949-392-1999
SHOW NOTES FOR EPISODE 213: HOW TO MAKE $10,000 MONTHLY WITH A SINGLE FAMILY HOME
As real estate investors, we are always looking for ways to generate good cash flow in retirement. To generate $10,000 a month, assuming a net cash flow of $100 per door, you could buy 100 houses or a 100-unit apartment building. Or, you might want to consider what Gene Guarino, today’s podcast guest recommends, “Why not buy a single family home that generates $10,000 per month net?” Find out how in today’s podcast episode!
What You Will Learn
- What is an Assisted Living Facility?
- How to turn Single Family into an Assisted Living Facility?
- Why Residential Assisted Living Facility is a good investment?
- What are the business opportunities in Residential Assisted Living?
- What are the factors to consider in investing in Residential Assisted Living?
About Our Guest
Gene Guarino
Gene Guarino, was a guest back on the Old Dawg’s REI Network on October 17, 2016, episode 041, “Investing in Assisted Living Facilities.”
Gene is a CFP, (Certified Financial Planner) in the US and also licensed in Australia. He is the President of Residential Assisted Living Academy. He owns and operates residential assisted living homes in Phoenix and Scottsdale, AZ. Gene has real estate investing for over 30 years. He has owned and operated sixteen businesses and been an angel investor in numerous others. Gene has written four books, hosted 3 radio shows and has spoken to over 300,000 people in four countries over the past 20 years, topics ranging from business and investing. Today, Gene is focused primarily on residential assisted living. With over 77,000,000 Baby Boomers coming of age, the need is greater than ever and getting bigger every day. Gene’s goal is to help those people and to train others to help them as well. To “Do Good and to Do Well”
More About Gene
How did Gene get into in Residential Assisted Living?
- Gene heard about Residential Assisted Living (RAL) from a business standpoint 15 years ago from a speaker at an event who was talking about it but had not actually done it.
- Gene wanted to learn more so went out looking for people who are doing it, but was not successful enough.
- After 5 – 6 years ago, his mother started to need help, so his interest came back.
- As he sought housing for his mother, he found out that Assisted Living Facilities are expensive, not easy to find a great place, and the great places have waiting lists.
- He literally vowed to create a solution for his mom, knowing that if he can create something which he will be proud to have his own mother stat in, that others would move in too, and they did.
- He believes that in every crisis, there is an opportunity. So, when he could not find somebody to teach him, he decided to buy an existing business and learn by running and operating it.
- It was the school of hard knocks. It was an expensive tuition. He learned from it, everything that was good and bad about it, paid his lessons, and decided what to do differently.
- Then, he bought a second one and then a third.
- Today, he teaches others how to do the same exact same thing.
Assisted Living Facility (ALF) – Defined From a Wide Spectrum of Elderly Care
There is a wide spectrum of Senior Living – from independent living, to assisted living and to those who need medical help.
The “Golden Girls” facility
- Seniors are “roommates”
- Take care of each other
- No outside caretaker
Convalescent Home
- Larger facility
- More of an institution
Residential Assisted Living (RAL)
- Falls between the two above
A “Big Box” Facility:
- Usually part of a large, publicly traded entity (examples include Brookdale, Atria, Sunrise)
- Constructed for 100’s or more people
- Collectively servicing thousands of seniors
- It is like a hotel, not a home, but home-like
- Caregivers are moving in and out
- 10 caregivers taking care of 200 people
A Residential Assisted Living (RAL) facility is a residential facility, located in a neighborhood, in a single family home, where seniors, who are not ready for a nursing home, but who can’t live on their own, live with 24-hour caretaker care. There are no doctors or nurses, but there are properly trained caregivers who take care of the residents 24/7. A resident spends around $4k – $6k or more per month. A typical resident is someone who needs some help in the daily living activities, such as medication management, food preparation, bathing, housekeeping,
Typical Resident of an RAL
- 70-90s, still living in own home but not able to get around too easily by their self
- Kids visit regularly
- Don’t require hospitalization
- Do require help with:
- Medication management
- Food preparation
- Housekeeping
- But most don’t move in because they need to.
- Most move in after an incident or an event
- They fell, went to the hospital and case worker at the hospital says they can’t really live by themselves
- Children began to evaluate their options (see above)
How is Long-Term Care Paid?
- Most people don’t plan for the costs needed for long term assisted living. So, how do people pay for care?
- Most people don’t have insurance to cover this
- The state will cover up to $2K per month, including your Social Security (i.e. if you’re getting $1,300 in Social Security, the state will cover $800 for assisted living)
- If the average amount paid nationally for assisted living is $3,750, then a place for $2,000 must not be that great
- The remaining people will have their long-term care paid for by a combination of their Social Security, children, pension, home equity, etc.
- Genes Solution:
- Buy a RAL home in your area
- Generate $10K a month in income
- Move into the master suite of the RAL home you own when it’s your time for assisted care for yourself
Residential Assisted Living as an Investment
Opportunities in this kind of business include “one” or “both” of the following:
- Real estate investing only – someone owns the real estate and leases it to the operator of an RAL
- Business of residential assisted living – lease the real estate from some one and operate the RAL facility
- Or do both – own the real estate and operate the RAL business
What Attracted Gene to “Residential Assisted Living” as an Investment
- For Gene, everything is cyclical.
