The Keith Andrews Podcast

Investing in Residential Assisted Living for Big Returns | Isabelle Guarino E23

• Keith Andrews • Season 1 • Episode 23

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In this episode, Keith sits down with Isabel Garino, a leading expert in residential assisted living, to explore the lucrative opportunities in senior housing. They delve into essential caregiver dynamics, various business models, and key marketing strategies to ensure success in this growing field. From funding options like SBA loans to the importance of the caregiver-to-resident ratio, Isabel shares actionable insights and advice for real estate investors looking to enter this niche. Discover how the RAL Academy can help you thrive in the senior housing market.

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If it's $6,700 a month times 10 residents, you're bringing in $67,000 every single month to run the home with your staff, your food, electricity, cable, you name it, property insurance. That's probably going to run you around $35,000. Your debt service, your mortgage might be like $12,000 a month. So that's leaving you with $20,000 of monthly net income on that one home. That's pretty common of what we see out in Colorado. We actually have a student who just opened their 27th care home out there in Colorado. 27? Yes. my goodness. mean, I mean the numbers you're throwing at me, I'm like, I only need like a couple and I'm... you Joining me today is Isabel Garino-Smith. Isabel is an expert in residential assisted living. Having grown her family's legacy into a thriving business, she not only runs successful assisted living homes, but also teaches others how to get started through her residential assisted living academy. All right, well, I'm excited to have you. You're doing something really cool. It's a niche that... I think everyone's heard about, they really don't even know where to get started. So with that, let's just hear about your story, like how you got into real estate and why assisted living. Yeah. I actually kind of grew up with a real estate family. My dad had always been a real estate investor doing all sorts of different things, but about 14 years ago, my grandmother fell, broke her hip and needed care. And when we went, she was in upstate New York at the time. So when we went to look for somewhere that was suitable for her, every place was like disgusting. Like I didn't even want to leave my goldfish, let alone, you know, my beloved grandmother. It was like, this is not right. So him having that background in real estate, he said, wait, wait, wait, wait, we're going to be paying like five, six grand a month for her to live in this home. or we could own the home, own the business, she could live for free and we could be cash flowing like 10 grand a month. He's like, this makes a whole lot of sense to get into this. So without having anyone there to like help us or guide us along the way, he purchased his first residential assisted living home with the intent to move my grandmother in. She passed before we could move her in, but we kind of really fell in love with the industry in all the while. And I had just graduated college. So I started. saying, what are you doing? What's going on here? I want to learn more. And we started working together from there. And now we teach and train other people how to do what we do, which is investing in senior housing in a residential setting. That is really cool. You essentially like house hacked this whole business, right? I mean, that's pretty incredible. And what part of upstate New York? Saratoga area. Okay. My grandmothers from upstate New York, she grew up in the Finger Lakes region. There you go. So, and she went through the same thing. mean, like we, yeah, it was definitely a battle and, you know, passing her around between different, you know, family members. And it was like a real struggle. Yeah. So, you know, you think about residential assisted living and you often think about maybe not the best. care, you know, one of the things that I've always thought about it is the turnover on like the people that are actually working in these houses. How do you attract good people? How do you keep them there? So there's not like this constant turnover, because that's one of the things that I heard that could be challenging about this niche. For sure. And I think that in the large facilities, like the commercial ones, Brookdale, Sunrise, Atria, they have immense turnover and it's like really, really bad there because their ratio of seniors to caregivers is typically 30 seniors to one caregiver during the day and up to 50 or one or 60 to one at night. So in our homes, we recommend a four to one or five to one ratio. So already if you're getting paid the same, but you are taking care of so many less people, first of all, you can actually do your job well. So you feel good about what you're doing, but also you feel like you're not being overworked, underpaid, all of this. So we really felt that residential assisted living was not only beneficial to the senior who's now getting that quality care and attention and whatever that they need, but it was also beneficial to the caregivers because of that high turnover. they don't, why would you want to do that? Like if you're getting paid same to work at In-N-Out or Chick-fil-A, or take care of seniors, which is a tough job, you wanna make sure that you're being treated fairly and respectfully. And I think that RAL is kind of that way to do that. So we focus heavily on training, retaining, onboarding the best of the best, but also really making sure that they know and understand that what we offer is very different than what other jobs are out there. And many of them do know this because they're coming from that role into our homes. So we don't have as much turnover issues. I would say the bigger issue that we have in general industry wide, big, small, whatever is just lack of caregivers because the next generation coming in, they don't want anything to do with this. They don't want, you know, to be wiping seniors bums and hanging out all