This is episode #371, and my guest today is my good friend, Gene Guarino.

Today we’re going to talk about one of the most fascinating opportunities I’ve heard of in real estate investing. I’ve known Gene for a while now, and every time I talk to him, I get excited about what we’re going to share with you today.

It’s a way to double your rents from a tenant that will sign at least a 5 year lease, most likely never leave, and be one of the easiest ways to manage tenants. All from houses that you don’t need to buy at deeply discounted prices to make work…you can find plenty of them available right now all around you, even right off the MLS.

Gene teaches others how to buy nice homes in nice areas, and turn them into Residential Assisted Living homes. This could be a house that is on your street, and you probably wouldn’t even know it. It may be the perfect storm for this investment opportunity, with an aging population, and from an investment standpoint…a much easier way to find deals and manage them.

I don’t want to take away from the show…so please help me welcome Gene Guarino.

Highlights of this show

  • Meet Gene Guarino – Residential Assisted Living investing expert.
  • Learn how there’s a huge opportunity to invest in homes for assisted living that has likely been right under your nose.
  • Join the conversation about how you don’t need to be the operator of the business, just the property owner.
  • Learn how this opportunity will only continue to grow as our population continues to age.

Resources and Links from this show:

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike:This is the Flipnerd.com Expert Real Estate Investing Show, the show for real estate investors, whether you’re a veteran or brand new. I’m your host, Mike Hambright, and each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility, and taking control of your life and financial destiny, you’re in the right place.
This is episode number 371 and my guest today is my good friend, Gene Guarino. Now today we’re going to talk about one of the most fascinating opportunities that I’ve heard of in real estate investing. I’ve known Gene for a while now and every time I talk to him I get really excited about what we going to share in today’s show. You’re going to love it.
It’s a way to truly double your rents or better for rental properties, and the tenants will sign a five-year lease or better and probably most likely never want to leave once they’re in, and it will be one of the easiest ways to manage tenants that you’ve ever had if you have, you know, B and C class properties for sure. All from houses that you don’t need to buy at deeply discounted prices to make work. So you probably don’t have to spend money on advertising and hustling really had to find those deals. You could probably find plenty of them right around you even on the MLS. It’s crazy.
So Gene teaches others how to buy nice homes in nice areas and turn them into what he refers to as Residential Assisted Living Homes. It doesn’t mean that you need to operate an assisted living home, you may just be the real estate part of that and leasing it to somebody that does that. This could be a house that is on your street, maybe next door, and you probably wouldn’t even know it. It may be the perfect storm for this investment opportunity with an aging population that wants to leave in nicer homes that are more residential and not, you know, facility. And from an investment standpoint, it might be the perfect storm because it’s easier to find these homes than almost anything else and they cash flow much, much better and are more stable to rent.
So, hey, I don’t want to take away from the show, but please help me welcome, Gene Guarino, to the show. Hey, Gene. Welcome to the show.
Gene:Good to be here with you. Good to see you again. I can’t believe it’s been two years.
Mike:Yeah, yeah. Yeah, it’s hard to believe that it’s been that long. As we kind of get started here, I want to have folks introduce you, but, you know, I’ve had . . . this is episode number 371. We’ve done a lot of shows. Had a lot guests on the show before. And I always love talking to you because, first off, you and I kind of click, we’re like kindred spirits, I think. But also, what you teach people, and what we’re going to share today is such a fascinating topic and such a unique kind of spin on, I guess, traditional real estate investing. So I’m excited to talk about it.
Gene:I always love to share and I got to say you do a tremendous job of bringing great information to people, and I appreciate you letting me be a part of it.
Mike:Yeah, thank you, Gene. I couldn’t do without guys like you. So, awesome. Well, hey, before we get started, this is such a fascinating topic and I think it goes perfectly in today’s market where a lot of traditional real estate investors are facing some challenges, harder to find deals and stuff, and this is kind of the perfect storm of a unique way to do things differently and truly make more money than by doing it the traditional way. But before, that’s a little teaser for folks that are listening right now, but hey, before we kind of dive in into the topic, maybe you could just share your background as to kind of how you got started in real estate investing and how you fell into this niche.
