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SHOW NOTES FOR EPISODE 423: WHY THE SENIOR LIVING REAL ESTATE MARKET IS BOOMING
Ten thousand Baby Boomers are turning 65 EVERY day! The number of people 65 years and older will double in the next 40 years! This reality means that the demand for senior housing will increase exponentially in the near and distant future. In this episode, real estate investor, author and entrepreneur Vinney Chopra discusses this phenomenon and shares how real estate investors can position and profit from this market shift.
What You Will Learn
- What is the “Silver Tsunami” and why is it important to you as a real estate investor?
- How much will the age group of 65 plus in crease over the next 10, 2030, and 40 years?
- What the various types of Senior Living are and which ones are the hottest
- Why is there such a strong demand for Senior Housing?
- How did Covid-19 affect the Senior Living space?
- When you lack the expertise, how forming a partnership can fill and strengthen your expertise
- How much does it cost to stay in Luxury Senior Housing and how are people paying for it?
- Comparing Senior living to multifamily investing – how do they differ and what are the benefits of each?
- Why Vinney chose to go into Senior Housing after being only in multifamily
- How REITs like Senior Living so much
About Our Guest
Vinney Chopra
Vinney (Smile) Chopra, originally a mechanical engineer from India, is a top multifamily investor and syndicator with over 40 years of experience in real estate. As a multifamily syndication expert, he has facilitated over 29 successful syndication deals. He has acquired as Principal and Key Sponsor a very successful real estate investment portfolio worth over $350 million, more than 4300 doors under management. Vinney is an international best-selling author and host of two podcasts. He holds an MBA from George Washington University. There’s a reason Vinney’s nickname is “Mr. Smiles” which is evident even through just hearing his demeanor in his voice. He is a strong believer in the power of an individuals’ ability to shape the world around them through positive thought, enthusiasm and selfless actions. His latest passion is to develop and build Luxury Assisted Senior
Livings Multifamily in a great partnership.
The “Silver Tsunami” is coming!
- The U.S. and the world has been experiencing a phenomenal “Silver Tsunami” for the last 2 1/2 years
- What that means is that EVERY DAY 10,000 Baby Boomers (people born between 1946 and 1964) are turning 65 years of age
- The total number of people 65 years of age and older are currently 56.4 million.
- In 10 years, that group will increase to 74.1 million people
- In 20 years, that group will increase to 82.3 million people
- In 30 years, that group will increase to 88 million people
- In 40 years, that group will increase to 98.2 million people
- For those that are 80 years of age and older:
- In 2020, there are 6.7 million
- In 2030, there will be 9.1 million
- In 2040, there will be 14.6 million
- In 2050, there will be 19 million
- In 2060, there will be 19.7 million
- There is a good book that addresses this area and other demographic changes called Big Shifts Ahead by John Burns and Chris Porter
Top Cities Seniors Relocate to When They Retire
- As seniors get older and retire, they are moving to warmer climates – places like Florida, Texas and Arizona
Senior Living Categories Defined
- In senior housing there are many different types of housing
- There are age-restrictive housing communities with little to no restrictions
- Independent living, not requiring special services
- i.e. 55 plus
- Retired communities
- Golf courses, etc
- Fitness Center
- Independent living with special services – Doesn’t need
- Transportation
- Housekeeping
- Assisted Living – More regulation is required to obtain state licensing
- One spouse has passed away
- The remaining spouse is degrading in health
- One person may have a fall and are no longer able to take care of themselves
- Cannot cook
- May need assistance with medication
- Doesn’t require 24-hour assistance
- Memory Care – state licensing required
- Alzheimer
- Dementia
- Monitoring required
- Skilled Nursing – Federal licensing is required
- High need-driven
- Medical services needed
- Convalescent Home
- 24-hour care required
- Independent living, not requiring special services
Demand for Housing
- Demographics show that there is going to be a significant need for housing for this major demographic group
- As detailed above, there are many different types of housing needed
- For example, in the Assisted Living area there are multiple options
- Residential
- Regular single family homes converted to accommodate 4 to 12 senior residents
- Special bathrooms
- Wheelchair access
- Commercial
- Larger facilities to accommodate more
- Residential
Cost of Senior Living
- Assisted Living
- $3,500-4,500 per month
- All utilities paid
- 3 meals-a-day, snacks, etc.
- Housekeeping
- Laundry, living
- ADL (Assisted Daily Living)
- Social, Educational and Cultural Programs are important as well
- How are senior residents funding their housing?
