Residential Assisted Living: $15K+/month From One Single-Family Home

Hey everybody, this is Toby with Global Integrity Finance. We're here again today at the Quest Trust Expo 2019 in Houston, and today we're with Gene with Residential Assisted Living, right?

Absolutely.

Gene, tell us who you are, what you do, and tell us about Residential Assisted Living and what's so unique about it.

You know, I really appreciate meeting you first of all because we've been watching each other, seeing each other at different events, but you came out and had a little presentation that I did, so that I hope that was helpful. So what we do is we take single-family homes and convert them into assisted living homes. There's a lot of people that need help. They can't live at home by themselves. They need to have some assistance, and they don't want to go to a big box facility which feels institutional, like a dormitory setting, like a dormitory. We call it the big box, the Sunrise, the Atria. But what we do is we take a single-family home and convert it. So it's a very profitable business model. But what I love about what we're doing is we're really helping people. We call it doing good and doing well.

Nice. So one of One of the things I saw you speak yesterday that I really never realized— watched the show a few times but not a bunch— but the Golden Girls. And here was a great example back in the '70s where 4 older ladies didn't want to get put into an institutional housing event but went and got individual rooms and became best friends and lived their life together on the show. And you've kind of taken that model and made it real.

Well, it's, it's that model but beyond that, because that model is called co-housing.

Okay.

Co-housing is where they live together, take care of each other, but eventually some of them may need more help where they really can't just be, let's hang out as friends, let's be community, but we really do need assistance, but we don't need a nursing home.

Yeah.

So what we do is not a nursing home, but it's not the Golden Girls. It's literally right in between. But that co-housing model is something else that is a great model as well that we're working on, working with. But we take that person who's not ready for a nursing home but can't take care of themselves at home. Their family loves them dearly, but they can't give up the job and not watch their own kids to take care of mom and dad. Gotcha.

So it's that in-between solution.

We also focus on the private pay versus the Medicare/Medicaid, so we're not doing low-end, we do high-end in nice homes. Okay. So one of the parts of what we do is we're dealing with better homes, better areas, with a higher paying clientele. We're paying $4,000, $5,000, $6,000 a month each, and there may be 10 of those seniors in the home. Wow. So the revenue that's generated, if it's $50,000, you may net maybe $15,000 out of that at the end of each month. So a monthly income from a single-family home of $10,000, $15,000, $20,000 is very significant. Wow. Standpoint, an investor standpoint, the rates of return can be huge. You can do it very hands-off, which is what I do, and I teach my students how to do. But you can be right in the business, or you can be very hands-off. I choose to be very hands-off. That's what I like on the niche itself. We're really helping people, providing a great solution, but you don't have to get sucked into it.

So these are elderly people in a house. Things are going to break. And part of this, uh, setting, do you have maintenance crews that are ready to go in, fix the hot water heater, fix the HVAC system, fix an outlet, all that stuff? Or how does that work?

Yeah, absolutely. But it's really two parts. There's the real estate part and then there's the business part. Okay, so let's just say you want to play the real estate part where you own the real estate.

I own the house.

Yep. You lease it to that operator. That operator is probably going to be responsible to take care of a lot of those falls.

Okay.

But that real estate owner could also have a home warranty policy to take care of the big things— HVAC, hot water, and so on. But as a business owner, and I own the real estate as well in an entity, and I own the business over here in an entity, I lease it from myself.

Gotcha.

We do take care of all of that because we're part of it.

And these— and so something you said yesterday was a lot of these are set up with a full-time cook, so they've got somebody always preparing the meals for them. Also, you have nursing in and out facilities and all that. So how does that— I mean, who orchestrates and manages that? The business?

The business, yeah, the business entity.

So it's a turnkey over there?

Yeah, if you're doing the real estate over here, you're not concerned at all with that. You're leasing the house instead of for $2,000 a month, you might lease it to them for $4,000 a month because they're going to be able to pay that because they're generating huge income. But you as the real estate investor over here, you bought a house, you're leasing it to— you are not really concerned with their business at all.

Gotcha.

On the business side, which is what I do and teach others how to do as well, that right here has all the moving parts of food preparation, the caregivers— not medical, but caregivers that are trained properly in the state— and getting the residents taken care of, that relationship with the family and so on. That business itself sell. That's where you can make that very huge 20-30% cap rates, $15,000-$20,000 each month from a single-family home. But the real estate, just think twice the market rent with a 5-year lease. That would be—

so I just go buy the property and then lease it over to you and then I'm done?

