. That\u2019s not actually going to help me be a business owner. It\u2019s going to help me be more hands off, having scheduled things. You come to me with your issues in this formal way.<\/p>\n
When you\u2019re trying to acquire your first residential assisted living facility, I know you have four ways of actually acquiring one. Do you think you could just walk us through those really quick?<\/p>\n
Yes. First, you can buy land and build a custom home from the ground up. For a lot of my\u2026 People I talk to who are in the Midwest where land still exists and it\u2019s still relatively cheap, that\u2019s sometimes the way they want to go or my guys who are in construction or their contractors, they love that option. Plus, when you\u2019re building a custom home, when you live in a state like Texas, Ohio, Illinois where you are allowed to have 16 residents in a home, you\u2019re not going to find a single family home that has 16 bedrooms and bathrooms. You\u2019re probably going to have to build it. If I was in a market like that, I would want to build a custom home that\u2019s perfectly suitable for this, so I can house as many residents as I am allowed to house. The second way that you can do this is buying a single family home and converting it to become a residential assisted living.
As we talked about, having as many bedrooms and bathrooms to start. That way, you don\u2019t have to do too much of a renovation or addition. Some neighborhoods will tell you, you can\u2019t make the home look different from the outside. What does that mean? Right? In one of our homes, we built out the garage. I still have the door facing on the outside, but it\u2019s not a real garage. Now, it\u2019s two or three bedrooms back there. Different things like that. The third way would be buying an existing business and the real estate. That\u2019s the fastest and easiest way to get up and running in cash flowing, but not every market has good ones for sale or ones that you\u2019d be willing to take over. It\u2019s a nice easy way to get your feet in right away. Someone\u2019s done all the hard work for you, but you\u2019re going to pay a pretty penny for it. The last way is leasing the home, so working with someone who\u2019s going to be the landlord and you\u2019re going to lease the home from them to operate the business.<\/p>\n
Okay. We\u2019re running out of time. I have so many questions. Last thing here and then David, I\u2019ll let you get to the deal deep dive here because I know that that\u2019s probably going to be pretty juicy. But when it actually comes to market. Let\u2019s say we overcame all the obstacles, we got it permitted, the neighbors love us and great, move in, and you got the house and you got it set up. Now, how do you market it? Because this seems to be\u2026 You\u2019re marketing to an older demographic in theory, I guess maybe you\u2019re marketing to the families of the older demographic. I\u2019m assuming you\u2019re probably not going to market this on TikTok. How are you actually getting the word out there for your facilities?<\/p>\n
Yeah, definitely marketing is so important. Number one, you are going to want all of those different key components like a website and brochures and business cards as well as having a Facebook page, right? Daughter Judy, you\u2019re correct. She\u2019s probably not on TikTok, but 50 to 70-year-old, she\u2019s probably on Facebook still. Being a part of your local community, working with elder law attorneys, hospice agents, long term care insurance people, geriatric doctors and nurses, showing up at community events, whether it\u2019s your RIA group or your local farmer\u2019s market to let people know you are a home in the community that cares for your seniors and you exist. You could do anything from boots on the ground marketing to old school paper marketing. One of my best tips is I always tell people, \u201cWalk into the local churches, synagogues, and temples,\u201d because daughter Judy, when her loved one needs care and assistance, if she\u2019s a religious person, you better believe she\u2019s going to church to ask for prayer. Right?
She\u2019s bringing that to her elder or her pastor and saying, \u201cHelp me out here.\u201d Do you know any resources? The church probably won\u2019t take a referral fee from you, but if you just recently came in with some brochures and cookies, they\u2019re going to be like, \u201cWow. This nice guy came by. He had this cool home. It\u2019s right down the road,\u201d and they\u2019re an excellent resource for marketing. Last but not least, placement agents. There\u2019s an entire industry of people called placement agents. There\u2019s a national ones like A Place for Mom, absolutely do not like them and I stand by that. Do not use them. I prefer using local placement agents.
