Do you want to invest in the real estate industry but looking for a different new spice in it? Don Costa welcomes Isabelle Guarino Smith on The Flip Talk Podcast. Isabelle, the COO at Residential Assisted Living Academy, dives into investing in residential assisted living. Senior Homes is different than most real estate investment opportunities because it is not just real estate. It is a business. The demand and supply in residential assisted living do not match, and it is a great business investor might want to dive into. Find out more by tuning in to this episode!

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Senior Housing: Investing In Residential Assisted Living With Isabelle Guarino Smith

I have an amazing guest with me. I want to first talk about some of the cool things we have going on in the show. Make sure you’re going on over to FlipTalk.com and checking out some of the free resources we have. We also have some amazing trainings and opportunities to be part of our circle. With that said, I have Isabelle with me. How are you doing, Isabelle?

I’m doing good. I’m happy to be here.

I’m glad to have you. We didn’t touch on this before we talked, but I knew your dad, one of the most incredible speakers that I have ever come across. It was a pleasure having the opportunity to know him for the short time that I did. I just want to throw that out there. I’m excited to talk to you about what you have going on. We haven’t spoken before. This is the first time. I’ve seen you at a few events. We haven’t had the opportunity to talk, so I’m excited to hear what you have going on. Let’s talk about what you do and why you do it, and we’ll go from there.

Thank you for saying that. I appreciate that. I feel like I had seen your name in his Rolodex somewhere at some point, so I’m glad that you were able to meet him. My dad passed in October 2022, and I had been working with him for years, just behind the scenes as his COO, running the ins and outs of all of his businesses. When he passed, my job really transitioned to stepping up front and leading this charge going forward, continuing to teach investors and entrepreneurs how to own and operate residential assisted living homes for seniors. We not only own and operate our own homes, but we teach people how to do that. That’s what I do day in and day out. I’m all about that. My world is senior housing all the way.

I’m excited to be able to share because, to me, it’s a great opportunity not only to cashflow really well, but to make a mega impact. In your life at some point, everyone hits a point where they want to do something that has purpose and meaning. I think it’s a cool opportunity. Whether it’s a fit for your readers or not, it’s something to ignite that in them to say, “Let me start thinking down that direction, not just making all the money. How can I give back to the world and the community?”

 

 

How can you give back from a business perspective? Legacy and paying forward are huge, but also to take an asset and be able to solidify its income. It’s the best of both worlds. You have your typical single-family rental and one rental amount in whatever market is. If it’s vacant, you turn it over, whereas, with Airbnbs or the residential assisted living, there are opportunities to buy that income, and also mitigate some of those vacancy issues and stuff like that. That’s what I want to get into. First and foremost, for somebody who’s interested in the residential assisted living stuff, can you take your typical 3-bedroom and 2-bath house and do that? Do you need a larger property? What would somebody be even looking for if they wanted to get into that space?

The number one thing is going to be the location. What I mean by that is the demographics of the area. That’s going to determine if it’s the right location or not. You want to do that demographic research and find out, is it around the 50 to 70-year-olds who are upper middle class and typically homeowners? It might work with the property you already have, but that demographic and location research is the first thing to determine, “Could this work or not?” It’s going into what the rates are in that area. Determining the national average for assisted living right now is $4,500 a month.

Every city and state completely varies. Salinas, California averages $7,100. You have to find out what is the average in your area and determine whether are there homes you know nearby. Are they full or empty? What’s the story? What’s going on there? What’s the maximum amount of residents allowed? In California, you’re only allowed to have six residents in a home. In Illinois, Texas, you’re allowed to have sixteen. Most states fall between those 2 numbers, 6 and 16. If you have a 3, 2 in California where you only are going to have 6 residents, that home might work because you’re going to retrofit it, and maybe add on some square footage.

If you’re in Texas, no, unless you’ve got a bunch of acreages, then you can add a bunch. It ranges. Depending on that location, it’s going to determine whether should you even look further, then finding out the area and your maximum amount of residents allowed. Should that be a property you start with or not?

For instance, if you had a 4-bedroom, 2-bath, you could have 6 residents there. I’m assuming there’s a caretaker.

