Real Estate Investor? 5 Reasons to Invest in Senior Housing
If you ask experts if it’s wise to invest in senior housing, you’ll get a mix of responses. Some people will say yes while others will say no. While senior housing may not be right for everyone, it’s not an inherently bad investment.
Like any commercial investment, whether it’s right or not depends on your budget, your goals, and how much time and energy you have to manage your investment.
Have you passed up the opportunity to invest in senior housing because you weren’t sure it was a good move? Or maybe you haven’t thought about it before? Either way, here are several reasons to consider investing in senior housing as your next property acquisition.
- There will be a senior housing boom
As the baby boomer generation enters retirement, Crown Commercial Property Management explains that the profitability of senior housing as a real estate investment will only increase. This is due in part because of the housing crunch seen across the United States, as well as the boomer generation retiring. By 2030, there will be a 50% increase in boomers of the age of 75, and many of them will need senior housing.
Once people turn 65, many of them opt to live in assisted living communities, long-term care facilities, and memory care facilities. Sometimes they opt for state-run facilities paid for by their insurance, but other times they opt for private facilities. Some even choose to live in a senior community just to be closer to people their own age, even if they don’t need support.
While it’s important to choose your real estate investments based on business wisdom, which includes demand, it’s equally important to pay close attention to population patterns, the economy, and demographic statistics.
For instance, the current labor shortage combined with the rising cost of lumber makes senior housing a profitable investment for the future.
- You can invest in REITs
There’s no doubt that senior living facilities are a profitable investment, whether you buy the actual property or invest in REITs. If you’re not in the market for a physical property, you can invest in a senior housing real estate investment trust.
According to data published by Investopedia, seniors are moving into care facilities and assisted living communities more frequently than before, and they’re also moving in much younger.
This fact, along with the demographic trends, make senior living REITs a great investment.
- Senior housing is uniquely resilient
We’ve seen some crazy ups and downs in the housing markets across the United States in the last few years as a result of the pandemic. However, senior housing has remained somewhat stable. The need for this type of housing is unavoidable, so it doesn’t lend itself to the same kind of turbulence as residential or standard commercial investments.
Since senior housing is a combination of hospitality, need-driven services, and real estate, it’s uniquely resilient compared to other commercial real estate investments.
For instance, income and appreciation returns tend to be higher for senior housing compared to the overall property index and multi-family properties.
If you’re looking for commercial investments that are more stable than others in fluctuating economies and have promising returns, senior housing is a great option.
- Diversity is excellent
It goes without saying, but diversity in an investment portfolio is excellent. If you’ve already started collecting various commercial property types, why not go for some senior housing properties, too?
Senior housing properties have several unique advantages for diversifying your portfolio. Not only are these properties profitable and survive in uncertain economies, but the demand for senior housing is growing.
If you’re going to diversify your portfolio, it makes sense to choose a property type that is in demand and more likely to remain profitable through difficult times. Senior housing offers these benefits along with several more.
- It’s a solid investment for the long term
Senior housing is an excellent long-term investment. By the year 2050, about one-fifth of the population will be of retirement age. Today, that number is around 15.6%. That’s a massive increase in the number of people who will possibly need senior housing in 2050.
If you invest in senior housing now, you’ll already own the properties when the demand for them increases exponentially. Like other investment properties, you’ll be able to raise the rent according to the current market, which makes senior housing a highly profitable long-term real estate investment.
Which type of senior housing is better? That depends
Investments are a personal decision, and senior housing may not be the right investment for you. However, it’s worth considering and discussing the matter with an investment advisor or someone you know with experience owning this type of investment.
As with anything, there are risks involved with owning senior housing. For instance, if you rent properties directly to seniors, you’ll always have turnover since many seniors will end up needing to move into an assisted living facility or nursing home. The other problem you’ll have to deal with is tenant conflict.
Anytime you have people living in the same environment, even when they have separate homes, you’re going to have some kind of conflict. It may show up in the courtyard or in the laundry room, but you might need to handle some issues.
If you own an assisted living facility, on the other hand, you’ll experience less turnover and a high occupancy rate. This makes assisted living and nursing home facilities more stable than senior communities. However, you’ll pay more for these buildings and there’s always a risk that your tenant – the care facility business – might not be able to stay in business.
Should you invest in senior housing? It’s worth considering
Whether you’re a commercial or residential investor, consider investing in senior housing. Regardless of the type of housing you own, it’s a relatively low-risk investment with promising long-term ROI. The best part is, the demand for these properties will always exist, and profitability is little more predictable in our uncertain economy.