The senior housing industry is ripe with opportunities. Many new investors have just acquired their first assisted living facility. They will soon learn from experienced operators and owners that the most important aspect of surviving and thriving in the senior housing business is having a solid management team.

This is true for any asset class within the senior housing industry. Consequently, it is imperative that owners find the right management team and build the right type of management contract.

The Responsibility of the Management Team

Owners, especially new buyers, know what a business is worth. There is a concrete amount paid to acquire that senior housing investment. However, maintaining profitable operations is a completely different matter. As a result, owners rely on their management team after they buy healthcare properties as senior living property investments.

Most investors choose to hire third party management companies. There are a variety of management companies. Each specializes in a particular field, whether that by asset type, region or market.

The main responsibility of managers is to oversee day-to-day operations. They interact with the facility on an intimate level, dealing with the daily circus and instituting initiatives to reach operational goals and budgets.

In order to work together, the owner and manager must enter into a management contract. This is not a lease. It is an agreement that outlines the facility’s objectives, management responsibilities and outlines compensation.

The Management Contract

The management contract is the prime motivator for the manager to perform well. The industry standard management contract calls for managers to be paid five percent of gross revenue each month. As a skilled nursing and assisted living brokerage, the JCH Group does not often recommend this contract model.

Under this model, managers are encouraged to fill the facility to maximum capacity to drive up revenue for a bigger five-percent cut. However, there is no motivation to manage expenses. As a result, though revenue may rise, so may spending, which leaves little profit for the owner.

Instead, owners are encouraged to build a contract where the manager receives a smaller percentage of gross revenue. In addition, owners should incentivize operational goals with bonuses or profit sharing. This way, the manager is motivated to increase revenue while still being held accountable if the net profit is in the red. Aligning the interests of the owner/investor and the management company is crucial to the profitability of any facility.

Consult with the Top Skilled Nursing and Assisted Living Brokerage

The management contract can be negotiated alongside the owner by a senior housing brokerage. It is best to rely on investment specialists before signing the management contract to ensure that there is a system of checks and balances in place in order to protect the owner’s interests. Experienced legal counsel is also a necessity.

The JCH Group is a premier nursing home brokerage specializing in senior living investments, assisted living homes for sale, senior housing valuations, and contract negotiations. No matter your level of experience in the housing business, our team of experts is available for acute insight and sage advice.

To speak with your investments specialist at the JCH Group, contact Nick Stahler at 714-463-1663.

Assisted Living Information

Assisted living

Assisted living is an asset class known by many different names: assisted living homes, assisted living facilities as well as board and care homes. Though these facilities may be called by different names, as a whole, assisted living provides the same care. Choosing the right size facility is important in the assisted living investment process.

Within senior housing’s assisted living sector, there are two basic types of physical plants. First, the residential home facility which is a single-family home converted into an assisted living home or more commonly referred to as a board and care home. Second, the purpose-built assisted living facility is a structure that is built solely for use as an assisted living facility and is typically much larger in size.

Though staffing requirements change with the size and scope of the facility, the type of care provided remains uniform in all types of assisted living.

Differences between Residential Care Homes and Purpose-Built

In California, assisted living homes following the residential home model, house three to six residents at a time. In some states they may care for as many as 10 or 12 residents depending on the size of the residence. This model allows for a more intimate, homelike setting. Residents are able to interact with the same caregivers on a daily basis, allowing for a more personalized level of care.

Purpose-built assisted living facilities typically offer 20 beds or more, and can have up to a couple hundred residents living on campus. Larger facilities offer an energetic environment with a full social calendar. Because the physical plant is larger and there are more residents to care for, the type of attention each resident receives may not be as intimate as that offered in a residential home model. However, for residents who prefer plenty of things to do and people to meet, a purpose-built assisted living facility would be the best choice.

Operators Choosing to Buy Assisted Living

For operators, the distinction between residential care homes and purpose-built assisted living facilities is even more important. The two are entirely different, which allows for operators of varying skillsets to get involved in the senior housing industry.

Operators should look for residential care home assisted living facilities for sale if they are:

• Just starting in the business
• Want to provide personalized and thoughtful care
• Be fully involved in the details of operation
• Enjoy working with a smaller staff

Operators should look into purpose-built assisted living facilities for sale if they:

• Want a larger campus and resident population
• Are confident in managing staff members and delegating responsibilities
• Enjoy interacting with a larger number of residents
• Have strong communication skills

Every assisted living operator is required to have the proper licenses and insurances to operate the plant lawfully.

The JCH Group as Your Assisted Living Brokerage

Senior living property investments are available if you know where to look. The JCH Consulting Group is the preferred senior living brokerage. Our team of experts knows exactly how to get the best senior housing investment, keeping your goals and preferences in mind.

If you are searching for assisted living properties for sale or want to get involved in the senior housing business, contact one of our investments specialists for further information. Find out what a business is worth and why the choice to buy assisted living in our current senior housing industry is a good one.

