Senior Housing Investment: A Good Idea?

Thinking of expanding your real estate portfolio? Consider investing in senior housing. The increasing demand for senior housing is attributed to ‘Baby Boomers’ (people born between 1946 and 1964). According to census.gov, 10,000 Baby Boomers are crossing the 65-year threshold every day. The 2020 census revealed that the population of retirees is about 73 million. By 2030, it is projected that 20% of US residents will be senior citizens. This means that senior housing could end up being a very profitable real estate investment in the next decade.

Why Is Investing in Senior Housing Smart?

Putting your money into senior housing could be a very wise move. So, why is a senior housing investment a good idea exactly?

Low competition – Senior housing real estate is a hot market that most property investors are not paying attention to. Not only will you face less competition when trying to land a real estate deal, but owning senior living investments means that you will not have much competition when looking for buyers or renters.
High return on investment – Renting out to retirees can be very lucrative. A recent report by the National Council of Real Estate Investment Fiduciaries (NCREIF) revealed that the ROI for a senior housing investment has consistently been around 13%.
High occupancy rates – Due to modern healthcare, life expectancy has increased greatly. And generally, seniors remain in one place once they find their retirement homes. This means a higher occupancy rate, and ultimately, cash flow properties.
Growth potential – The senior housing market has incredible growth potential. With the increasing number of aged people, senior housing investors will always have tenants that require housing. You can start by investing in one senior housing investment type, and then diversify to other housing types.

If you now find yourself thinking it wise to invest in senior housing, we can offer you some guidance:

Senior Housing Investment Options

When it comes to a senior housing investment, there are different types of real estate investments you could consider. However, the terminology used for different types of senior housing investments can vary from region to region. For instance, the term ‘assisted living’ could mean one thing in one country or state, and something different elsewhere. Generally, the different kinds of senior housing vary depending on the level of care provided.

Here are the most common senior housing investment options:

Aging in place – This refers to a situation where a senior continues residing in their current home. The home can be modified to address mobility issues, and health care professionals can be called whenever there is a need. Aging in place is usually cheaper compared to any other senior housing option.
Age-restricted communities – This is a housing option where residency is limited to individuals over a certain age. Residents could live in an apartment, a townhouse, a condo, or single family homes. Some age-restricted communities are designed to cater to people with specific interests. For example, there are those built close to universities for retired professors and those that want to interact with an intellectual community.
Assisted living – In assisted living facilities, residents have a private bathroom and bedroom, but share all other areas. Usually, such facilities provide meals, laundry, transportation to doctor’s appointments, recreation and exercise activities, and housekeeping. They could also have onsite entertainment venues and beauty shops.
Nursing homes – These are facilities that offer intense medical care. Nursing homes provide laundry services, transportation, meals, and housekeeping. They also offer 24-hour supervision and medication management.
Continuing-care retirement communities (CCRC) – CCRCs incorporate several types of senior housing options. For example, a continuing-care retirement community could have nursing homes, assisted living facilities, and senior apartments within the same property. This makes it easy for residents to shift from one section to another as their needs change.
Co-housing – There are two types of co-housing; general co-housing and senior-only co-housing. In each case, residents own their homes but share common areas like community buildings and yards. Quite often, co-housing works a lot like a homeowners association. You can see a list of communities on the Co-housing Association of the United States website.

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Where to Invest in Senior Housing

If you are looking for a senior housing investment, you might be wondering which cities would be ideal. U.S. News has come up with a list of the best places to retire based on factors such as house affordability, retiree taxes, happiness, and access to quality health care.

Here are some of the best cities for a senior housing investment accompanied by Mashvisor’s rental data to give you a general idea of how long-term rental properties perform in each real estate market:

where to buy a senior housing investment

Tampa, Florida

Median property price: $420,114
Price per square foot: $212
Traditional rental income: $1,831
Traditional cash on cash return: 1.8%

San Diego, California

Median property price: $804,753
Price per square foot: $522
Traditional rental income: $2,623
Traditional cash on cash return: 1.2%

Orlando, Florida

Median property price: $335,973
Price per square foot: $180
Traditional rental income: $1,705
Traditional cash on cash return: 1.8%

Chattanooga, Tennessee

Median property price: $325,625
Price per square foot: $168
Traditional rental income: $1,512
Traditional cash on cash return: 2.2%

Fort Wayne, Indiana

Median property price: $239,918
Price per square foot: $111
Traditional rental income: $1,261
Traditional cash on cash return: 2.1%

Lakeland, Florida

Median property price: $309,687
Price per square foot: $147
Traditional rental income: $1,435
Traditional cash on cash return: 1.8%

Knoxville, Tennessee

Median property price: $338,511
Price per square foot: $146
Traditional rental income: $1,267
Traditional cash on cash return: 1.4%

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Grand Rapids, Michigan

Median property price: $298,937
Price per square foot: $159
Traditional rental income: $1,296
Traditional cash on cash return: 1.4%

Sarasota, Florida

Median property price: $589,389
Price per square foot: $288
Traditional rental income: $2,148
Traditional cash on cash return: 1.5%

Bottom Line

Whether you are a beginner real estate investor or a veteran that wants to diversify their portfolio, you cannot go wrong with a senior housing investment. As Baby Boomers age, there will always be demand for senior homes. Senior housing is a low-risk investment that guarantees you high returns.

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Is a Senior Housing Investment a Good Idea?