Gene:You got it. Well, I’m a old guy. I mean, I’m 56 years old and I’ve got the gray beard to show for it. But when I was 18 years old, that’s when I did my first real estate, and was because we had a business, we were tenants, we were leasing a property to run our business, a music school, recording studio. We leased it for two years. The landlord was terrible and we had to buy our own property, and that’s how I got into real estate. And that was a long time ago. So we did our first one, then we ended up buying a fix and flip, did rentals. We made a lot of money in real estate over the years. But flash forward today, some 30-plus years later, Residential Assisted Living.
The reason why I’m in this now is because this is the best thing in town. You know, you alluded to the concept of it’s so hard to find a good deal today. Six years ago, they were giving us properties. Remember those REO lists, you’d go to the bank and, “Here it is. Pick how many you want.” Today, it’s unbelievable. But with this niche, my goodness, this is the only thing that I’m doing after 30-plus years in real estate. This is the best place to be.
Mike:Yeah, it’s such a fascinating topic. So why don’t you just tell us a little bit about what that means, Residential Assisted Living—I know we’re going to go into a lot of detail, this the topic of the whole show—but at a high level, what that even means?
Gene:You got it. So let’s break it down. Residential, it’s not commercial. It’s a residential single family home in a nice neighborhood. Assisted Living, people who live in these homes, it’s a group home for the elderly. So those of you who may remember in the ’80s a show called “The Golden Girls.” Those were four mature women living in a house taking care of each other. So what we do is go the next level where they’re in a house, residential setting, but there’s caregivers that are taking care of them. So it’s a group home for the elderly in a residential setting.
But it’s not a nurse, doctor, medical situation. It’s assisted living, but nobody moves into this because, “Oh, I just want somebody else to make my breakfast.” They need help with their activities of daily living. Now here at my age and your parents are 80 or 90, you understand what means. They’re starting to get a little bit frail, they can’t move as fast, they’re forgetful on their medication management, and so on. They need help but they’re not ready for a nursing home. But if you’re a lot younger, you’ll looking at this and saying, “Well, that’s not me. It’s not my parents. My parents are only 50 years old. They don’t need assisted living.” Got it.
But there’s millions of people that are moving into this space that need a place to live and they need the care, and this baby boomer opportunity. You know, one thing I always like to make sure to share right up front, Mike, is that a lot of people don’t quite get it because in World War II, when it ended, 1945, the world changed, because literally what happened was all these guys come back from the service and they got busy, right? Population explosion. A year later, another baby was born and then it just started to climb. So when you look at charts of these population, it truly is a silver tsunami of seniors that’s coming.
So the front edge of the baby boomer, you know, they’re 71 years old. They’re not in assisted living, but their parents are. Now, they’re coming. They’re 15 years out. So the silver tsunami of opportunity is our opportunity to get ahead of the wave. But you’re not the first, but you’re right at the right spot. Timing is key and this is the perfect time to get into this game.
Mike:Yeah, that’s awesome. Well, the silver tsunami, have you trademarked that? If you don’t, I think somebody probably will. You know, what’s interesting about this, Gene, is I think that . . . You could say this about a lot of real estate things, but I think this more than anything, I think people can relate to how that would fit into their family or their situation.
And then at the same time, we also see . . . because I know we are going to talk about this a little bit, like, “Hey, for yourself, maybe this is an opportunity to start planning to help take care of your parents or to help them take care of themselves,” whatever that might be because if you have parents, which we all do, right, they’re going to need help at some point. They need a solution.
Like, whether you have somebody move into their house or, you know, what a lot of people do historically and one of those things that I think about sometimes, like I don’t want to go into a facility, right? Like most people, traditionally that’s what you do. You go into a home but it’s like institutional, right? It’s like you’re going to something that feels more like a hospital than a home, right?
