Today’s REI Classroom Lesson

Gene Guarino talks to us about how Residential Assisted Living Care can have exceptional opportunities to create consistent wealth.

REI Classroom Summary

Gene explains how to make money on the rent side and the business side when owning and managing a Residential Assisted Living Care Home.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Announcer: Welcome back to the REI classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Gene: Hello. This is Gene Guarino from the Residential Assisted Living Academy.
Announcer: This REI Classroom real estate lesson is sponsored by
Gene: Today what we’re going to be talking about is the three top reasons why you might consider doing assisted living care homes. When I first got into real estate, I did my first deal when I was 18-years-old, no money down because I had no money. And the concept of getting into real estate was a mind boggling task. Who do I go to? How do I learn? But after I got into real estate, I realized wow, you can make a lot of money. And I’m sure you have figured out too.
So I know there are really three reasons why people get into real estate. One is cash now. So when we talk about cash now, the idea is fix and flip, wholesale or transactional funding where we get in, we just turn it over and a double close. Or maybe just the sign in the contract. Cash now is fun. The problem is you’re unemployed once it’s sold. You have to go find another good deal. And in a market like we’re in today, that would be very difficult to do.
So the other one is cash flow. So buy and hold. So when you have a single-family home, we say buy and hold. That’s good, but making $100 a month, $200, $500 a month was exciting when I was 25. But when I’m 54, not so exciting.
So the third is cash later. Now that whole concept is wonderful, but I’m a little bit more immediate than that. The concept of saying I’m going to get my big payday when the mortgage is paid off in 30 years just doesn’t excite me today.
So I was thinking about the opportunities that are out there and I said let’s look at the megatrends. So what are the megatrends? We’ve got baby boomers out there. The baby boomers are here, they’re here to stay and they’re aging. And when I say aging the front end of the baby boomers right now, they’re turning 65, 67, 68. I’m on the backend at 54. So somewhere between 50 and 70, those are the baby boomers right there. So the reality is that they are lasting longer and they’re lasting longer and they’re now no longer working, but they need to live someplace.
So they’ve got their home paid off, that’s terrific. But what happens when they need some help? They don’t need a nursing home, they don’t need medical help and they’re not ready for the golden girls moving into a home, or for four men or women to share rooms and just camaraderie with each other. They need something more and that’s assisted living.
So when you think the opportunity and the megatrend, one reason why they get into it, it’s a huge opportunity. So how do we get into it? You can invest in a REIT or a hedge fund or a mutual fund and get into senior housing that way. It’s very hands-off, it’s just put your money in, get a rate of return and that’s fine. But I like to be more interactive, more hands-on. So I said, “Well, how else can I do this?”
So when you think about building a nursing home or a large assisted living facility where it’s 100 or 200 people in a facility, it could cost $50 million to put that project together. That’s too big. And then I’m competing with the REITs and the hedge funds so I didn’t want to do that. But I do know real estate, I know residential and commercial. So I said, “Let me get the best of all worlds. We’ll do residential real estate with a commercial aspect.” Assisted living in this single-family home.
So here is what it is. You’ve got 10 people, let’s say, living in a home, being taken care of 24 hours a day. They pay significant money to be there for that care. And you as the owner of the real estate, you can make significant money. And if you also own and operate the business, well it’s the Holy Grail. If I were to say to you $10,000 a month from one single property, that may get you a little bit more excited than $100 a month.
So if I wanted to make $10,000 on single-family homes buy and hold, I might need 50 or 100 of those homes. That’s a lot of tenants, toilets, turnover, termites and the whole rest of it. If I wanted to do an apartment, well, I need probably a 100-unit apartment in order to make that $10,000 net after everything is said and done.
But if I get to take one single-family home, turn it into an assisted living facility, a home, a care home and it’s called different things in different parts of the country. RCFE in California, personal care homes in Atlanta, Georgia so different things around the country. But turn a single-family home into an assisted living home. And if I could net $10,000 per month from that single home, well, that gets me excited. And that’s what I do, and at the Residential Assisted Living Academy, I teach people how to do that. And what we do is we take those homes, we convert them into that business itself and now we have two entities. One owns the real estate, one owns the business. One leases from the other.
So if you just want to do the real estate play, in the future one of these, I’m going to go ahead and share with you what to look for in the real estate. You can lease it to the operator and probably get twice the fair market rent. I’ll teach you how to do that. Or you can own and operate the business itself. And that’s where you can make $10,000, $15,000 a month, even $20,000 a month from a single-family home.
That’s what we do. That’s the residential assisted living that we talked about. It’s a huge opportunity. The baby boomers are here, they’re going to have to live somewhere. They can’t stay at home. And by the way, do you have somebody in your family that might need that kind of help? And if you do, and some of you are just like me you’ve already had parents in that situation, you’re going to write a check to somebody for $3000, $4000, $5000, $6000, $8000, $10,000 a month. Would you rather collect those checks instead of write those checks? And one of the benefits of owning the home yourself, when it comes time, you can move right in. That’s one of the reasons why my wife and I got into this niche and now it’s the only thing we do.
As a certified financial planner in the US as well as in Australia, I’ve been doing real estate for 30-plus years. I’ve had 17 different businesses. This is the one thing that I’m doing. So I’m glad you came and I’m going to teach you more. Keep listening. Residential assisted living.
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