Senior housing investment has become a trending asset class in the real estate market for years now. “As more baby boomers transition into retirement, investing in senior housing is now a relatively low-risk investment with potentially high returns,” Daniel Pessin said.
Are you considering adding senior housing to your investment portfolio? If yes, then you need to understand senior housing facilities as well as the different pros and cons.
What is a senior house?
Senior housing is a broad term used to describe a wide range of facilities that cater for senior citizens who are 65 years or older. As the baby boomer generation has aged, the demand for specialized facilities that will cater for their unique needs has increased. According to a report by Urban Institute, as of 2020, 54 million US citizens are either 65 years or older. It is predicted that 80 million people will fall within this age bracket by 2040. Based on these statistics, investment in senior housing could be a smart choice.
There are different types of senior housing arrangements. It may be a community with different independent apartments or a facility with several rooms. “It’s important to have a good understand of the different types of senior housing you could invest in,” Daniel Pessin said. In most cases, senior citizens choose a living arrangement that suits their health and needs. The following are different types of senior housing arrangements
Types of senior housing
This is a form of a senior living facility designed for old people who do not require specialized care. It offers seniors an autonomous lifestyle with the enjoyment of a community of older people. Such a community contains different apartments which may be one room or two rooms with a toilet, bathroom, laundry and kitchen. The payment for this apartment is often calculated on a monthly or yearly basis.
Residents have the liberty to move in and out of the community. They take responsibility for taking care of themselves. However, they may request some supportive services based on an additional fee. Such services include laundry, meal arrangement, transportation in and out of the community and fitness facilities.
This is another form of senior housing designed for the aged who can no longer live independently. This is a housing facility for old people who can no longer
perform activities of daily living ( ADL). According to the NHS, activities of daily living are basic life activities an individual performs to keep himself safe, healthy and clean. This can include bathing, body grooming, moving around conveniently, housekeeping and shopping. Residents in assisted living facilities get assistance in areas of activities of daily living in addition to the enjoyment of the community of old people.
This is a licensed specialised healthcare facility designed for old people with certain health conditions such as Alzheimer’s, dementia and some other cognitive disorders. Memory cares have specialised structures and staff to cater to senior citizens with these medical conditions. Sometimes, memory care forms a part of an assisted living facility.
This type of facility is usually highly secured to prevent the patient from wandering.
Skilled nursing home is a more intense adult housing facility. It caters for seniors who due to physical or mental challenges can no longer live without 24hrs supervision and care. This type of facility has live-in medical staff such as nurses and doctors who work round the clock to tend to these aged citizens.
Skilled nursing is slightly different from other housing facilities in the sense that it’s not a permanent adult housing facility. It’s a care facility where adults in need of their specialised services stay for a short period to receive treatments.
Other forms of Senior housing includes ;
- Senior co-housing
- Aging in place
How to invest in senior housing
Senior housing facilities differ based on the condition of senior citizens whom they cater for. These differences also affect the real estate valuation of these properties. As such you may need specialized knowledge in senior housing real estate. To be on the safe side you can choose to invest passively through REITs and private equity funds that own some senior homes or make direct investments with partners who are highly experienced in the senior housing investment space.
What are the possible downsides of adult housing investment
Inevitable turnover is set back in adult homes. Turnover is unavoidable in all housing facilities. However, it’s harder to find a replacement in adult homes due to the financial and age requirements of most adult housing communities. Vacancy can affect the ROI overtime.
“Health of residents is another challenge.” Daniel Pessin said. “ A major pandemic like Covid 19 can affect the population of residents. Most senior houses had to reduce admission of new residents so as to meet up with the CDC regulations. It affected the income of the facilities as well as ROI of investors. However, let’s hope such a pandemic never repeats itself.”
Senior housing real estate investment is a good choice if you seek the right knowledge and learn from experts in the senior housing real estate space. It’s a resilient real estate niche and the demand is permanent.