With one caveat. I don't want anybody to think I'm just going to buy a property and find them. What you really want to do is find that tenant first. That tenant is the operator of the residential. Yes. And then say to them, where do you want this house? Yeah, they're going to say, well, here's the community, here's the neighborhood, here's where my demand is. Yep.

So go find me a house in that area.

Exactly. If you do it that way, you're fine. But if you do it the other way, let me buy a house and find— that'll be a hard—

yeah, because he may not have any clients to put into that house.

So it's just a location, and location is really critical.

Okay. And when you talk about location, talk about that. What do you mean by how critical it is?

Demographics are really the key because this is not about mountaintop and oceanfront. This is about who lives in that area. So let's say you and I are brothers and we're of an age where our parents are 89 years old. We're really the client because we're the ones who are going to pick the home for mom or dad to live in. We're the ones who are really going to pay the bill for her. But mom or dad, our parents might be 80 or 90. So that is kind of your, your prime clientele. These people who are there, not Golden Girls in their 70s, these typically 80s and above, some below, but in their 80s. They need help or otherwise they'd stay at home.

Gotcha.

They're not there because it's a country club or it's a nice place to stay. They need assistance but not medical assistance. So for all those reasons, it's a really good niche to be in right now. Talking demographically, um, where you're looking to be in the location is where there's a lot of people who are upper middle income. Okay, so not low income, not the top of the top, cream of the crop. But up here, they have plenty of money to pay for mom and dad's care. Mom and dad probably have a house that can be liquidated to pay for their care, IRAs, pension plans, all of that. Okay, we don't want to deal with Medicare and Medicaid, which is kind of like Section 8. Yeah, we, we have a bed, we can either charge $2,000 or $6,000. I'd rather charge $6,000. The person is going to get the same level of help, but I really can make a lot of money and do well with $6,000.

Makes sense. So you're looking for that echelon of the baby boomers that are now ready to—

well, their parents are of age.

Yeah, right.

They want to go on a cruise.

They won't be babysitting anymore, right? Right.

And I don't mean to see that in a bad way. The point is, but it's reality. Yeah, they weren't designed to do that. Yeah, there's a real need. And I think a lot of people listening right now understand that because their own parent— my mom— that's why, you know, you asked at the beginning, how did I get into this? My mom needed help. And when I realized that Mom needed help and we could not find what we were looking for— we didn't want to move her into a hotel, there the caregivers really couldn't care less, right?

They're doing a job, they're just there, whatever.

So we decided to create that environment, and I— a home that I'd be proud to have my own mother in, right? I knew if I did, others would want it. They did. They filled it. People immediately asked me to teach them how to I'm a teacher by nature, so that's what we started doing. So we own and operate, we train people how to, we also have an investment opportunity for people as well. Great.

Um, so something else you talked about yesterday was the statistics. Talk about that a little bit. You had these charts that how it's changing drastically.

I think the one you're talking about is that 1960 to 2060. I love that chart because, you know, if you're looking at a chart, it kind of goes up like this, and at the top in 1960, not many people were, you know, 75 and above, right? But flash forward 100 years, where we're headed, the projections of the next 40 years, yeah, not far at all. This chart, instead of going like this with a few people up here, it's more like this with a little— with a massive bubble, millions of people that need this help. So I talk about the silver tsunami and the baby boomers. Yeah, I'm one. I'm assuming you are.

Right below it.

All right, below.

Good for you.

So with the baby boomers coming though, they're 10 years away from being in assisted living, right? But as they march closer and closer, boom, when they hit the shore, it's a massive crisis because, uh, millions of people are going to need that additional.

And there's not gonna be anything available.

Yeah, right. And that's why you see a lot of these big box facilities being built now. Part of it is to fill the need now. Part of it is because this wave is coming and they want to be prepared. But there is room in the inn right now. There's a million beds. There's a million four turning 85 every year.

That's what the other thing I was asking— you had some statistics. Yeah, so a million four every year turning 85.

Yeah.

And then you had it broke down to 1,000 a day. So 4,000 a day.

4,000. 4,000 a day are turning 85.

I didn't listen. Don't get me wrong, I didn't listen.

You did great, because I had to go so fast. But it's not like every 85-year-old moves into assisted living. Let's make sure. My grandmother lived home.

But even 10% of them at home.

Exactly.

That's 400 a day.

That's a lot of people.

That's a lot of people.

