Middle Market in Senior Housing
There is absolutely no doubt that the senior housing industry is in a cycle of robust construction. New buildings are being built every single day, but for who?
Despite the growing number of investments in the senior housing industry, operators and developers are consistently ignoring a largely underserved market.
The Middle Market is Untapped
The middle-class market of the senior housing industry targets affordable and low-income residents. There are very few operators serving the middle market with new construction, but it is easily the largest senior population needing residence.
Most developers are opting to construct new buildings. The land is expensive and with the cost of new construction, service and rental fees must also increase. Residents in these new facilities can pay upwards of $8,000-$10,000 a month. Because of high construction costs, it is nearly impossible for new buildings to house middle to low-income residents and still maintain profitability.
Unfortunately, a large, growing, part of the senior demographic cannot afford these high monthly payments and need more affordable care.
Get to Know the Middle Market Residents
Residents living in assisted living facilities pay an average of $4,000 to $6,000 a month. For private pay senior housing industry facilities, residents pay through lifelong investments, whether that is a 401K, real estate or traditional savings accounts. Middle class residents also have these lifelong investments, but may not be able to afford such a high price tag.
The middle-class market still works on a private pay model and current residents pay between $2,000 and $3,500 a month. This is a much more reasonable price range and presents a fantastic opportunity for the savvy developer.
Lastly, the remaining group of the senior housing industry demographic is the residents receiving Medicaid. Seniors receiving federal aid are able to do so because they have little to no net worth. These seniors are often placed in facilities that operate specifically on government subsidies.
The difference in pay model for low income/government subsidized housing may discourage operators from participating. For those developers, the middle market may be an extraordinary opportunity for their next investment in the senior housing industry.
Make the Next Senior Housing Investment in the Middle Market
Even now, few operators see the potential of the middle market. But, it is more than possible to make returns housing moderate to low-income residents.
Operators and developers can do so by picking up existing facilities on affordable land away from the city without compromising on population density. Minor renovations make the senior housing investment proper for the middle class market while keeping monthly costs low for residents.
The need for senior care will never diminish. People are living longer than ever before and will need care. The middle class market is largely underserved, and looking for care.
Navigate the Senior Housing Industry with the JCH Group
The JCH Senior Housing Investment Brokerage is the leading brokerage for healthcare properties. Developers and operators alike depend on our senior housing investment specialists to navigate the tough terrain of the senior housing industry.
To find your perfect opportunity in the middle market, speak to our team for guidance.