The senior housing and care sector is generating buzz, with more real estate investors hopping on board. According to the PwC’s Emerging Trends in Real Estate 2019 Report, investing in senior housing is, once again, one of the best bets for real estate investment and development for the coming year. According to the survey, investors are now more interested in independent living units, assisted living facilities, nursing homes, and long-term care facilities. These senior housing real estate properties present profitable investment opportunities for investors.
A recent CBRE U.S. Seniors Housing & Care Investor Survey and Trends Report further supports this, providing data which indicates that 19% of survey respondents said they already had some type of investment in this sector. In addition, another 20% of respondents said they were interested in investing in senior housing in the future. The fact the almost two-thirds of property investors surveyed have interest in the senior housing and care sector says a lot about the current and future market. There are several key factors and trends that have contributed to this increased interest. Moreover, several forecasters predict that the senior housing market will continue to grow and expand.
Here are the top reasons why you too should start investing in senior housing.
#1 Baby Boomers Driving the Demand
It’s no secret that senior housing properties are in high demand as the number of Baby Boomers entering retirement is growing daily. As the largest demographic of Americans, these Baby Boomers will be in need of care and housing supply in the decades to come. According to Haven Senior Investments, a trusted advisor for property investors in the senior housing marketplace, the number of Americans 65 and older will hit 79.2 million by 2035 as the Baby Boomer generation ages. This massive demographic continues to drive great demand for senior real estate properties.
A typical senior housing resident is estimated to be 83+ years of age. And while the oldest Baby Boomer today is 72, recent estimates from the US Census Bureau show there are over 8.5 million Americans of the age 83 or more. In addition, the US Census Bureau estimates that this population will comprise 10.2 million people by 2025. As you can see, all signs indicate the demand will only go up in the decade ahead, making investing in senior housing a great long-term investment strategy for savvy property investors.
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#2 New Senior Housing Development and Supply
The inventory of senior real estate properties is relatively old – 58% of the stock is more than 17 years old and 32% is older than 25 years. As these real estate properties age, they often become outdated as care amenities improve, tastes change, and new regulations advance. Moreover, despite the growth in the senior population, new supply and construction of senior housing properties have not been keeping pace over the last ten years, which represent challenges for real estate investors thinking of investing in senior housing.
However, reports suggest that new senior housing development is on the rise. In fact, according to the Emerging Trends Report, senior housing is the top prospect for development of residential properties and the 3rd prospect for development in the commercial and multifamily properties!
Moreover, as independent living and assisted living communities have become a more popular choice for senior residents, the majority of new development has occurred in these property sectors. As more senior housing residents (and property investors who want to start investing in senior housing) are demanding new supply with high expectations in terms of quality, this trend is likely to continue.
#3 A Recession-Resilient Investment
A major benefit of investing in senior housing real estate is the resiliency of this sector. Like all property types, senior housing investments have their own business cycle. Nonetheless, the demand for senior housing properties is far less affected by the rise and fall in employment or the expansion and contraction of gross national income (GNP).
Furthermore, other market trends may come and go, but there will always be a need for long-term medical and health care facilities for the aging population, regardless of what’s going on with the economy. In other words, its needs-based demand characteristics allow senior housing investments to endure many of the downwind recession pressures faced by other real estate sectors.
The senior housing sector continues to prove to be a strong asset class regardless of the overall economic condition. This means that you can thrive while investing in senior housing properties, even if your investment is not in the best location! As a result, savvy real estate investors are capitalizing on this sector as a low-risk investment that generates great returns.
#4 Historic Investment Performance
Another reason why real estate investors are currently motivated to start investing in senior housing properties is the fact that this type of investment has returns higher than most other major real estate asset types. In fact, this sector has already outpaced the rest of the housing market in terms of income stream, appreciation, and total return on investment.
According to the National Council of Real Estate Investment Fiduciaries (NCREIF) 2018 property index results, the total return for senior housing real estate on a ten-year basis was 10.52% – far outpacing the overall property index of 6.09% and apartment total returns of 6.10%.
In terms of real estate appreciation, senior real estate investments generated 3.73% of total returns, versus the 0.54% for the overall property index and 1.03% for apartments.
Lastly, investing in senior housing also yields higher total income returns (6.61%) than both the property index (5.53%) and apartments (5.20%). All these numbers prove that a senior housing investment is your best bet for making money in real estate!
The Bottom Line
Whether you’re looking for ways to diversify your investment portfolio or you’re just getting started with real estate investing in the coming year, consider investing in senior housing. There will always be demand for senior real estate properties as American Baby Boomers age and there’s room for growth and new development due to the shortage in supply. Not only that but it’s also a low-risk investment that you can always count on to yield high returns.
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