As for any niche in the real estate market, where there are people, there’s demand! Is investing in senior housing a lucrative investment strategy for real estate investors?
Senior housing can be defined as housing and accommodation targeting a specific age group which we all know and love: senior citizens! With many assisted living facilities popping up all over the country, it makes perfect sense that real estate investors are diving right into it for profit! According to Forbes.com, Baby Boomers who make up a third of the total US population have been hitting retirement age over the last few years! This will drive up the number of retiree households by around 10 Million.
Types of senior housing
Senior housing is not simply housing designed for the accommodation of senior citizens. There are many subcategories involved. These categories are usually defined by the age group, health and independence, and length of stay. The list below dives deeply into them:
These communities are age restricted to residents over the age of 55. This type of residential properties is the best type for real estate investors. They offer a resort-like living experience which attracts many tenants and residents can buy, rent, or lease! This gives investors different options for their investment property.
Independent Living Housing
This type of senior housing offers seniors an independent living experience while facilitating many recreational, social, and even educational activities.
Assisted Living Facilities
Assisted living facilities are very common for ages above 60. The tenants are senior citizens who are looking for a more hands-on living assistance but are able to live independently.
Nursing Care Facilities
Nursing care facilities are designed for senior citizens who need 24/7 nursing care.
Note: There are more types of senior housing facilities but we’re going to focus on 55+ communities as it remains the main focus for property buyers and real estate investors.
Why invest in 55+ communities for senior housing?
Less wear and tear
This is an obvious one with renting out to older generations. Your tenants won’t be throwing wild parties nor will they be caring for children. You can rest assured that your property is in good hands with senior citizens!
Calm place to live
Since most senior housing developments are gated communities, you can expect low street traffic and low overall noise. If you’ve ever visited a grandparent in one of these communities, then you’ve definitely noticed how quiet and neat everything looks.
According to Collateral Analytics, a study about the impact of noise pollution on real estate values confirmed that air traffic was the most influential factor to home prices followed by road and rail traffic noise. You can expect an increase in your property’s value for up to 5% in a quiet area. Of course, this matters to you as a real estate investor as you’re guaranteed a high property value due to the low noise levels.
Nearby amenities and activities
Retirement housing communities want to attract senior citizens to live there and they go about achieving that by creating activities and events for the residents. These can range from yoga classes to educational courses, and even parties! These communities are also typically near key amenities to allow for easy access for their tenants.
By having such activities and amenities available for potential tenants, you are more likely to get the place rented out ASAP and reduce vacancy rate to a minimum.
Specific tenant pool
If you’re buying an investment property for senior housing, then your tenant pool is already specified! Senior citizens are a great tenant pool for any rental property. Accordingly, you can target 55+ seniors for your rental property without having to market your property to other age groups. This can cut your marketing budget in half.
For most senior housing communities, the tenants pay a monthly fee and they get amenities, safety, and even medical supervision. In many communities, property owners and residents pay a fee for maintaining the property and the property management company will take care of all that for you. This is a major advantage as you won’t have to worry about most investment property expenses!
Wondering about other rental property expenses? Read this blog post: 9 Rental Property Expenses Real Estate Investors Shouldn’t Forget.
Most senior housing facilities are located in temperate weather locations. States such as Florida, California, and even Georgia are known for being the home of many 55+ senior housing communities. The great moderate weather is a factor that plays a major role in buying such an investment property. Additionally, when most US senior citizens are looking for a retirement home, they are looking for great weather that won’t affect their daily activities. This is why an investment in Florida or Central California works best! Besides the weather, these locations which attract senior citizens tend to be some of the best places to invest in real estate.
To learn more about how we will help you find a great location for investing, click here.
Types of properties for senior housing
There are generally two types of properties that real estate investors can venture into in order to make money in real estate:
Single-family homes are a common property type with senior housing. It offers independence and privacy while giving residents a relatable living arrangement. Generally speaking, these single-family homes have yards, lawns, and many even offer swimming pools. Typically, all additions fall within the maintenance responsibility of the management company in exchange for a monthly fee. If you’re interested in buying single-family rental properties, read this blog post to get more info: How to Ensure Successful Single Family Rental Investing.
Condominiums are a great way to save space in a limited gated community. Real estate developers, who make their living through building such properties, use condominiums as a way to create big living spaces while benefiting from every inch of land. Keep in mind that condominiums are not separate units. It usually takes the shape of an apartment and offers bedrooms, kitchens, balconies, and even laundry rooms. Of course, this type of property is popular among real estate investors to buy as rental properties! Read this blog post for more insights on buying a condo: Is Buying a Condo a Good Investment Decision in 2018?
Locating the perfect senior housing investment property
When going for a property investment, it’s one thing deciding on a type of property to go for and it’s a whole different story to actually find it! Luckily, finding the best investment property for senior housing is a lot easier now through technology.
Using an investment property calculator can make 3 months’ work turn into 15 minutes! You can simply specify your investment needs and start browsing to find the best investment property for senior housing. Click here to use Mashvisor’s property finder and enjoy the 14-day free trial!
How to assess an investment in a senior housing community
Location, location, location!
Location is just as important when buying senior housing! Real estate investors must assess the location and its walkability before buying. Keep in mind that senior citizens want everything at hand. There are generally two types of locations for senior housing communities:
- City housing structures
- Suburban communities
Both of these categories have different attractions. For a city housing situation, your tenants get to enjoy the perks of living in a big city like New York or Miami with the security and safety of a senior housing facility. On the other hand, suburban communities offer a more secluded and quiet experience for residents.
The property management
As previously stated, property management is one of the perks of buying a property in a senior housing community. In most cases, property management and maintenance fees are included in a monthly membership fee to the housing community. Therefore, you must investigate the company and review it properly.
You must know who is taking care of your investment property. After all, you’re buying an investment property to earn rental income!
It’s surprising to see how many normal things that one cannot do in a senior housing community. Many communities ban pets, outdoor grilling, and many other fun things! These restrictions can affect your ability to attract tenants in the long run.
Tip: Make sure you research rules and restrictions in any community you wish to buy in! You don’t want to buy a property in a community that does not allow talking on balconies after a certain hour, for example!
Assess the community’s financials
This comes with the territory when investing in any local real estate market. After the housing crash of 2008, senior housing took a hit just as much as the rest of the real estate market! A great way to research the community’s financials is by going through the county’s foreclosure records!
Medical care is one of the most needed services for senior citizens. Accordingly, researching the medical care facilities and centers around the senior housing community can assure you of the quality of life for future tenants.
Senior housing is a great investment strategy to start real state investing. Additionally, this property can serve you as well when you hit the 55+ age group! As for the case of any real estate investment portfolio, diversifying your real estate investments by location, property types, and even investment strategies can create a well-rounded investment portfolio for you!
If you have any more insights on buying an investment property for senior housing, please share them with us in the comments section below!