day. They're not interested. And so we do have a huge crisis because right now 80 % of the care staff in America is immigrants from other countries. So they love seniors, have respect for seniors and I love working with them, but right now there's really that lack of the amount of people to address the coming silver tsunami. Got it, yeah, I mean, it's a problem that's not gonna go away for sure. so, like, is a, maybe you just run down what a typical home looks like. It's like, how many patients, how many bedrooms? Like, what do you look for? to even find a property that would work for this business. So depending on where you are in the country, you're going to be allowed to have somewhere between six and 16 residents in the home. So I'm in Phoenix. I'm allowed to have 10 residents in a home here. So my homes are 10 bed, 10 bath homes. They're luxury homes in really nice parts of town. Most seniors want private bedrooms and private bathrooms. You have to think they're moving from their whole own physical home. and now they're to a bedroom, they don't wanna share. They're already sharing a house. They don't wanna share a bedroom. So private is preferred. These are typically like think 300 to 500 square feet per resident is preferred. The state will say you only need 80 to 100 square feet, but we highly recommend 300 to 500. So with 10 residents minimum of 3000 square foot home, upwards of 5000 is very comfortable. Now to start something like this, do I have to be a nurse or anything like that as the owner of the business? Great question. You don't, you don't need to be a medical professional at all. We're just real estate investors who got into this. You are going to be hiring the licensed administrator in the real estate world. That's kind of like your property manager. They do all of the hiring, firing, training, onboarding of your caregivers who are doing the 24 seven care. They also deal with the state, make sure that you're not getting any deficiency, that your paperwork is up to par. They do all of that as well as house maintenance, right? Like the toilet, the roof, the this, the that, they're dealing with all of that and any other contractors that come along. So that is your key hire, that licensed administrator, and then they hire out all of your other employees or independent contractors. So where do you find these people though? You can find For that role. Yeah, you can find them on Indeed and Craigslist, LinkedIn, anywhere, or even just asking around in the industry. It's not full time to oversee one of these homes. Two to four of these would be full time. So most of them oversee a bunch and we call it like a three pack. You should have three homes within 20 to 40 minutes of each other so you can share your resources and just scale. Wow. So you really don't even need to have that much knowledge on how everything works. If you can find that person, that person is going to be your, your key hire because they're doing all the day today. Now in regards to setting up the business, you know, getting it licensed through the state, setting up the physical home to meet all the requirements. You really should know what you're doing, but again, it's not a medical license. So we at the RAL Academy, we've been training people how to do this for the last 10 years. So we show you. step-by-step as a real estate investor and entrepreneur, what you need to know. There's nobody else really out there training like that. They're training more to become a caregiver, to become an administrator. We're the only ones training the owner-operator portion of this. Yeah. is there a typical, like I'm assuming that two story homes won't really work for this. It needs to be maybe a ranch style or. Ranch style is preferred. have some students with multi-level homes. You add in a residential elevator or chair lift. You have to think if it's, if it's on the larger scale, like in Texas or New Jersey or Wisconsin, where you can have 16 residents in the home, it's probably going to be a multi-level home. So adding in that residential elevators, usually 30 to 50 K one time you put it in. But if it serves a whole nother floor that has six bedrooms, it's worth it. Wow. So When you like, is there certain places that you just, won't allow it like as far as zoning or stuff like that, like how do you even know if you would be able to do or an HLA maybe that prevents it? I guess that would be a battle, right? Well, because of the federal fair housing act, we are a protected class. So no one, not a state, not a city, not a county angry neighbor or HLA can tell us no. So it is a beautiful thing, not because. They're seniors, it's not an age related thing. It's because they're considered disabled by the time they move into assisted living. You're not moving in for fun, right? You're moving in because you need help with three to five ADLs, activities of daily living, which is like everything we do from the moment we get up out of bed to the moment we go to bed, including getting up, transferring, Walking, bathing, toileting, eating, brushing our hair, brushing our teeth, taking medication. They need help with these. are no longer allowed to live alone. So because of that, we're a protected class. So really no one can say no, which is a beautiful thing. And it's zoned residential. next door is, you know, mom, dad, two kids and a dog. It's in a regular upscale, but regular neighborhood. That's, that's incredible. So it's really like, cause I know like one of the challenges many real estate investors like myself are having. especially right now with interest rates going, well now they're going down. So I think we're going to see a change there, but it's that cashflow, right? It's like a couple of years ago, you could put 20 % down on pretty much anything and you'd cashflow. Right now, that's not the case. You got to a lot more money down if you actually are looking to cashflow, but this looks like something that you could do to kind of get over that, right? Like you find a great, I mean, even when you're looking for a home, your criteria is going to be a little different. Yeah. mean, I