The senior housing industry is quickly becoming a mecca for real estate investment. Many new players have entered the arena from other asset classes, but the senior housing industry is far from crowded. It may, however, be difficult to spot the right opportunity, particularly one that matches your goals and talents.

Still, for those searching to buy assisted living facilities or post their CCRCs for sale, possibilities are endless. For operators, leasing facilities in the senior housing industry is becoming increasingly commonplace, and may be exactly what’s needed to build a portfolio in its infancy.

Responsibilities of the Tenants and Landlords

Why lease a skilled nursing facility? Why lease an assisted living facility or other healthcare properties for that matter? REITs own the real estate in as much as 40 percent of facilities in the senior housing industry. As a result, leasing is not only common but, for many, the practical choice.

Many operators turn a healthy profit from leasing facilities in the senior housing industry. In fact, it may also reduce responsibilities and risk for the tenant as liability is distributed between two parties instead of one.

Read: Red Flags To Look For When Investing In Assisted Living

The majority of leases are triple net (NNN). This means that the tenant is responsible for all expenses, including property taxes, repairs to the plant and any and all insurances. Meanwhile, the landlord services the debt or mortgage.

On occasion, there are leases with provisions for large repairs if they exceed a predetermined dollar amount, landlords share the cost. This is often to cover unusual incidents, such as a car crashing into the building or fire.

Senior Housing Industry Leasing Negotiations

There are some clauses in the contract negotiations that look different from others in accordance to market conditions. Unfortunately, market conditions change. For that reason, it is ill advised to negotiate your own lease contracts.

Negotiations on market rate leases should be left to brokers, attorney’s and investments specialists who know the senior housing industry inside and out. They are familiar with the parameters of the industry and the market conditions, they create boundaries to the clauses that protect you against unfair and unrealistic expectations.

These lease contracts include clauses such as lease rates, escalators and performance covenants.

Escalators and performance covenants are meant to ensure that tenants do well enough to add value to the facility. The senior housing brokerage chosen as a representative should be well versed with where these lease terms should stand. Doing so will only help you satisfy these requirements year after year.

The JCH Group for Your Housing Investments

No matter who you are in the senior housing industry, the JCH specialists are your top resource to make your senior housing investments flourish. From skilled nursing facilities to assisted living facilities to other types of healthcare properties, we are prepared to make the most of any situation. Our agents skillfully handle negotiations, contracts, lease terms, valuations, consultations, sales and transactions.

To learn more about how the JCH Group improves your senior housing investments, contact our investments specialists at your convenience.

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