Gene:Oh, yeah.
Mike:Yeah. Hopefully, a lot of folks here understand the investment opportunity, which is tremendous and that’s why I’m excited to talk about this today.
Gene:So yeah, let’s talk about that because I have to say when I first heard about this was probably 15 years ago when I was at a big real estate seminar, hundreds of people in the room. And the guru from the front was saying, “Assisted living is going to be an absolute, wonderful thing and you should do it, get involved now.” So he shared for about 10 or 15 minutes on it and at the end, I went up to him and I said, “Hey, tell me more.” And he said, “I can’t. I don’t do it. I’m just telling you it’s a good thing to do.” And that was depressing. It’s like oh, come on.
So then I had to look for somebody who will teach me how to do it. And frankly, I couldn’t find somebody who knew what they were doing who was willing to share. I found people who knew what they were doing. They owned the homes but they didn’t want to share it with me because then I’m going to take their business. How shortsighted. There’s millions of people that need it. But they either weren’t willing to share or they just weren’t capable of. Not everybody is a teacher and willing and able to explain to somebody.
So that was 15 years ago. Then life went on, right? And it wasn’t until about four years ago when my mom really started to need help, and that’s when it got personal. It wasn’t just money, it’s, “Wow, I’m now in a situation where my mom is starting to get forgetful. She’s aging. She needs help and what are we going to do?”
And that’s when it becomes real because then you start to figure it out. Wow, either we go in and take care of her, quit your job, do whatever it takes, and I wasn’t born to be a caregiver, especially not for my own relatives. It’s just not who I am. Or you have to hire somebody to move into the house to take care of them.
That’s expensive, $23 an hour is the national average for an in-home caregiver. Eight hours a day, that’s a lot of money. You’re spending five, six grand a month just for that eight hours a day, and you’re still watching mom or dad at night and on the weekends. That’s too much. The third choice is put him in a home. And if you’re like me, your parents said to you, “If you ever put me in a home, I’m going to boot you out right now,” right?
But you and I, we have a context. I know when I was a teenager, I did youth ministry work and service projects in high school. And I would go to the old folk’s home to rake leaves and cut the grass. And it was this big, old, it looked like a haunted house and old folks lived in there. And it’s like, “What is this?” That was assisted living. At that time, that’s what it was.
Now, they started to, years ago, turn institutions, little mental institutions into senior homes, really nursing homes because all of a sudden, people were living 60-, 70-, 80-, 90-years-old and they weren’t prepared for it. So they assumed they must be crazy when really it’s Alzheimer’s or dementia, but they didn’t know that at the time. They’re just like, “No, let’s put them here and strap him down.” And it was a really bad situation. So when I was looking for something for my mom, I could find it, that’s when I vowed to create it, and that’s what I did.
Mike:That’s awesome. And just to clarify to people, imagine, conceptually, if your parents or your grandparents, or whoever needs to move, they need care, right? They need help. They can’t live on their own anymore or they shouldn’t, or you feel like you need to help them. They could go live in a home, which, ultimately, is a rental property, and we’re going to talk about the business side of this in a minute, is like a rental property that has been kind of retrofitted, probably the door way is widened a little bit and stuff to make a little more senior-friendly. But you might break that up home open to three, four, four, six rooms for multiple people. And it’s in residential neighborhood. It could be the house next door to you instead of some hospital looking building on the other side of town, right?
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Instead of some hospital looking building on the other side of town, right?
Gene:Exactly. And that’s what I want you to be thinking about. It’s a house and it could be literally the house next door, and you wouldn’t know it. There’s no sign in front. It doesn’t look any different. And inside, the renovations that you might do to make this senior-friendly is may be widen doorways, maybe grab bars in the bathrooms near the showers and toilets. It could be take out shag carpets from the ’70s and put in a smooth floor that’s not going to be a tripping hazard, but it’s just like that.