People who are local in the community, basically their whole job is when the senior needs assisted living, that\u2019s who you call on. They say, \u201cWhere do you want the home? How much do you want to pay? What amenities are you looking for? What area do you want it to be in?\u201d They basically pass out business cards of homes that fit that criteria. They charge either first month\u2019s rent or half of first month\u2019s rent, depending on who they are and their local fees, but that\u2019s a really nice, easy way to fill your home pretty quick working with them.<\/p>\n
Awesome. I like that. Get into this method and you too can be the answer to somebody else\u2019s prayer.<\/p>\n
David, you\u2019re the answer to my prayers.<\/p>\n
Thank you for that, Rob. I didn\u2019t even have to get into residential assisted living facilities and run a business. All right. The next segment of our show is the world famous deal, Deep Dive. In this segment of the show, we go deep into one specific deal with our guest and remember that you too can do more deals with the help of BiggerPockets tools and resources, which is you will find at biggerpockets.com. All right. Isabelle, question number one. Rob and I will alternate firing them at you. What kind of property is this?<\/p>\n
Residential<\/p>\n
Shocking. Residential assisted living facility. Wouldn\u2019t that have been funny if she came in and said, \u201cOh, I flipped a house in North Florida or something like that.\u201d<\/p>\n
Airbnb. Okay. Question number two, how did you find it?<\/p>\n
Oh, on the MLS.<\/p>\n
Okay. Question number three, how much was it?<\/p>\n
It was 795,000.<\/p>\n
It\u2019s shocking that you were able to find a deal on the MLS. I\u2019ve been told that\u2019s impossible, and the only way to find deals is to spend your entire life talking on the phone for 12 hours a day trying to find an off market opportunity.<\/p>\n
In this industry?<\/p>\n
No. I\u2019m being sarcastic because everyone says, \u201cThere are no good deals. There\u2019s nothing on the MLS.\u201d<\/p>\n
We\u2019re workshopping David\u2019s sarcasm still.<\/p>\n
I do hear that a lot. People complain that I need to send the emoji face when I send a text because they\u2019re like, \u201cI don\u2019t know how to take that.\u201d It\u2019s like, \u201cAll right. I hear you. I just will never send emojis.\u201d All right. Rob, you\u2019re up.<\/p>\n
Right. The next question that I have is, how did you negotiate it? I\u2019m sorry. Is that the right\u2026<\/p>\n
Yeah. Yeah. She paid 795. How\u2019d you negotiate?<\/p>\n
Oh, yes. That\u2019s right. Sorry.<\/p>\n
795. This particular home was actually listed for 835. We put in an offer for 825. They did not accept. They took it off the market, ripped out all the floors and put carpet in. Not what I needed for assisted living. Then, they put it back on the market for 800 and we offered 795 and they took it.<\/p>\n
Wonderful. All right. What did you do with it once you bought it?<\/p>\n
We put about 200K worth of renovations in, so 995, just about a million dollars all in. We made\u2026 It was a six-bed, five-bath and we turned it into a 10-bed, eight-bath without changing the square footage. 5,500 square feet.<\/p>\n
Then, sorry. Really quick, how did you fund that?<\/p>\n
We funded it through private money. We had two lenders on the deal.<\/p>\n
What was the outcome of the property?<\/p>\n
We got it licensed for residential assisted living, hired a licensed administrator. We have 10 residents in that home. They are paying average rates of about $6,000 each. It\u2019s about 60K coming in every month in our gross. Our expenses on that house run about 35,000. Then, our mortgage, give or take 12,000. Now, it\u2019s a cash flowing between 12 and 18, if I\u2019m at 100% vacancy or less.<\/p>\n
Okay. Now, what lessons did you learn from this particular deal?<\/p>\n
Well, it was very frustrating because we did not tell the seller what we were planning to do and my renovation costs went up because I had to take out the carpet that they had put in. I think they had tile in there. We also put in a hardwood and hardwood soaks up liquids. That was a mistake. Would\u2019ve put in LV or tile. I think the flooring was just such a pain. I wish I would had a conversation with the seller and then I wish I would\u2019ve chose a different material.<\/p>\n
I really appreciate you sharing that actually, because too often, we hear about what everything that went great with the deal and nobody says what went wrong. But trust me, in every deal, more things go wrong than they go right, even when it\u2019s a big win. I think that\u2019s a testament to real estate that you can screw up royally and come out with a profitable deal that makes you hundreds of thousands of dollars over time. It\u2019s one of the reasons I like playing in that space, because the target is so big. It\u2019s almost difficult to miss is you get a couple of things right, but individual elements of every deal go wrong.
