RAL 101: Why and How to Invest in Residential Assisted Living

Isabelle Guarino headshot on graphic that says Why Residential Assisted Living is Such a Great Investment

Isabelle Guarino, COO of RAL Academy, joined host Remington Ramsey on the Real Producers Podcast to share the secrets to success in residential assisted living (RAL). Be sure to check out the full episode, and read a few of the valuable takeaways highlighted in this blog post.

At Real Producers, we think it’s a great idea for real estate professionals to use their expertise, knowledge, and connections to get into different niche products under the real estate umbrella. One such “product” is residential assisted living, or RAL for short. Isabelle Guarino of RAL Academy explains what exactly this is.

“Residential assisted living is different than what you might think of when you think assisted living. It's not a commercial facility. It's not a big box [like most of the mega-facilities]. Instead, it's a single-family home in a regular neighborhood being used to house seniors who need 24/7 care and help with activities of daily living. So it's kind of twist on real estate investing.”

Everyone will be impacted by someone needing care at some point in their life. And when you find yourself constantly spending money on something (like expensive care for your elderly loved ones), it’s wise to stop and think about how you can potentially make money off of this instead. In the context of assisted living, why not acknowledge that your grandparents, or parents, or you yourself will likely need help – and make the decision to own the property and control the quality of care? It’s a choice between spending $5K+ a month for a loved one to be in an assisted living facility, or bringing in $10K a month (financial breakdown below) to own and operate your own RAL.

Why RAL is Better for Residents

Isabelle’s father, Gene Guarino, authored the book The Silver Tsunami of Seniors: Your BLUEPRINT to starting a Residential Assisted Living business that creates residual income and builds a legacy. In it he details what the actual care looks like in many of the big box facilities – and the reality is pretty grim. Even at the facilities that try really hard, they are simply too overextended, and top-quality care isn’t feasible.

Isabelle shares, “At the big box facilities, the ratio of care is usually 15-30 seniors to every caregiver. That's impossible. One person can't take care of 15 people, let alone 30. In our homes, it's a 4-to-1 or 5-to-1 ratio for seniors. So the level of care relative to the same cost is significantly different. Also, we all grew up in homes and are used to this setting. It's not these long hallways where, honestly, many seniors at the bigger facilities become just a number. When we get caregivers who come from that environment to ours, they're like, ‘I get to hang out in a luxury home all day long and care for four seniors? This is awesome.’ So it's so much better for the senior to get that quality attention and care, it's better for the caregivers who can actually do the job that their heart has called them to do, and better for the families knowing that everyone really loves their mom and dad and is getting that attentive care. It really is a win-win for everybody.”

Leasing Your Property for Someone Else’s RAL

In the podcast, Isabelle shared a few different routes someone can take to get involved in residential assisted living. The least “involved” option is owning a suitable property for an RAL and leasing it out to someone else who will actually own and manage the business. Here’s what Isabelle shared about this option:

“You can be getting twice the fair market rent. You've got a long-term, low-impact tenant. People are not signing one- or two-year leases with you when they're leasing to run their residential assisted living. They’re signing 3-, 5-, even 10-year contracts. So as a landlord, you're not worried about turnover. This is someone who's establishing a business and trying to plant roots. Location matters a lot to them, so it's a long-term tenant for you with little or no maintenance. There are no teenagers punching holes in the wall. You don't have to be worried as much about the upkeep. It's a great way to have those rental properties that are hands-off."

Owning an RAL Business Without Day-to-Day Involvement

Of course, if you wish to own the residential house but also wish to own the RAL business, that’s a viable and lucrative option – and it’s what they teach at the RAL Academy training. Isabelle’s company teaches not only how to own the real estate but operate the business in a very hands-off way. Isabelle owns three RALs and shares what her personal experience looks like:

“I spend about one hour a week on the phone with my manager, then I visit the homes every other month. Many tenants – 10 in each home, 30 total – don't even know who I am, and I want it to be that way because I don't want to be hands-on. I teach people how to build the business up passively, and then if they want to be more hands-on they are welcome to. I like owning not just the real estate but also the business because that's when we get to the cash flow of $10K, $15K, even $20,000 a month on those homes. That's what I like to see.”

Ideal Characteristics of an RAL Property

When we say single-family home as it pertains to a residential assisted living house, we aren’t talking an average three bed, two bath. What you need is a nice luxury or upscale home. It's still considered single family, but maybe it’s a six bed, five bath. About 300 to 500 square feet per resident is a good rule of thumb. So if you're having 10 residents, a minimum of 3,000 square feet and upwards of 5,000 is comfortable.

The first thing to look into when you're identifying where you want your home is the demographics of the area – and we're not necessarily looking for the senior. We're looking for Judy, the adult child who's paying for Mom or Dad's care and choosing where they will live. She is your key demographic, so 50-70 year olds who are upper middle class. You want to be within close radius to this customer base. Then you need to look into the area’s demand. How many other homes or beds exist, and are they full? Do they have waiting lists?

Most seniors will want private bedrooms and private bathrooms, but you’re likely not going to find a 10 bed, 10 bath on the market. This is where renovating will come into play. Homes that are on the market with funky layouts, properties that have power lines, or houses on super busy streets are great for this because your regular single family probably isn’t going to want those things.

Timeline for Getting Started

“If you're going to buy land and build custom from the ground up, that's going to take you some time – maybe a year or two. If you're going to buy a single-family home and convert it, that again could take six to 12 months. There are 30,000 of these that already exist today across our country so if you're buying an existing RAL you can have the business running day one. That is the easiest way to get involved, but it's going to cost a pretty penny. Or you could lease a home for this and be the landlord on the home and operate the business,” shared Isabelle.

Challenges of Owning an RAL

Like with any business, creating and running a residential assisted living home comes with challenges. Isabelle details what kind of hoops owners will have to jump through in order to push your RAL across the finish line and open your doors.

“This is a highly regulated and licensed industry. It's not an Airbnb or fix-and-flip. You know, there's no HGTV shows about this. It's not a highly saturated market in the sense that we’re 1.3 million beds short today. We need more homes like this, absolutely. It's just not the fastest, easiest thing to get into. Sometimes it takes a little bit of time, especially depending on which of the ways you get involved. There are barriers to entry and I like that. I don't think everyone should get into this business because we're caring for people's lives and you have to do it the right way. If you're not willing to jump through the hoops, you shouldn't be in this business.”

Cash Flow: The Numbers

Let's assume you do have the right heart and want to get into this. Let's briefly go over the numbers for what this looks like for an average home. Why would someone want to do this financially versus buy a short-term rental, long-term rental, or multi-family? Here’s the breakdown Isabelle offered:

“Let's say the national average to live in an assisted living home is $4,500 per month per person. If you had 10 residents in your home – around the country you're allowed to have somewhere between six and 16 residents, depending on your state or county’s limits. With 10 residents, that's $45,000 coming in every single month. Let's say there are $30,000 of expenses for food, electricity, cable, your caregivers, and your liability insurance. We need to bake in a lot for all those different things, and maybe your mortgage is $5,000 a month. That one home is cash flowing you $10,000 a month as the owner. Take-home money is $120,000 a year, and that's just one average home. In our training, we really focus on doing above-average homes because most seniors want something a little bit nicer than just the run-of-the-mill.

If you’d like to learn more, check out the RAL Academy webinars, or schedule a free discovery call with Isabelle or one of her team members at www.ral101.com.