Investing in Senior Housing Properties - Alternative Investment Success in 2023

Canada’s population is rapidly ageing. While this presents challenges for pension funds and policymakers, it’s also creating opportunities for savvy real estate investors—especially those with knowledge and expertise in senior living.

A report from Statistics Canada in 2017 showed that for the first time the nation’s history, the number of seniors exceeded the number of children. According to the report, nearly 17 percent of the nation’s population is 65 or older. Certain areas of the country, including provinces in Eastern Canada, are ageing more rapidly than Western Canada.

In 2011, Statistics Canada reported 29 percent of Canadians to belong to the Baby Boomer generation, born between 1946 and 1965. As the Baby Boomers continue to age, their ability to live independently in single-family homes will continue to deteriorate. Because of this, the demand for senior housing solutions is only expected to grow in the coming years.

But first, if you would like to learn more about senior rental investments, or would like to connect to a mortgage broker to start securing the financing you need, click the link below to book a free strategy call with our team at LendCity today.

A primer on senior rental housing

Investing in senior rental housing is often more complicated than purchasing a typical single-family or multi-family investment property. There are several types of senior housing you should be aware of. The type of senior housing you ultimately opt to invest in will also determine what, if any, regulations your property is subject to.

Senior housing properties typically require more deeply involved management strategies compared to most multi-family rental properties. Additionally, it’s important to be aware of any liability you’re assuming by purchasing and operating a senior housing community.

While senior housing can be a lucrative purchase for the right investor, understand that owning and operating a senior housing community often requires more care and attention compared to most other types of investment properties. Your operational costs are likely to be significantly higher, and you may need to consider governmental regulations when establishing property services.

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Types of senior housing

The type of senior rental housing you invest in will largely depend on your comfort level with the different types of care and services provided at each housing class. There are also different market needs depending on your target geographic market. Here are the most popular classes of senior housing available:

Independent living

Independent living centers are multi-family housing concepts designed specifically to meet the needs of senior residents. Independent living centers, compared with traditional apartment buildings, may offer greater accessibility tools, like wheelchair ramps and elevators instead of staircases and escalators. Most independent living solutions include meal plans, some housekeeping services and unit maintenance. Independent living centers don’t provide healthcare or advanced care services.

Assisted living

Assisted living facilities provide a wide range of services for seniors. Generally, they cater to individuals able to handle most aspects of daily living, but who require regular medical attention or help with daily tasks, like bathing. Skilled professional nursing assistants usually work at assisted living facilities, providing help with tasks like administering medications, bathing and eating for older adults with more extensive needs.

Skilled nursing facilities

Adults unable to tackle most daily tasks, and those who require extensive medical care daily, are best served at skilled nursing facilities. Here, registered nurses and other healthcare professionals provide services designed to meet the needs of seniors with more advanced requirements. Because they provide healthcare, skilled nursing facilities are often subject to fairly stringent regulations.

Continuing care retirement communities

These senior housing solutions are among the most lucrative, yet most challenging, to own and operate. Continuing care retirement communities offer a mix of different housing types. A resident may start in independent living, then transition to a skilled nursing unit at the same property. These types of communities are attractive to prospective residents because of the stability and flexibility they offer.

Senior rental housing investing mistakes to avoid

If you believe investing in senior housing is a great way to get a leg up on your financial objectives, carefully consider some of the more common senior housing investment mistakes below. As with all niche markets, this one can pay great dividends, but has its obstacles and nuances to understand and plan for. Some of the prime mistakes new investors make include:

Failure to know the market

If you’re thinking about investing in a market that already has an abundance of independent and assisted living centers, you’re unlikely to find your investment is very successful. Perform extensive research to determine which senior housing sector needs are most pressing in your target sub-market. Or, if those needs have already been met by other investors or private entities, consider shifting your focus to a nearby market that’s underserved.

Develop a senior housing strategy that accounts for local sub-market factors, as well as your own needs and objectives as a real estate professional. If you’re hoping to keep your operating expenses at a minimum and avoid dealing with governmental regulations, for instance, you shouldn’t ever invest in skilled nursing, regardless of where national and regional trends are headed.

Placing your eggs in a single basket

As with all real estate investments, senior housing can be a risky purchase. Because of the increased costs associated with operating and owning senior-focused properties, many investors struggle to balance their cash flow. If you’re a first-time investor, senior housing likely isn’t for you. You should think of a senior housing investment as a way to diversify an existing real estate portfolio.

Choosing the wrong operators

The people you hire to operate your senior housing property will ultimately make or break your success with that particular investment. Hire property managers intimately familiar with both your local market, as well as the senior market as a whole. Also, make sure they have a demonstrated track record of observing all relevant laws and regulations.

Using senior housing as an investment vehicle allows you to both reap high returns while also providing the local market with a much-needed resource. Opting to make senior housing a part of your journey toward financial independence can help you diversify your investment strategy. Plus, you’ll make a difference in your community by serving a growing population in need of stable, reliable housing.

If you would like to learn more about senior rental investments, or would like to connect to a mortgage broker to start securing the financing you need, click the link below to book a free strategy call with our team at LendCity today.

Investing In Senior Housing Properties, With Scott Dillingham