There’s a massive real estate boom happening in this country, and it’s going unnoticed by most real estate investors. It’s not the residential market, which is as hot as ever, or even the larger commercial market. It’s a niche within the commercial market. We’re talking about senior housing developments.
The Benefits of Investing in Senior Housing
Senior housing has always been an investment option, but it’s never been more attractive than it is right now. You could even make the argument that it offers the potential for the greatest return of any type of residential or commercial real estate. Here are several of the key benefits:
- Long-term growth potential. It doesn’t take much research to find that the population is aging and more and more people are needing some form of assistance as they age. Fewer people are aging in place than ever before, which means nursing homes and assisted living facilities are in higher demand. This all means one thing: long-term growth potential.
- Lower competition. When compared to residential real estate and traditional commercial properties, fewer investors are paying attention to senior housing. This means less competition and better opportunities for securing high-ROI investments.
- High occupancy rates. Turnover is a normal part of owning income-producing rental properties. But unlike college rental properties, apartments, retail storefronts, or even single-family homes, there’s far less turnover with senior housing. Once seniors find a place they like, they aren’t interested in moving. They prefer stability (particularly as their health declines).
- Recession-proof. Most investments take a pretty big hit when the economy dives into a recession. But with senior housing, there’s almost no impact. Seniors always need long-term care. This gives you a very reliable source of income in any economic conditions.
- High ROI. Because of the long-term growth potential and high occupancy rate, there’s generally a pretty healthy ROI associated with senior housing. You obviously have to do your due diligence and select good properties, but it’s possible to get healthy returns year after year.
Crown Commercial Property says it best: “Population patterns, economic activity and demographic statistics all play a part in shaping the economy as well as commercial real estate opportunities. The ongoing labor shortage, the absurdly high cost of lumber and the rapid aging of the population sets the stage for commercial real estate investors to profit from investments in senior housing.”
While you might not want your entire portfolio to be focused on senior housing, it can certainly provide a nice vehicle for diversification. Even at just 10 to 15 percent of your portfolio, senior housing gives you a safe, reliable, and recession-proof investment to hang your hat on.
3 Tips for Success
As you think about adding senior housing to your investment portfolio, consider the following tips for success:
- Know Your Options
There are numerous types of senior housing. Each one has its own nuances, advantages, and challenges. Some of the most common include:
- Aging in place
- Assisted living
- Age-restricted communities
- Nursing homes
- Co-housing facilities
- Continuing-care retirement communities (CCRC)
Make sure you’re familiar with each type of senior housing. When considering a specific property, you need to be aware of the kind of property it is and how this impacts your investment.
- Look Across State Borders
Senior housing is one of those real estate investment niches where it pays to be state-agnostic. In other words, you should look across state borders to find the best markets and opportunities. According to Mashvisor, some of the best senior housing markets in the country right now include Tampa, Orlando, San Diego, Chattanooga, Fort Wayne, Lakeland, Knoxville, Grand Rapids, and Sarasota.
- Carefully Research the Facility
If you’re investing in a single unit within a larger facility, it’s imperative that you understand what kind of facility it is and read through all of their rules, covenants, and restrictions. First off, you need to know who is responsible for specific fees and expenses. Secondly, you have to get clear on the rules surrounding renovations, lease agreements, tenant turnover, etc.
Adding it All Up
Senior housing is quietly becoming one of the best and most profitable real estate investment niches in the marketplace. But within the next five years, it’s no longer going to be a secret. Now’s the time to invest. Do your research and dive right in!