Caregiver.

Ideally, you’d want a 4-bedroom to have 6 residents, and you could have 2 people per room.

You can do shared rooms, but people do want private bedrooms as many private baths as you can. Your caregiver does not have to live there. They’re still there 24/7, but they’re doing shift work. You don’t need an extra space for them to live.

I want to dissect all that. Before we do that, back to the location. I’ve had friends that have had transition homes for vets and for people who are coming out of rehab. I know neighbors can be particular about having those homes that are in those neighborhoods. Do you run into those issues with neighbors with a residential assisted living?

People just have NIMB, Not In My Backyard syndrome. They’re always just, “No.” I think the biggest thing is that of the types of group homes we’re seniors. They’re not smoking outside, running around naked, and doing all this crazy stuff. They don’t even have cars and can’t drive at that point. I also am like, “Do we have 24/7 awake people at these homes?” That is an incredible neighbor to have. Talk about you’re out of town, you need your trash cans to let out to there was a robbery and someone’s awake 24/7. They might be a great neighbor for you to have. One hundred percent, people will still get angry neighbors, but because of the Federal Fair Housing Act, which is a Federal Law, technically, any HOA neighbor, city, or state can’t tell you no.

One hundred percent, people will still get angry neighbors, but because of the Federal Fair Housing Act, which is a federal law, technically, any HOA neighbor, city, or state can't tell you no. Click To Tweet

It’s a Federal Law that would be discriminatory against disabled people because if you need assisted living, you’re considered disabled at that point. We have created the RAL National Association which represents all 30,000 of these care homes that already exist. If you ever run into an issue, the National Association will protect you. We have lawyers there who have fought for many of our students, and they win every time. It’s not a fun fight. If you can avoid it by doing the neighborhood over that doesn’t have an HOA, I’m always going to say to go to the neighborhood over.

You could put it anywhere, but you want to be a good steward of whoever your community is, and make sure that you are putting it somewhere where it’s going to be more accepted obviously. Pick your battles is what you’re saying. How do you go about locating? Say you want to get into this, what are some of the things that somebody could do to locate a property that would be ideal? Do you do typical marketing like a typical investor, cold calling or direct mail? Are you on the MLS? What are some of the strategies?

Definitely going MLS just searching for a property. There are four ways you could get into this. The one we’re referring to right now is buying a single-family home and converting it to become. In that case, I would be on MLS looking for a deal, maybe working with a realtor, and letting them know what you’re looking for. We are not looking for the same thing that most other investors are. We don’t necessarily want that 3-bedroom, 2-bath. I’m okay if there’s a power line, if the home backs up to Walmart, and if a fire station is right next door because first of all, my seniors can’t even hear that well anyways, so none of those things bother and affect them. Secondarily, the busier the street is, the more traffic that goes by, the more eyes on my property. I love that.

For someone with two kids and a dog, they don’t want their kids playing soccer and the ball going into the main road. For me, I want it as close to the main road as possible. There are some things that you’re looking for that set you apart. You’re not necessarily fighting for the same properties as most other investors, any funky-shaped homes, any homes that maybe already have ramps, guardrails, and different senior-safe type things. Maybe someone who was disabled lived there and they had to retrofit the home for them. We bought a home that had the weirdest-shaped living room.

It was a 1,300-square-foot living room and has 10 fans in it. What is a regular-single family going to do with this? The property sat on the market for months because everyone would come in and be like, “What do I do here?” For us, we chop it right up. We turned it into four bedrooms, two bathrooms, a little hallway, and a living room. It was perfect. We want that funky home that maybe the regular-single family investor would pass up.

That makes a lot of sense. I’m assuming you don’t go in and put granite countertops in, travertine tile floors, and you’re going in just making sure that it’s somewhat ready, comfortable, safe, and secure. You are not doing anything too crazy.

The main feature is you want the home to be senior-safe. You’re going to be wanting to add in ramps, guardrails, and things like that. It doesn’t have to be ADA-compliant, but you want it as close to that as possible. Having nicer bedrooms, bathrooms, and things of that nature, that’s eye candy. I believe you did a show with Philip Vincent?

 

Yes, I did.