- Real Estate tends to run in 7 – 10 year cycles, and he believes that we closer to the top now, than the bottom. Using a baseball analogy, Gene doesn’t know if were in the 7th innings or extra innings, but we it can get “called on rain” any moment now.
- Since 1946, when the Baby Boomers came on the scene, they have been literally driving the world’s economy and changing it as they go through like a petro-python on every chart that you can see – suburbs, franchises, health care, assisted living – all developed to serve the Baby Boomers.
- Thus, Gene looked at this phenomenon, and thought, “If I’m going to set myself up forever, the one thing that is to the bigger cycle – baby boomers are aging and they will need a place to live.
- It is a “silver tsunami” opportunity that is coming our way, that we cannot deny.
- The demand for assisted living is big and it can only grow from here
Factors to Consider if You Want to Pursue RALs
- This is not a business for a quick buck
- You need to be committed
- There are going to be challenges you’ll need to overcome
- When you are making $10-15K net each month from a single family home, there’s has to be a fair amount of work involved or else everyone would be doing it
- Most of the work is upfront – getting it up and operating
- But once it’s operating, or have 2 or 3 of these facilities operating, it can take 5-10 hours per week as you “manage your managers”
- Once it’s up and operating, it can be both financially rewarding and a true service to people
- Key components of staffing –
- Does not require professional nurses or doctors (not medical). If that’s the case, RALs are not the right solution for care of that person. It’s a group home for the elderly, not a medical facility
- RALs use caregivers who are properly trained (each state has it’s own requirements for training)
- Ratio of caregivers to patients is a management issue, but Gene’s rule of thumb is 5-6 residents to 1 caregiver
- Qualifications of staff required by the state varies, but what is important as a qualification of a caregiver is someone who wants to take care of the seniors and properly trained with right attitude
- Shifts is usually 12 hours, from 1 shift to 5 shifts
- Key Expenses – 3 categories to consider:
- Infrastructure – house, taxes, utilities
- Care of the Residents – caregivers, managers
- All inclusive – food, newspapers, entertainment
- Assumptions for gross income
- Residents are generally paying $4k per person, per month, minimum
- The national average rate is $3750 (source: genworth.com/costofcare) in a private room in an assisted living facility – and that goes everywhere from medicare-medicaid, from the bottom, to the highest, most expensive pay on the top (Gene’s business focus is only on private pay and not on medicare-medicaid).
- If you have 10 residents at home, from private to semi-private shared rooms, paying $4k per month, the potential gross income for the home is $40k per month.
- The expenses from it could be around 70% of the gross income.
- Thus, the net income is 30% of the gross income or $ 12,000 per month.
- Occupancy turnover – Vacancy rate on national average is 10% for the “big box” facilities.
- Key success factors
- Location
- Learning the right way to do it
- Raising the capital
- Hiring the right people
- Target Market’s capability to pay for the cost of care
- For most people who don’t have long term care insurance, there is government or state assistance
- For people who worked for large companies, they have their pension to pay for the cost
Gene’s Business
- Training – teaching people, from beginning to end
- Where to do it
- How to do it
- How to hire people
- How to raise capital
- How to finance the entire project
- How to run with hands-off not hands-on.
- For Cash Investors Only
- Gene has created a vehicle for those people who are only interested in investing in these types of projects.
- REIT (Real Estate Investment trust) in real estate senior housing
- Yield of a Residential Assisted Living is 30% return on capitalization (on the business itself not just the real estate) vs. to 8% of a large scale RAL. But there’s a lot of moving parts:
- If you are just lending money – 4-10%
- If you are participating in the profit – 6% plus equity
Ways to Get Involved
- As a passive investor.
- As a lender, holding a note and receiving a guaranteed income.
- Lowest return
- As someone who is willing to provide a capital.
- Someone else does the work
- You get a decent return, plus a percentage of the profit (10-15%)
- Someone who owns the real estate and operates the RAL facility.
- Hands off but still in control
What Does it Take to Get Started?
- Get trained. Learn what to do in advance. You need to know what you are doing.
- Build your team
- Manager
- Caregivers
- State requirements
- Qualifications
- For example: AZ – 104 hours of training vs. TX – 4 hours in 30 days
- You want someone who loves seniors and loves caring for them
- How many required (i.e. 1 caregiver for every 5-6 residents)
- Shifts (8 or 12 hour). Night shifts, day shifts
- How do you find good people?
- You want the right people
- Right attitude
- Right reason
- Wants to work with seniors
- Cash requirement
- Acquisition of a property (buy, rent, lease)
- Renovation of house that is involved
- Carrying cost to get it up and running to where you want to be
- Capitalization required will depend on different categories of involvement
- Don’t be under-capitalized
- Anticipate it taking longer to get it started than you think
- What will the negative cash flow be for first 2-6 months to get to break even. Be prepared for it. It could be $5-50K, depending on your business and the length of time
- You can calculate and estimate all costs before you get started.
Free Training Available
How to Reach Gene
- RALAcademy.com
- Phone 480-704-3065
IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher, GooglePlay, iHeartRADIO and Spotify and Subscribe, Rate & Review our podcast. This will greatly help in sharing this podcast with others seeking to learn real estate investing as a means to achieve a successful retirement.
Check out our other podcasts at olddawgsreinetwork.com.
Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.
Episode Sponsor: Meno Studio – menostudio777@gmail.com