And then you mentioned the idea of bedrooms, most homes don’t have 10 bedrooms. You know, it’s not like the “Brady Bunch” home that was designed. They don’t have that. It’s three, four, maybe five bedrooms. So you might have two people in a bedroom.
Or do what I did. You take other space in the house and then make those into bedrooms because most people want a private room and we can charge more for that. But shared rooms, private rooms, master bedrooms, in that house, what most people don’t realize, Mike, is that the average person is paying almost $4,000 a month, nationwide that’s what it is. I mean, I’m in Colorado right now. Here in Texas right, those states average close to four grand a month, per month for a single individual, in a private room, in assisted living. That’s an average home.
Mike:That’s assisted living in . . . and you’re saying in a residential assisted living home.
Gene:They’re pretty much exactly the same as the big box facilities, the Brookdale, the [inaudible 00:13:30], the Sunrise, pretty much the same price right there, but four grand. Then what we do is above that. We don’t do way at the top, but above that. So it’s a nicer home. So five or six grand a month. I was visiting one my students in California and he’s in Southern California. And in his home, they’re averaging $8,000 a month per person. It’s phenomenal.
Mike:So what you’re doing is you’re saying, “Hey, you could go put your parents, if you can afford it,” we’re going to talk about the affordability thing here and obviously I don’t think prices are going down for this a bit probably because there’s a lack of supply for probably . . . I know from some other family members in the past that they had to get on a waitlist to go into more of a facility takes place. So you could move your parents or your grandparents into a facility type place which is still very, very expensive, or for about the same price, you can move them into a nice home in a neighborhood that has a backyard, you could hear birds chirping and they have probably a little more dedicated care, I would guess, because there was a small number of people there.
Gene:Those are great points that I don’t want to skip over. So some of you right now you’re listening and you’re saying, “Hey, I’ve seen the big box facilities come, a large 100, 200, 300, bed facility coming to my city or my town.” And that’s good news because really, from my perspective, that’s kind of like McDonalds. They bought the land, they put up the franchise, they know that the demographics are right for burgers, that’s a great location. So all you have to do is just take the other corner. Now if it’s a big 300-bed facility, you’re not taking the other corner but a neighborhood nearby within a mile or two or five miles.
They’ve already done million-dollar research on the marketing to know that the people are there, they’ve got the money, they’re there for decades. So don’t worry. As a matter of fact, if you see the big box come, that’s great sign that you’re in a great area for this. But we teach people how to go right through it, to know where to do it, where not to do it, and how it’s done.
Mike:Yeah, that’s great. And so let’s get into the business side of this, because a lot of people, and you and I have talked many times and we’ve talked about this a bunch. So I know that from a real estate investor standpoint, which is who’s listening to the show right now, they’ll start to think of, “Wow, I don’t want to run an assisted living facility,” right? And so that was one of the more fascinating things in our conversations in the past is there is kind of like the real estate side of the business and then there’s the operating side of the business. And maybe kind of share, break that down a little bit more for us so people don’t say, “It sounds like a good investment but I don’t want to be changing elderly diapers in my rental properties. I already have enough problems with tenants.” Or whatever they may think.
Gene:Exactly, we don’t need to add that to the list of things we don’t like. So parts. Real estate on one part, business on the other. Let’s just talk about the real estate side. The home itself, think a nice home in a nice area, not the three-bedroom, two bath breeder box, average 1,500 square foot home, not that, but a bigger home. Now why bigger? Because I’m going to want 10 people, 12 people. In Texas you can have up to 16 people in what they call a small facility. That’s a residential assisted living home in Texas. So in some states they let me get to as little as 6 people, some states it’s unlimited.
So we want a bigger home so it’s comfortable. So that’s one. It doesn’t need to be the Taj Mahal, it doesn’t need to be 8,000 square feet, but not a 1,200 or 1,500 square foot. More importantly, it’s the location of that home. But the real estate side apart, frankly, that’s the easy part, and you guys have that licked. You know what you’re doing. If you’ve been watching FlipNerd for a few months or a few years, oh my goodness, what a resource you have at your fingertips to know how to buy right, renovate right, do it. But we also know that right now it’s harder and harder to get a good deal on real estate.