I know people that literally have negotiated closing costs of $50,000 that didn\u2019t know that they could only collect $30,000 of those closing costs. In fact, one of them was a residential assisted living facility buyer who was buying with an agent in another state and didn\u2019t run it by me and they lost $20,000 of money they negotiated because they didn\u2019t know that was a rule. Yeah. It hurts, right? It\u2019s like the same feeling you get when you like Mike Tyson had all this money and he lost it all to Don King. It wasn\u2019t me, but it still hurts to know that it happened. There are so many things that happened like that in every single deal. It doesn\u2019t mean you did things wrong, it just mean that you learned.<\/p>\n
Yeah. Have you seen the Mike Tyson thing on Hulu? It\u2019s amazing.<\/p>\n
Is it like a documentary?<\/p>\n
It\u2019s like a foe. It\u2019s like actors are doing it, but I\u2019m pretty sure he was involved, but oh my gosh, it\u2019s so good. You have to watch it.<\/p>\n
I wonder what the auditioning was like to get someone that could do Mike Tyson\u2019s voice.<\/p>\n
Oh, I have to put on the close caption.<\/p>\n
He said, \u201cHi, I\u2019m reading for Mike Tyson.\u201d<\/p>\n
How hard was it to find someone that looks like him and can talk like him? That could not have been easy to do.<\/p>\n
Okay. Also, I didn\u2019t want to say\u2026 I\u2019m glad you said that because I would\u2019ve assumed that carpet was actually a good idea because I have always hated carpet. But once I had kids, we moved into a house that had carpet and I was like, \u201cOh, thank God for carpet,\u201d because kids fall a lot.<\/p>\n
I know. But the thing is carpet\u2019s a trip hazard for seniors because it\u2019s poofy and fluffy and their feet are shuffling. You know what I mean? It\u2019s a lot easier for them to trip on it. It\u2019s actually better just to have the tile or the luxury vinyl. Hardwood carpet stinks, soaks up liquids and some of the wood, I\u2019ve already had to replace. It\u2019s just like, \u201cWe paid a pretty penny and I wish we didn\u2019t.\u201d<\/p>\n
Okay. Awesome. Well, last question here, who was the hero on your team for this deal?<\/p>\n
Oh, hero on our team? Well, my dad because he had secured the private money through his connections.<\/p>\n
All right. That sounds good. Remember that you two could do more deals with the help of BiggerPockets marketplace. Simply go to biggerpockets.com, look for the nav bar, and you can find agents. You can find lenders. You can find tradesmen. You can find a lot of the people that you need through the website. All right. Isabelle, I\u2019m going to head us over to the last segment of our show.<\/p>\n
Famous Four.<\/p>\n
It is the world famous, Famous Four. In this segment of this show, we ask every guest the same four questions every episode. Question number one, what is your favorite real estate book?<\/p>\n
My favorite real estate book, which it may be a business book, but it applies to real estate for me, The Pumpkin Plan. Have you ever read it?<\/p>\n
No, I\u2019ve never heard of this.<\/p>\n
Oh, my God. It\u2019s really good.<\/p>\n
Was this Starbucks plan to build pumpkin spice that would just take over the world and dominate the white girl industry?<\/p>\n
No. It is so good. You have to read it. It\u2019s basically about when you grow those massive pumpkins, like the huge winning ones, that you have to kill every small pumpkin to make that one pumpkin grow that big. To me, it\u2019s like a real estate business book because it\u2019s like, \u201cStop letting all these small little things drain you and drain your business. Focus on what is going to make you the most amount of money the fastest.\u201d It\u2019s about killing off clients, people\u2019s deal that drain you.<\/p>\n
That\u2019s really good. Rob would grow a huge pumpkin like that, turn it into an Airbnb and rent it out as a novelty. He\u2019s salivating over there at the thought of what that could look like.<\/p>\n
I see. People see a orange piece of real estate that\u2019s going to rot in three days, I see dollar signs.<\/p>\n