would think, Matt, how many bedrooms can we get in this thing? So that's probably something else that you're doing, right? Is taking a look at maybe a four bedroom house and going, hey, can we turn it into a six bedroom house or something like that? Is that correct? Yeah, there's really four ways you can get started. One is what you're thinking right now, converting a single family into an RAL. The second is buying land and custom building from the ground up. Third is leasing a home to use for this. So we have some students who buy and renovate these and lease them out to operators who just want to sign a, I just talked to somebody yesterday who had a operator sign a 12 year contract with them with increases every single year. All they're doing is basically being the landlord for this business more or less. I didn't even think of that side of it. Basically buy a house with the intention of renting it out to an operator at a higher cost, right? But you can go in and fine tune it so it meets whatever their criteria is. Exactly. And then you're not even having to deal with the business side at all. Yep. So that is one way. And then the fourth way is to buy an existing RAL. So there's 30,000 group homes that exist across our country today. And in that way, you're buying the real estate and the business. So you're up and running cash flowing day one. So there's a lot of ways to get started, but really the sky is the limit. just depends on what you want, what you need. But we do look at people's homes and kind of say, is this a good fit or not? Now, does this type of business qualify for like an SBA loan where you can buy the property and the business all in one shot? Exactly. So a lot of people will use SBA to fund no matter which of the four routes. Cause even if you're going to create the business, SBA is interested in that, the purchasing of real estate, the reno carrying costs and paying you all throughout the project. So SBA is a fantastic way to fund this type of project as well as private money, hard money, syndication. Those are pretty much what everybody else is using outside of SBA. Just to get it up and running. And then once you get it, then you can refinance or whatever out of that heart. If you want the hard money, hard money. Yes, that would be. Mostly I would say people are doing syndications with private money or SBA. Those are the two most common ways to fund this. Okay. Wow. That's really interesting. I didn't even really ever think of that side of it. and so how, so you started with that first one. How many, of these homes do you have right now? So now I have three here in the, Phoenix Scottsdale market and then we invest in other people's all across the country because we train so many people how to do this. Of course I get great deals that come across my plate. So now we're into the private lender sector as well. Nice. And so your academy that you started helps train people basically how to do this. Exactly. We teach real estate investors and entrepreneurs step by step, all four of those methods, how to do this hands on or hands off. how to do memory care versus assisted living, how to make those strategic hires, how to raise the capital for it, really A to Z everything you need to know to get started in this industry. That's incredible. So maybe you can just break down. Let's say I did own a house and I was running it. I was the business owner. What could I, and I know each market is probably going to be a little bit different, but what could I expect as far as revenue or actual profit after paying all the expenses of the employees and everyone else that's in there to run it. What are we looking at? Where do you live? I live in Colorado Springs. Okay, Colorado. So that's great. you're throughout the country, the national average to live in a care home right now is$5,500 per month. So per person, per person, per person. Okay. So in Colorado, it's a lot higher. I don't know Colorado Springs exactly, but your rates are probably more like 7,000, but let's cut that in the middle. We'll call it like 6,700, right? If it's $6,700 a month times 10 residents, you're bringing in 67,000 every single month to run the home with your staff, your food, electricity, cable, you name it, property insurance, right? that. That's probably going to run you around 35,000. Your debt service, your mortgage might be like 12,000 a month. So that's leaving you with $20,000 of monthly net income on that one home. That's pretty common of what we see out in Colorado. We actually have a student who just opened their 27th care home out there in Colorado. 27? Yes. I mean, I mean the numbers you're throwing at me. I'm like, I only need like a couple and I'm good. that we tell people like just do a three pack, just do a three pack. One that you can have your loved ones go if and when they need it. One that you can leave that cash flow as legacy to your kids so that they don't have to work or whatever. They're getting a blessing. And then one just for you to live off of. Like you've got your little three pack, you're good to go. And one for you. Well, that one that your loved ones go into, one for you eventually as well. So that's pretty crazy. That's incredible. Wow. I'm really glad that we had this conversation. mean, I've heard about residential assisted living and like how good the numbers are. And then I also heard the horror stories. Plus, I think you got a really bad rap during COVID and everyone was sick and then like all that stuff. But I think a lot of that could be mitigated. And I think, especially if you do it right, right? And you're getting good people and you're keeping up a certain level of standard that, you you could have your own mother in there. yeah. And think of it like that or yourself, like, you know, make sure it's set up with the, with the, you know, comforts that you would appreciate as well. Exactly. When you think about stuff like that, like COVID was beneficial for us in the RAL industry, not assisted living, right? Assisted living's had a bad rap and that's due to history, neglect, abuse, and people running this just for