At Mom’s House, he calls the adult child Daughter Judy, just like we call her. When Daughter Judy walks into the home, if she’s going to be paying you $5,000 a month for her mom to live there, she wants to be wowed. She wants to be like, “This is nice. I could see myself here.” What’s going to get her impressed? Nice kitchens, nice bathrooms, open space, and a nice area. You do want things updated and renovated. These homes typically are in more upscale parts of town, bigger lots, and nicer neighborhoods. You want it nice but it’s not like you need to be spending top dollar. There are a lot of things that you can do where you can make your money go further and still make it look very nice.

That leads me to the next question. Who pays? You hit on the daughter may pay, but what are some of the options that people have to pay for their care in a facility or home like this?

Some people will try to use Medicare, Medicaid, and VA benefits. Ten percent of the population has long-term care insurance. If you have that, it’s incredible, and that will pretty much pay for all of your needs. The other one is they have saved up cash, their IRAs, their investments, or just like what Phillip does, they sell their home and are using that money to pay for their needs. I will say the largest category of people falls into this final one, “I’m going to let my kids figure it out.” They are relying on their adult children to pay for their care needs. They might have a certain amount of money set aside, and then they’re like, “When it runs out, you figure it out. You help me.” For many of our clients, Daughter Judy pays for them. The adult children flip the bill.

This is probably a random question you may or may not get all the time, but as an operator, what do you do if the money runs out? You can’t exactly evict them like a normal tenant. How do you protect yourself as an operator in situations like that?

When someone is signing up to live in the home, they’re agreeing that they’re going to be paying this rate and that their loved one is going to be reevaluated every couple of months to make sure that we can still care for their level of need. Sometimes, they might need to escalate and go to an actual nursing home. They’re agreeing to that. You don’t sign up for something that heavy of a lift unless you have a plan of how you’re going to be possibly able to afford this. For the most part, it’s very interesting, people are always concerned about that, “What happens when they stop paying?” We’ve owned 3 homes for 10 years and never once has someone not paid.

We have had plenty of people who come and say, “We thought mom was going to live for a year. We’re going on two and a half years but the money is starting to run out. What options do you have?” They always come to have that conversation to then say, “What can we do?” When you mentioned shared rooms, I like to have maybe 1 or 2 options within the home that are shared rooms, mostly for that case. Someone is living in the solo room, they’re paying $5,000 and say, “Money is starting to run out. I don’t want her to leave your home. What do we do?” You can come move into the shared room, so it’s only going to be $4,000 a month. Now, the person can still stay in your home, but you’re helping accommodate the family.

There are different options, but truly, people have never stopped paying. If they do stop paying, the residency agreement that they’re signing, it’s not a tenant-landlord relationship, it’s a residency agreement that the family signs and the senior signs. Most of the time, this is like ACH deposit that it’s just coming out. Sometimes, they’ll bring you physical checks. You’ll have a late fee policy.

If it’s a no-pay policy after a certain amount, it’s a 24-hour come get your loved one. They’re moving back home with you or to another home because you’re not going to pay. You can’t just eat at the restaurant and not pay. We have care here. Everything is being taken care of. Luckily enough, we and the thousands of our students have never had it. We have had spent down, but never just drop mom off and run away. It’s not really a problem.

If somebody has taken the time to put their family member into a home like this, they’re obviously caring enough to make sure that they’re being looked after and looked out for. You guys have tremendous training behind getting somebody set up and making sure this happens. In curiosity, what would somebody need to consider when considering going this direction as an option for them as a homeowner or a landlord?

It’s definitely different than most other real estate investment opportunities because this is not just the real estate. It’s a business. It’s learning all those steps involved in hiring the proper staff, not just hiring them but training and retaining them. Make sure that they want to stay, they’re loyal to you and going to give the best of the best care. It’s the whole marketing component. You’ve got to be constantly putting yourself out there and trying to get these beds filled. We’re 1.3 million beds short right now. The demand and the supply do not match.