And that's the US numbers. That's the other part of this is when we say the baby boomers, that phenomenon is worldwide, right? It was a world war, not a US war, right? So this is literally an opportunity. And I've been to Panama, Belize, all kinds of other countries where they need this help too. So if somebody wants to invest or participate internationally, There's that opportunity as well.

Nice, outstanding. So as you're seeing this grow and growth, what do you see as a pitfall? Where there's got to be a negative, Gene. I mean, there's always an outside and a downside, so let's talk about the downside a little bit.

Yeah, and this has been well documented that one of the biggest needs and crisis in our, in our future economy is the need for people that can give care.

Okay.

Because we— there's, first of all, our economy is going great right now, which means low unemployment, which means there's not a lot of people available for it, right?

They're getting higher paid, they're holding out for better jobs.

But it's a different person. When I get a cup of coffee today, that person behind the counter would not be a caregiver, right? And a caregiver would not be a barista at Starbucks. So it's— but there's not as— the caregiver crisis, that's going to be a big issue.

That's going to be your—

we— and we can't replace that completely. AI, artificial intelligence, mechanically and so on. There's all kinds of inventions and, and things that are coming up that will, but still human care is human care. So that's your biggest issue in the whole—

it's getting enough people to manage those facilities to that caregiver level and not manage, uh, because we're teaching them how to do that.

It's the caregivers themselves.

That's what— but you got to be able to, to coach them, manage and hire them and make sure that they're doing the right— they're not just filling the spot. Yeah, that they're actually doing it because they care, and that's the key word. Caregiver. Yeah, not just health provider, but a caregiver.

Yeah, and that's the part that people don't realize. They look at a big building, let's say again the, the bigger companies of Brookdale and so on, where they have a beautiful campus, it's a beautiful facility. It's the humans that are taking care of mom that count, right? And if they're treated like a nameless, faceless corporation—

we hear those stories all the time.

Yeah, and you hear it from the big box.

Yeah, right. And that's the anxiety or the stereotype that's thrown into this is, well, I sent my grandmother to this place and they treated her like crap.

Yeah.

And, and so I think if we can get that message out that this is a more hands-on, smaller scale, just multiple settings that gives that more touch that we need for our parents, grandparents.

You like numbers, so I'll give you this one. In, in our homes, the ratio is 5 to 1, so 5 residents for 1 caregiver. In a big box facility, it could be 15, 20, 25. In the evening, it could be 30, 40, or 50 to 1 caregiver. There's no way they can provide the level of care that we can on the smaller level. Some people call it boutique assisted living, we call it residential assisted living. It's called different things in different states, in different countries.

Both of them set that apart and give it a better class.

Absolutely.

I like it, residential and boutique. I like those What else is going on in these residential assisted living?

Well, my goodness, we— I just got back from an investment get-together.

It was a cruise.

Well, actually, the one that I'm talking about is I was in Seattle at Microsoft.

Oh, that's right.

500 investors, family offices there representing literally billions of dollars and all kinds of things being presented. But when I talk about assisted living in a residential setting, the ears peak up. It's There's a lot of interest in this topic. So anyway, we have— I own and invest, and I invest in other people's projects as well. We have an investment arm. We also have a national association for this entire industry that we formed. We do our national convention. Our third annual is coming up this first weekend in October.

Really?

And that's a great place for anybody who's either in the industry or thinking about, whether they're owner-operator, investor, curious, to come and meet hundreds of players in the industry.

Where's that going to be?

It's in Phoenix, Arizona. It's October 4th and 5th.

Okay.

And we've got some great guests. We have Harry S. Dent coming, the New York Times bestseller, The Demographic Cliff.

Yeah.

We've got Dr. Bill Thomas, who is the founder of Eden Alternatives and the Greenhouse Project. In the industry, you know what that means, but that's big stuff. We've got Jonathan Goldsmith, the most interesting man in the world from Dos Equis Beer coming. He's a great guy.

We could go on and on. Love that guy.

We're just about to nail down having another large name, uh, which starts with an R and ends with Kiyosaki. We're just pinning down the details.

Rich Dad, Poor Dad. Yeah, yeah, nice. Outstanding. Well, Gene, it's been an honor and a pleasure to visit with you, to know you, and I guarantee we'll be doing business.

I love it.

Hey everybody, Gene, how do they get a hold of you?

Yeah, I'm going to give you a website that they can to get a lot of great free information. RAL101.com.

Okay, RAL101.com.

Yeah.

And then a phone number?

A phone number: 480-704-3065.

Perfect, perfect. Reach out to Gene or Global if you have any questions. Gene, again, thank you so much.

Thank you, appreciate it.

My honor.