Facing the Silver Tsunami: The Different Types of Senior Living and Their Demands
Real estate market experts are seeing a deluge of demand in the senior living sector. Indeed, all signs point towards a “silver tsunami” as baby boomers retire en masse. According to an article from MarketWatch.com, the senior living market had around 730,000 homes in its inventory in 2017. This number is expected to swell into 920,000 per year from 2017 to 2027, creating a tsunami of opportunities that can draw in investors looking to diversify their portfolios.
With deal acquisitions totaling $15.7 billion last year (with $7.1 billion attributed to private buyers), the senior housing sector is expected to welcome even more investors to the fold as market fundamentals remained positive in March of this year. Property prices have also increased and investor demand picks up.
The opportunities will definitely keep on coming as seniors plan to retire in hot markets such as Florida and Arizona. For this reason, investors are basically looking at a potential goldmine that could yield high returns if they are able to play their cards right.
And despite the challenges posted by the CoViD-19 pandemic, the senior housing industry can still experience a shred of optimism as lockdown restrictions are eased.
It all starts with education. With the “silver tsunami”, investors have a new arena to play in. But to be successful, they have to know a lot about structuring effective investment strategies that produce the best possible outcomes. This would mean identifying the type of senior living facility to invest in.
Let’s take a look at a few of the best types of senior housing that could be ideal for beginners:
1. Active living
Active communities are basically neighborhoods where retirees (usually at a minimal age of 55) can enjoy specific amenities not found in traditional types of senior housing. That said, active living communities feature smaller living spaces and may include a mix of single-family homes and apartment rentals.
One of the best advantages that active living communities have is the fact that units cost less to maintain. They also offer enormous value-add potential since fitness centers and other types of leisure facilities can be added to cater to the active lifestyles of residents.
Shared living spaces are becoming popular as the years go by, seeing that seniors want to live in communities where they can be among peers. That said, senior cohousing options are ideal for retirees who want to scale down and live with other people in communities that allow them to make friends.
While this is a relatively new niche market in the senior housing sector, cohousing proves to be a class of its own as it engages seniors who wouldn’t want to live on their own. Moreover, communal living options prove to be more profitable compared to other senior living arrangements. In an article for US News, cohousing offers provisions for shared recreation areas, communal kitchens, and other amenities that residents need. These translate to a higher net operating income and stable cash flow.
3. Assisted living
For sure, there will be retirees who want to live in communities rich in personal care services but don’t want to end up in traditional retirement homes. Assisted living taps into this market by providing 24/7 assistance and therefore produces a higher yield for investors.
If you are looking to invest in assisted living communities, you might want to start with smaller sizes first. But the most effective step you can take is to build a syndication deal where you pool money from other investors to acquire a facility. This would allow you to purchase a higher-end property with lots of cash flowing units.
4. Senior Group Home
Another type of senior living investment you might want to consider is a senior group home. Although similar to cohousing, a senior group home is more intimate, gathering at least ten residents under one roof. But just like cohousing, this option is ideal for seniors who would prefer living with other people. Other than that, it also passes off as a more affordable option for retirees.
Senior group homes are fairly common in states such as Florida and can produce very stable revenue numbers. However, you will need to raise a great deal of capital and dive into high-value senior group homes in hot markets in order to get the most out of this niche.
At any rate, your success in the senior living market will depend mostly on the niches you want to invest in, the kind of value-add improvements you are pursuing, and the amount of capital you have on hand.
If you need help in getting started as an investor in the senior living market, we are here to help! Give us a call today to explore opportunities in this growing and highly profitable sector in real estate!