Senior housing is different than most other real estate investment opportunities because this is not just real estate. It's a business. Click To Tweet

If anybody knows about it, that’s a great business that you want to be in where those things are skewed that bad. Considering there are only 47 million in the silent generation and there are 76 million Baby Boomers. We’re still 1.3 million short. The Baby Boomers haven’t even come. They’re not coming for another twenty years. This is going to be a mega-crisis. It doesn’t mean you shouldn’t market. You still have to market because the big box facilities, Brookdale, Sunrise, and EHM are marketing. They’ve got plenty of money to do it. You’ve got to make sure your name is out there too. People know and understand who you are, and what’s going on from there.

From the investor perspective, getting started, it’s the real estate and the nuances between that and any other form of real estate that your readers might be used to. Figuring out how to get the license, retrofitting the home to be ready for the seniors, marketing the staff, and really just putting together all those different documents, the policies and procedures, the emergency handbooks, all the way to the menus. These are things that the state has to see and stamp of approval. Getting all of that in alignment is very different than most other forms of real estate investing. It’s a business.

Being a business, all states have different license requirements. What are some of the most stringent? What makes this hard? What would somebody be up against it? I’m assuming it’s a lot harder in our heads than it really is at the end of the day.

I would agree. I think that the hardest thing is anytime someone tells you no or you can’t, and then it’s, “Wait, but why,” and being able to dig further instead of saying, “They said no. I can’t do it now.” Did you ask them? Did you explain it properly? Did you try this? Did you try that? You’re correct, all of the states have different licensing requirements and regulations. I don’t know that there’s one rule that’s a tough rule, it’s more finding all of the rules because they’re not very organized at the state level when it comes to these types of homes.

Finding all of those rules, being able to abide by all of them, and then making sure that you’re headed down that right path so that you’re not missing things, and then they say, “We don’t even approve the license because you missed this one thing.” It’s, “I didn’t even know it existed.” Getting all that research done upfront. In our training, we give everyone all of the state-by-state information. If you were doing this on your own, the heavy lift is determining all those rules and then following them perfectly. I will say there are things that some states will require fire suppression, so adding sprinkler systems. To me, that’s a non-issue.

Even if your state doesn’t require it, I’m always like, “Why wouldn’t you do that?” Especially if your state doesn’t require it and you do it, you better market that all day because now Daughter Judy tours home A and home B, and you say, “We have fire suppression.” She’s like, “Did the other home not? I can’t put my mom there. What if something happens?” If you’re going to pay for it, market it, use those dollars, and put them to good use. When the fire marshal comes over to do the home inspection and make sure everything is proper, I always tell our investors, “Don’t go crazy in the house and put exit signs, lights, this and that, and then invite the fire marshal over because you might have done too much work.

He now notates where you have everything. When he comes over the next year to determine if it’s proper, if one little light bulb is out, you now get a deficiency. You didn’t even need that light there.” I always tell them to invite the fire marshal over before they do anything. He’s going to walk in and be like, “You didn’t do anything.” He’ll be like, “Yeah. Tell me what I need to do.” He’ll tell you where everything needs to go.

You go do it, invite him over again, you get the stamp of approval, and you didn’t waste your time and energy going above and beyond for something that’s going to bite you later. It’s little things like that. Some people just go crazy for it or don’t have enough research. There’s not perfect meal. You have to know what you’re doing but then know some ways to get around certain things so you’re not going too crazy.

That’s excellent advice. I talk about that when we do home inspections after rehabs to not have everything in the home perfect because inspectors are paid to find problems. You want to make sure you leave something for them to find and point out that you can fix. That’s along the same lines. You have them come over and give you advice before you do all the work so you don’t create problems that aren’t already there. I think I’ve asked pretty much everything I want to ask. The people that run these homes, do they have to have a special license themselves? Do they have to do special background checks? What are you looking for when you’re looking to hire somebody to help run this on a 24/7 basis?

The licensed administrator, which in the real estate world would be your property manager, might be in charge of the marketing, hiring, and firing of your caregivers. They might be in charge of touring families through and doing all that paperwork with them. The list of their responsibilities could be a mile long. For me, when I’m looking to hire that person, I have to know you. What are your skills, strengths, and weaknesses? If you love to give a tour and you want to be hands-on in that sense, then don’t try to find a manager who has that skillset. Find a manager who is okay with hiring and firing your caregivers because you might not want to do that. Mixing and matching with who you are and what you want to do.