Senior Housing Residents

There has been significant publicity regarding the final increase of the minimum wage to $15 an hour. Though many celebrate this unprecedented win for full-time employees, someone must pay the increased cost. Sadly, residents on fixed incomes are the least able to do so and the most likely to have to.

The mandatory increase pushes operators into a tough situation, forcing them to make difficult decisions that benefit no one. The unfortunate reality is that in the senior housing industry, a $15 minimum wage means that, ultimately, the residents will pay in increased fees and rent.

Operators Face Tough Choices

We know the average age of the assisted living resident is 83 and most are placed in assisted living or skilled nursing facilities because they are unable to care for their own healthcare needs. Operators of senior housing facilities will now have their lowest paid full time employees earning $32,000 a year. Since operators are unable to squeeze this money out of all ready dwindling profit margins on their own, they must consider a few different options, most of which will not work.

First, operators could cut down on staffing in general. Unfortunately, this hurts the quality of care provided for the people who need it most. We can all agree that this is not an option that works for anyone involved.

A second option is to reduce the quality of food served to the residents.

Since medical care and nutrition are absolutely crucial for the residents’ well-being, good operators most often choose not to cut costs from these areas. Alternatively the only viable option is to raise the rates the residents pay to generate the additional revenue to absorb this increased cost.

$15 But Not Much Else

Since entry-level employees are receiving this mandatory raise, employees currently being paid $32,000 will begin expecting a raise equivalent to the minimum wage raise, which only exacerbates the problem. With bloated wages, operators need to generate large revenue increases just to keep the senior living facility running.

An additional concern is the new minimum wage may also push employees into higher income brackets. This may disqualify them from insurance subsidies they are receiving.  Now that their wages are higher so are their insurance costs. In this scenario, employees may end up with less net pay than they did with the lower wage.

At this time, the government has not announced plans to increase reimbursement rates to cover the higher wages they mandated in Medicaid and Medicare models. Operators are now left with another dilemma to fix within their profit and losses.

With less money to spend on staff members, equipment and other services, no matter how it’s cut, the residents will pay for this change in wage.

Even though all in the senior housing business space face this new challenge, demand remains very high and there is a still a pressing need for quality care.

The JCH Group as Your Skilled Nursing Brokerage

The senior housing industry will always be changing in complex ways. Still, there are plenty of senior living property investments you can make with the right information.

As your first choice investments specialists, the JCH Group team members are available to help you through your choice to buy healthcare properties or list your assisted living for sale.

To reach our assistance, contact us at your will.

Senior Affordable Housing

Senior affordable housing is a segment within the senior housing market. It is often overlooked or ignored because it does not generate the type of revenue private pay or Medicaid facilities produce.

Though it may not be the most idealistic addition, senior affordable housing can be an integral piece of any operator’s portfolio. In fact, many operators specialize in senior affordable housing assets or use them to positively diversify portfolios.

The question now becomes: How do I make senior affordable housing a good investment? Then, what do I do with it?

Maximize Margins

With proper expense management you can increase profit margins. This can be accomplished by squeezing and cutting costs in all departments.

At a minimum, senior affordable housing rooms should be semi-private, fitting two residents per room. This helps maximize revenue on a per unit basis.

Residents enter affordable housing knowing that the facility will not offer private rooms. Remember that you are making senior housing available to people who cannot afford private pay models. This makes senior affordable housing a fantastic PR move while still generating a profit.

Find the Facility Value to Match

If you have a prime piece of real estate, it wouldn’t make much sense to use it for senior affordable housing. For senior affordable housing to work as a profitable venture, the real estate value needs to be consistent with the facility’s profitability.

These will be less desirable or less attractive facilities. Senior affordable housing properties are often older and may be in need of more repairs or maintenance. In short, they will not be as nice as private pay facilities.

Do the math and the research to ensure that the facility and real estate you are acquiring conforms with the value a senior affordable housing facility will generate. Otherwise, consider a different healthcare use.

Use the Tax Benefits with Other Healthcare Properties

When you acquire and operate a senior affordable housing facility, the government typically provides tax credits. These tax credits are exceptionally valuable. They appear on real estate taxes or income taxes and state that you have provided senior affordable housing.

These credits can be used to offset taxes incurred from your private pay facilities or other more profitable facilities. Many operators use senior affordable housing tax credits in this manner to increase profit margins.

Choose the JCH Group for the Best Deals

in Senior Affordable Housing

Senior affordable housing should not go ignored. Though not particularly profitable, they are still valuable in many other ways. Used in conjunction with other healthcare properties, senior affordable housing can be one of the best decisions you make as an operator.

The JCH Group is a senior housing brokerage specializing in high profile and complex deals all across the senior housing market. Our team is dedicated to finding and assembling the best deal for your wealth and success.

The JCH Group is ready to help you acquire or sell any senior housing property of interest. To meet one of our talented agents, contact us at your convenience.