And you and I both know because we were all brought up in this way. You buy it 30% below the fair market value so that we make money when we buy. One of the things that I love about the residential assisted living is, not that I want to, but I could pay full retail, full price, even overpay, but full price and still make a boatload of money.
It’s the location that’s the key. So if I had the right house, more importantly, the right location, it almost, almost doesn’t matter what the cost is, the cash flow from that business. So the real estate, if you want to just own real estate, lease it to an operator, get this, you can lease it to them for up to twice the fair market rent. Twice. So if you’re getting two grand a month now and making money, if you’re getting four grand a month, that extra two grand goes straight in your pocket, it’s all profit.
Second part, they’re not going to want to sign a one-year lease. Your normal residential tenant, one-year lease, year to year, maybe they stay for two or three years, occasionally they stay for a bunch, but you get it, it’s one to three years is typical in residential rental properties. In this, the person who’s going to rent the house is going to be operating this group home, they’re going to want a five-year lease, with five-year renewals. So if you like the idea of having a long-term tenant, five-year lease, at twice the fair market rent, from a real estate side, this could be an awesome play for you.
Mike:Yeah, that’s incredible. You know, I would say my biggest . . . so first off, what I’m hearing and what I’ve heard before in our conversations but maybe some folks that are listening now probably are hearing this for the first time, is the reason you can pay . . . As real estate investors, I’ve bought hundreds of houses. I’ve been involved in thousands of transactions through students and things like that, is that everything we teach is buying distressed homes because we can get them at deeply discounted prices, but that’s harder than ever right now and that’s what I do every day. Believe me, I’m in the mix. But what I love about your product and what you teach others is that if you can get double the rent or more, you don’t have to buy at a deeply discounted price.
So therefore, you don’t have a ton of money in advertising, which is what I teach to generate leads and all. You can effectively buy houses off the MLS at full price, again, not that you want to pay. You always try to negotiate everything. But you can justify paying that higher price because you’re able to get so much more on the backend.
Gene:So that’s on the real estate side and location is really the key. And later on, at the end, we’ll go through a list of, “Here’s what I you to look for, for the right real estate.” And if you want a checklist, we’ll even send that to you too. At the end, we’ll show you how to get that.
Mike:Awesome.
Gene:But the second part is that there’s the business side. And the business is the residential assisted living business, the group home. Not get it. I get it. A lot of people listening are saying, “I don’t want to be the operator. I don’t want to deal with caregivers and residents and so on.” I understand.
But if you’re satisfied with the real estate side, perfect. That’s great. One of the key points I want to make to you right there is don’t get the house first, get the tenant first. Know who you’re going to lease it to before you buy the house. Key point. One of the things I train people is to know how to do that and do that as opposed to the other, “I’m going to buy the house and try to find the tenant.”
So the next part is the business side, and this is where the big money comes in, the cash flow. Because when we talk about $4,000, $5,000, $6,000 per month, per person, if you have 10 residents in your home times $5,000 a month, that’s $50,000 per month, not a year, per month in gross revenue. Now there’s expenses, though, it’s not just the house, the mortgage payment, debt service if you have it, it’s taxes, insurance, all of that. But the people, meaning the caregivers, the managers, the people that are watching and taking care of the residents in the home, that’s your biggest expense. You’ve got to keep that cost to a certain level. Our benchmark rule of thumb is 40% or less of the gross income—we’ll teach you all that—but that’s 40% or less.
Then there’s the other things like food, you’re feeding them. But you and I might go to dinner and I went to Outback Steakhouse, got a piece of salmon and it cost me $19.99. And I’m thinking, “Wow, that’s a lot of money.” But that piece of salmon could have literally fed four people there in the house, but we’re not going out to Outback. The food is prepared in the house by the caregivers. So the average is you’re only spending $5 to $8 a day for food, and that’s really good food inside the home.