Now if you don’t want to do anything and you want to be super passive, that’s totally fine. Pair them with an assistant administrator who again compensates for the strengths and weaknesses so that you’re getting the job done. No one person is going to be a unicorn and be excellent at all the 100 tasks you need them to be. They’re going to fall short somewhere. Find out what that is, and then compensate whether it’s yourself or an assistant administrator. When it comes to the caregivers, those are also licensed. Their primary job is the care for the residents. They’re the ones 24/7 on with the residents, caring for any of the activities of daily living, so eating, bathing, taking medication, and all of those different things.

For them, the big thing I like to look for is experience. You can go to caregiver training schools, and they’ll give you a list of fresh graduates. To me, that can be hit or miss because they might spend 2 days in the home and wipe their 1st bum or take the 1st first shower and be like, “Nope. It’s not for me.” Now they leave you. Someone who’s been in this for 10 to 15 years, they have the heart and experience. They know what this is and they get it. It doesn’t have to be that long of experience, but I do like to have some experience. I will also say that about 80% of the industry is people from other countries. It’s immigrants from all over the world.

We had people from literally every country you can imagine who have worked in our home. Many of them were doctors or nurses in their home countries, but that didn’t translate and come over their accreditation. Now they have these skills and they want to maybe be able to go back to school or something like that. It’s a great place for them to lock in, get started, and have a solid job that they can start working towards something else. I really look for experience and then, who are you? What do you do? What’s your background? Finding that out about them personally and being open to that.

If someone was a doctor in the Philippines, they come here, and now they’re nothing, that sucks for them. Being able to give them an opportunity where it’s, “Let’s help you get back on your feet. What can I do to bring you back there? Maybe you’re not going to be a doctor here, but maybe you could be a nurse or a nurse practitioner here, something of that nature. Giving them an opportunity in that direction is always good.

Is there anything I didn’t ask that you feel we need to hit on?

I don’t know. I think this has been good. I will say, I know I’ve been talking a lot about the business owning the real estate as well as the operations, but some of your readers might say, “I just want to own the real estate, and lease it to someone who would operate this business.” That’s another route that you can go. You don’t have to do them both. You can be the landlord more or less to the operating company. Many people come to our training or want to learn more to play that role. How do I retrofit the home, get it licensed, and then find that operator and work with them in that way? If anybody is interested in that end as well, we do teach about that. It’s not just about operating.

For anybody reading that’s newer, a lot of hotels do that. Somebody will own the building and Best Western will lease the building and operate the actual hotel out of it. Owning the real estate and leasing to an operator is not unheard of at multiple levels in the industry. It’s great advice. You obviously do training. I know it’s great training that you do. Tell anybody who’s interested how to find out about the training and how to get involved in it if this is something they’re curious or serious about getting involved in.

 

We host 3-day training events in Phoenix, Arizona every 6 to 8 weeks or so. We have about eight events per year. You can find out more about that at Ral3Day.com. Also, I’d love to gift your readers free books, free webinars, and free phone calls. If you just want to gather more information insights and see if this really is for you, Ral101.com is a great place to start.

Ral101.com is where they can get information and some free material and Ral3Day.com is where they can go to find out about the event and learn more about this industry. It was great having you on. I really appreciate your time. I don’t always endorse trainings but I am going to endorse this one. I know that you guys put a lot of heart behind it. It is an industry that does need to be served better and more of. The more people who care and want to get into it, the better. It is an opportunity to take your real estate and to also leverage it financially in ways that you can’t normally do with a single-family plain old rental. With that said, I appreciate your time. Thank you very much for being with us.

Thanks for having me.

 

Important Links

• Isabelle Guarino Smith
• RAL National Association
• Philip Vincent – Previous Episode
• Ral3Day.com
• Ral101.com

 

About Isabelle Guarino Smith

Isabelle is a graduate from Arizona State University, a former flight attendant, Disney employee and now works as the COO of the company and our lead educator. She has taken over the educational aspects form our late Founder, Gene Guarino and leads the company in our pursuit to Do Good and Do Well.