- Trusts
- Long-Term Care Insurance
- Family members often pay 30% of housing/care expenses
- Medical, Medicare
- Social Security
- Reverse Mortgages
- Sale of primary residence
Covid-19 Impact
- Because of the coronavirus, builders, owners and operators have had to rethink Senior Housing
- It has given new momentum and attention to the benefits of Senior Living done right
- Multi-storied facilities, for example, with elevators, may have to institute changes limiting elevator occupancies
- Assistant living operators don’t want to be in the “acute care” space – much more regulations, challenges and difficulties
- Assisted Living is more like real estate, apartment and multifamily ownership (60, 80, 120 units)
- They had 0% Covid-19 cases in their 15 facilities that Imran still operates (he sells the facilities but is asked by owners to continue operating)
- Strong lock-down policies
- When construction was halted across the state due to Covid-19, Imran got special permits in Michigan for his construction teams to continue to operate during the coronavirus because the demand is so strong for these facilities
Finding a Partner
- As Vinney was researching, he also started connecting with people in the Senior Living space and letting them know he is interested
- That’s when he met Shahid Imran, who previously owned a medical supplies company who is heavy into Senior Living. His experience includes:
- Ground-up construction
- He has already built 23 Luxury Senior Living facilities
- He also operates Senior Living facilities as well and knows the inside details on how to successfully run, staff and manage a Senior Living facility with assisted living and memory care
- He was building A+ “luxury facilities”and was getting high returns that are not normally associated with A+ properties
- He saturated the Michigan market with his facilities
- Imran’s love for Senior Living came about when he was looking for a place for his own parents
- He wasn’t satisfied with what he saw out at the ridiculous prices and decided to build his own
- Now, his motto is “We spoil the ones who spoiled us first.”
Comparing Senior Living to Multifamily Investing
- Vinney started comparing Imran’s A+ class Senior Living facilities with the C, B and B+ class apartments that he has bought
- Vinney has never purchased A class multifamily because it’s hard to raise the money and get a great return
- With multifamily, you can get $1,100-1,300 in monthly rent but with Senior Living, you’re looking at 3X multifamily (averaging $3,900-4,200 per month)
- He looked at concessions and Imran has
- Delinquency is 0%
- 24-30 month average client stay in senior living and 7-12 months average stay in multifamily
- In multifamily, you go where the jobs are. In Senior Living, they are retired. It doesn’t
- Maintenance and repairs is almost $0 because it’s brand new
- They also sell at 2-3 years as opposed to multifamily, which is now 5-7 years
- They only have to get a construction loan (currently getting 4.3% fixed for 10 years and 24 months of interest-only payments) – don’t have to mess with Agency debt
- Vinney has done 29 successful multifamily syndications and knows how to raise money
- Vinney is still buying multifamily, too
- Together, Imran and Vinney make a strong team
- They also want to build 6-8 Senior Care facilities per year and sell them after 3 years so they can keep building more
- Selecting the land, getting the proper permits and licenses and working with architects takes about 6-9 months.
- Then, when they break ground, it takes another 12-14 months to finish construction
- Once the building is 60-75% completed, they start the marketing to build-up occupancy
- There goal is to be 50-70% occupied when they open each facility
- It takes 65-75 staff to operate a Senior Living facility of approximate 100 residents – much more staff than required for a multifamily of 100 tenants
- One of the most important and key factors is hiring the best caregivers. The resident relationships with the caregivers is key to a successful operation.
- The higher rent amounts cover the additional people
- But stabilized Senior Living housing out performs multifamily by 2X (NCREIF study)
- If you run the Senior Living operation right and with higher standards it can provide excellent care for its residents
Why Luxury Senior Living?
- Before he started buying and building Senior Living facilities, Vinney’s partner Shahid Imran owned a medical supply company that served many health care facilities across the U.S.
- He witnessed, first hand, the rampant poor and neglected facilities all over the U.S. They were smelly and old. He would never take his own parents to one of these places. It made him very unhappy, but it also motivated him
- He sold his medical supply business for millions of dollars and set out to build “Luxury Senior Care” facilities at affordable prices
- He builds only single story facilities with swimming pools, putting greens, gazebos, multiple courtyards, private gardens, movie theaters, lounges, libraries, spas, salons, private eating facilities, special rooms for private parties and birthdays with family
- They have special events scheduled every month
- They also have transportation for special field trips and outings
REITs Like Senior Living
- Real Estate Investment Trusts love the Senior Living segment
- Vinney and Shahid have received LOIs (Letters of Intent with first rights of refusal) from multiple REITs
- REITs are telling them to contact the REIT when they are finished building it, tell them what the price you want and if they don’t want to invest, then they can place it on the open market
- Some REITs are contacting them when the property is only 55% complete with an offer
- There is pent up demand from Family Offices and administratives as well
How to Reach Vinney
- Website: VinneyChopra.com
- Email: Vinney@VinneyChopra.com
Interested in Learning More About Investing in Senior Living Facilities
- If you would like to learn more about investing in Senior Living facilities, click here or contact Bill Manassero at bill@manasseroproperties.com or call/text him at 949-324-1820
DISCLAIMER: Many of the above strategies take knowledge and have a higher degree of risk. You need to do your research and/or work with someone who is experienced to reduce your risk.
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