Seniors don’t eat as much, it’s prepared in the house by the caregivers and so. So all of your expenses, if we’ve got 50 grand here and I’ve got 30,000 in expenses, that at least leaves me with 20. So the idea of vacancies and so and so forth, that $10,000-20,000 a month in net revenue after all my expenses, there’s a real number and that’s exactly what we teach people how to do.
Mike:That’s awesome. That’s awesome. And I want follow-up on something you said just a minute ago, which is long-term leases. So I can tell you for somebody who has a portfolio of rentals, my biggest expenses by far, the two biggest expenses are vacancy and turnover. And I tend to have properties that, you know, are kind of a more working class type homes and sometimes, people unfortunately tear them up. And so I know you said long-term leases with a lot of these folks if you’re just interested in the real estate side. So the interesting thing is, and I’m guessing, is that, one, people start to think, “Well, why would they pay double for that?”
My guess is that, and you know a lot of people that are the operators, they probably generally don’t want anything to do with the real estate. They kind want just, “I’m going to run the business . . .” I mean, there are people like that, right? They want to deal with the business and they don’t want to own the real estate. In fact, if you go drive, I’m just thinking of my street right here, there’s a bunch of fast food restaurants, all sorts of stores, even big grocery stores and stuff, a lot of times they don’t own that, they just lease that, long-term leases from people that are going to own and maintain it, right?
Gene:Absolutely right. And let’s talk about that because, number one, every commercial establishment you go to, 90% of them or more, they’re leasing the space. Every mall, strip mall, every place. I’m sitting in a hotel right now, somebody owns the dirt. They’re leasing it to the person that owns the building, who’s leasing it to operator of the hotel, who leases the concessions, the restaurant, the bar, to somebody else. But only person owns the dirt. So you can make a lot of money. But if you’re on the real estate side, location is the key.
The rental income, and I want to point that out to you, you really brought up a great point, Mike, the idea of the long-term tenant. Keep in mind the tenant that we’re talking about is an operator of this business, but the person who’s living in the home, grandma, grandpa, the biggest damage they cause, because they’re not raising Rottweilers in the backyard, motorcycles in the dining room. They’re rocking in a chair. The biggest [inaudible 00:23:48] and they put a hole in the wall. But that’s it. There’s not a lot of property damage.
The curb appeal, they want to keep it up because it’s all about if somebody comes there, they feel good. So these homes are generally kept up very nicely. You don’t have to worry about that issue. Vacancy, done, repairs, turnover, all of that. There’s another operator waiting to come if that one goes away after five-years. Why would they? Because the cool thing is, and I want to say this too, there’s so much I want to share, right? We only get [inaudible 00:24:17].
Mike:I know. I know.
Gene:But the business itself that we’re going to talk about creating can be sold separately. So the real estate has value and can be sold. The business itself that you’re starting from zero is worth hundreds of thousands of dollars based on the cash flow itself. That’s huge because people, right now, if you’re just thinking real estate, hey that’s great, get your rental income, that’s good. If get you twice with a long-term tenant, that’s really good. But if you create that business and it’s worth $200,000, $300,000 on top of the real estate, that’s a pretty significant bonus.
Mike:Yeah, yeah. And one other thing I’ll say about the whole vacancy issue is my guess is unlike a tenant, unlike a traditional rental where the tenant’s lease comes up at some period and there’s these 30-day period where we either have to notify them we don’t want to renew or they may just leave. Like there’s a lot of turnover at the, you know, kind of the way that I do it.
And so in your model, my guess is you can define whatever terms you want because you’re dealing with a commercial person versus somebody that’s going to actually live there, right? So you could probably say, “Hey, you have a five-year lease, but at four years you need to renew at that point,” or longer term to where you have a little more awareness of what’s going on so you can transition instead of just, “Hey, I have 30 days to turn this around and get it rented again,” right?