That could be your book, Rob. The Green Pumpkin.<\/p>\n
Question number two, which now you got to come up with another business book. This is on you, Isabelle. What\u2019s your favorite business book?<\/p>\n
My favorite business book, I would say the 5AM Club. Have you read that?<\/p>\n
Uh-uh.<\/p>\n
Oh, man. You guys got to read. I\u2019m just joking. 5AM Club is great. It\u2019s just motivational. Mostly, like get the most out of your day, wake up, get stuff done, live every moment like it\u2019s your last. My dad being such a big inspiration with me in this business is really important for me to just have that vigor in everything I do and try to translate that to as many people as I meet. So 5AM Club.<\/p>\n
Awesome. What are your hobbies when you\u2019re not out there building your real estate residential assisted living business?<\/p>\n
I love hiking. Praise God, I live in Arizona. I try to do the 52-hike challenge, which is a hike a week all year long. I love spin class, traveling and I\u2019m a foodie. Great food.<\/p>\n
Question number four, I\u2019m interested to hear your answer on this because you\u2019re in such a specific niche. What sets apart successful investors from those who give up, fail or never get started?<\/p>\n
I\u2019m going to say three things, having grit, getting punched in the face and getting back up and back up and back up, never letting it stop you, having a strong why. If you don\u2019t know why you\u2019re doing what you do and it doesn\u2019t light you on fire, then stop doing it. Everything should be a hell yes or a no. Everything. Three, having passion. I think that a lot of people live life drifting and never committing and never being passionate about what they do. I think that if you don\u2019t have passion in what you\u2019re doing, you\u2019re not going to be very successful. Even if you are, you\u2019re not going to be happy about it.<\/p>\n
I like that. If it doesn\u2019t energize you and it\u2019s not a hell yes, kill that pumpkin.<\/p>\n
Unless you can turn it into an Airbnb. Lastly, Isabelle, thank you so much. We really, really appreciate it. This was amazing. Very enlightening. I\u2019m going to try to talk David into turning our Scottsdale Airbnb into a high scale, high luxury RAL. Can you tell us where people can find out more about you?<\/p>\n
To find out more about us, you can go to ral101.com. There\u2019s a whole bunch of free stuff there. Just like free books, free webinars, free phone calls. You can connect with me and I\u2019d love to chat with you, so ral101.com.<\/p>\n
All righty. Thank you so much, Isabelle. Rob, where can people find out more about you?<\/p>\n
Oh, you can always find me on YouTube being goofy at Robuilt or on Instagram being even goofier these days doing a lot of reels, putting myself out there as they say again. Again, Robuilt. What about you?<\/p>\n
I\u2019m a little bit less goofy, I will admit that, but I\u2019m on Instagram, Facebook, everywhere else, @davidgreene24 and I\u2019m on YouTube at David Greene Real Estate. Rob, you tend to make content that just tastes better. You\u2019re like a Pop-Tart. I noticed my stuff\u2019s very dry. It\u2019s like a bran muffin. There\u2019s a lot of nutrition in it, but you might choke on it. I got to learn to put a little bit of icing on what I\u2019m doing here. If you guys agree that you need to see a little bit more personality out of me, go to the comments for this show on YouTube and say, \u201cYes, we want to see more of David being dumb.\u201d Or if you\u2019re like, \u201cNope, I like David being serious and Rob being the Pop Tart,\u201d just put Rob\u2019s a Pop Tart and we\u2019ll know what you mean.<\/p>\n
That was actually my nickname back in high school.<\/p>\n
Thank you for that. Isabelle, great having you here. Thank you for shedding some light on this. Not often talked about the option for real estate investing, but it\u2019s very profitable if you can get good at it. This is David Greene for Rob \u201cThe Pop-Tart\u201d Abasolo, signing off.<\/p>\n