Is the Senior Housing Industry Just Rent and EBITDA?

One of the largest evolutions in the senior housing industry is the sophistication of the financial model. The senior housing marketplace offers limitless opportunities for those seeking high return, senior housing investments. However, with the surge of fresh players entering the senior housing industry, it seems that the industry has been inappropriately reduced to a simple mathematical equation. Somewhere along the line, the senior housing industry turned into a machine focused only on rent and EBITDA.

The Dangers of Playing the Numbers Game

Most investors only want and know numbers feeding the bottom line. It is a simple demand considering how much money flows in and out of these senior housing investments. These investors want every metric available to measure successes, shifts and profits with their senior housing assets. They want to know where every dollar comes from and where it goes, including metrics like EBIDTA, census, rates, margins, per resident/patient day and more.

These numbers are undoubtedly important and relay key information in keeping senior housing investments performing well. However, this approach can quickly turn into a numbers game, shifting focus away from what truly drives this industry, caring for the health of seniors.

Take a closer look at the senior housing industry and it is easy to tell that the most successful operators focus not only on the financial metrics and measures but trust that quality care and good customer service will drive the bottom line.

Metrics are important, but they are not everything. Profitability always follows good service and a quality product. Instead of falling into the trap of playing the numbers game, like the majority of operators and investors in the senior housing industry today, make your senior housing assets truly stand apart from the rest through the quality of care and amenities offered.

Have Your Housing Investment Stand Apart as Best-In-Class

The number one priority of all operators is to keep the beds full. As long as the resident census remains high, the facility should be profitable. But with the senior housing industry continually growing, more products are entering the space. There are many more independent living, assisted living and skilled nursing facilities competing for the same resident or patient. As a result, it becomes crucial to stand apart and above the competition.

The senior housing industry is, first and foremost, an industry that delivers specific lifestyle healthcare for senior citizens. Think about what aspect of your senior housing assets residents find most attractive.

Do you have a certified dietician designing every meal for seniors?

Do you have a legitimate wellness program?

Does your facility offer an exceptional caregiving staff?

How do your social clubs compare with those of other facilities?

How does your physical plant compare with the local and regional market?

In addition to determining your particular strength, seek independent verification and third-party certification. These come in the form of a “Best in Class” recognition, and these awards carry with them great marketing tools.

Why would a resident want to live in your facility? How can you attract them earlier? The earlier they move into your senior housing asset, the lengthier their stay, which means you generate revenue for that much longer.

The Senior Housing Industry is Always About the Customer

The senior housing industry differs from other asset classes because operators essentially live with their customers. This is a service industry, the people are the business, and as long as the residents receive high quality care and quality of life, they have no reason to leave.

Some of today’s operators think they know all there is to know in the senior housing industry. While the industry is not new, it is still quite young, and demands grow and shift constantly. To keep up with the ever-changing business model, we recommend maintaining a “student-learning attitude”. Learn and converse with staff members, caregivers, guardians and residents. The market changes as they change, so they are your best resource to staying on top of your operating game.

Work with The JCH Investments Specialists for More Senior Housing Tips

The JCH Senior Housing Investment Brokerage serves as a premiere brokerage in the senior housing industry. We have designed, negotiated and closed hundreds of transactions. From independent living facilities to skilled nursing facilities, we are your experts for the perfect senior housing investment.

For your free business valuation or for more information, speak to a JCH investment specialist today!

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