the profit. So that is, it is true that there are terrible things happening in big boxes. But in regards to COVID, 97 % of COVID cases that happened in assisted living happened in big boxes, only 3 % in RALs. And again, that goes to show that we can actually control things a lot more when there's just less residents in the home. It's not a caregiver who's working on floor 17 one day, floor three the next, and floor six the next. Of course they're spreading stuff. And you have multiple people coming in and out all day long. In our home, it's like the same care staff day in and day out, and it's a lot easier to control things. We also really didn't like some of these big boxes. You heard stories of people shoving food under the door and, people begging to get their loved ones out, to bring them into our homes because we were doing business as usual because we can control things and we can keep it safer. So it really shined to me a good light on the terrible things that were happening in big boxes. So people who weren't aware were now like, my God, it's worse than I even thought, you know, or the movies said whatever. And now they're starting to look for that alternative. It's kind of like Airbnb at a hotel or Uber to taxi. They're looking for an alternative and this is our time to shine. This is really that opportunity paired with the baby boomers who hold most of the real estate market right now, starting to age out and go into assisted living and now all this inventory is coming up, this is what we can be doing with that housing. It really solves so many problems that are happening in our country today. And how long would it take for someone that's just, they did sign up with your Academy, and they were serious to get started, like how long, once you find the location, purchase the home, how long would it take to actually have it filled with residents? Like on average, if you start marketing right away, which is what we always share with them on how to do in different strategies for that, it should be a lot faster. But if you are leasing a home, that's usually a three to six month timeline. If you're buying an existing business, that's also about a six month timeline. Converting a single family, depending on the conversion, could be six months to a year timeline. And if you're custom building, one to three year timeline. So it really ranges, but it also is heavily reliant on the marketing that you are doing even before you open. There's an entire industry of people called placement, Agents, they're kind of like realtors for bodies When when your loved one needs care you go to them and you say this is the amenity the price point the location I'm looking for and they shop homes for you and find the suitable home for your loved one It costs the family nothing. It costs the care home owner the first month's so it's good and bad because you can you're paying a lot, but The average stay in a care home is three and a half years So I pay 6,700 bucks all day if I'm gonna have somebody who stays for three and a half years, you know? Yeah, yeah, yeah, absolutely. So what's a common challenge that people that are entering into this space face? I think the trickiest thing in any business is people, right? If business was just paperwork, it'd be a whole lot easier, but people are the hard thing about any form of business. And I don't actually mean the seniors. I mean, sometimes the families that come with them, they can have a lot of high need and expectation. There's a lot of emotions going on, guilt, resentment, frustration, maybe some relief, know, so many things mixed up in one and they're dropping it at your doorstep. And it's a lot as well as the care staff, you know, we talked about them earlier. This is a tough job and they're not getting paid beaucoup bucks, right? It's difficult for them to find that motivation to show up every day when Maybe the senior isn't being that nice to them or whatever the case is. So I think people is the biggest challenge in any business. And the best thing that I've learned to kind of mitigate this is really be slow to hire, quick to fire. Make sure that when you're dealing with the families that you are getting eyes on the resident before they move in. And if they're giving you any red flags in that intro session to see if it's the right fit, don't let them into your home, right? This is not. a tenant landlord agreement, it's a residency care plan. So if they cannot follow the rules of your home, they cannot stay there. So in that first initial, you know, experience with them, you've got to make sure that it's the right fit, but people is always going to be the toughest thing. And really just trying to like stay calm throughout at all is, is always a good tip. Okay. Well, that's excellent advice. So how can people get in touch with you and tap into your academy? Yeah, we're on social at RAL Academy on TikTok, YouTube, Instagram, Facebook, you name it, but you can go to ral101.com if you want to download a free webinar, free book, or schedule a call with me or the team, ral101.com. I'm actually going to look into that myself because I've been looking at like just alternative investments right now and This one definitely caught my attention. That's why I was like, okay, I wanna have her on because I really wanna learn about this, but this has been great. I do appreciate you coming on. Do you have any last words for my audience or anything? You know, if you are looking for a way to cashflow on some properties that you already have, or you're getting into real estate and you're saying, everybody said cashflow is king, but I can't make it work. This may be an asset class to look at. but it can't just be all about the money. Our company motto is to do good and do well. So if this is also ticking your heart box, then go to Arial 101. We'd love to connect with you and see how we can possibly help you do good and do well. Nice. I will be in there. Trust me. I'm definitely interested. Thank you so much. It was great having you today, Isabel, and to everyone else that's out there. Thank you. God bless. Happy investment, you