Gene:Absolutely. Because that business that’s there, and very rarely I’m going to use the word business in this. It’s a group home for the elderly because there’s running issues and so and so forth and you just need to get through all that. But that, the point is, they can’t just move to another location, then the other location has to be qualified and licensed and so on. Plus the elderly people that are there, they’re not just going to say, “Oh, let’s get in the car and move across town.” So no, you’ve got a long-term lease, a lot control. And if I was consulting the real estate investor in how to lease it to somebody, I would go on one side, and if I’m consulting the person who’s operating the business, I’m going to go the other side. So there’s two sides.
Mike:So what makes a good . . . I know you talked about it a little, what makes a good rental property?
Gene:Sure. Well, when you say rental property, you mean for this industry itself?
Mike:Yeah, for this industry, yeah. What makes a good property? So I know, you know, when I’m doing rental homes, like we tend to like . . . you know, everybody has different lines of thoughts, but we tend to go to a little bit lower end houses because they tend to cash flow better. But of your house, you’re looking for a little bit, you know, higher end property that, like you said, has more bedrooms and more space. But maybe share a little bit more about what makes a good property for a residential assisted living unit.
Gene:If I were to give you a list and walk you right through the number one thing on the list is location, and any person who’s in real estate will explain or understand that. It comes to the location, location, location. So what I’m really looking for is not the trees and the mountains and the river. No, it’s the demographics of who lives there. So your key demographic is somebody like me, 50, 60 years old. Why? Because mom and dad are 80 and 90 years old and I’m really the client, because, really, you want the home nearby me so it’s easier for me to go visit Mom and Dad. So if it’s within a few miles of where I am, or better yet, in my neighborhood, now that’s a great location.
So you want the right age group. So don’t do it near a college campus, right? They’re 30 and less. Don’t worry about doing it in the old aged part of town where everybody is 90 years old. It’s going to be where the people who are the kids, 50, 60, who are paying for mom and dad where they live.
Next is the economics of it, not average, but above average income. So if the average income in your area is 50 grand, I want the neighborhoods worth 80 and 100 grand, right? It doesn’t need to a million dollars because that’s . . . we do kind of a five-step pyramid, from level one to level five. Level five is the, you can get a lot of money. There’s people paying $10,000, $20,000 a month for assisted living. That’s a lot of money.
But the point is, there’s very few people that can afford that. So there’s a sweet spot. It’s not at the bottom and it’s not at the top. It’s a sweet spot. That sweet spot itself is going to be in a nice, upper, middle neighborhood, bigger homes.
Now getting into the real estate part. Location is key. I wanted to be located on the busy section of the street in the neighborhood. So not in the quiet cul-de-sac. That’s okay, but if I can find it right on the front, the first house on the right inside the neighborhood, that’s perfect. Most times we look at that and go, “That’s not good. It’s busy there, it’s loud, it’s by the busy street.” And I’m like, “No, that’s perfect because it’s easy to get to. It’s convenient.
Even if it’s the house, and this is where you can start to get deals, you guys, maybe there’s homes that aren’t selling, there’ve been on the market for 100 days. Why? Because it’s next to the Walmart, it’s got a small backyard, it’s got a power line in the back, it’s got all those things wrong with it for a family or for you to live in. But for me, it’s convenient. I don’t need a big yard, they’re not out playing catch in the backyard, right? Noise, I can put up a fountain to give me nice white noise to block out those kind of things. So those things that are wrong for other people tend to be right for us. So that’s where we can get a good deal. And you want me to keep going on that?
Mike:Oh, yeah, sure. And share maybe a couple of things too that come to mind. You probably want more of a one story, right, versus a two-story. I mean, I guess you could do elevators and stuff like that in homes even. But I mean, I’m trying to think, maybe you could kind of . . . I know we can talk about this for a long time. We have before, I think.
Gene:I do a three-day training and I spend three days and I get to the end of it and I’m like, “I want to share more, there’s so much to share.” Yeah, what we’re looking for, if you can get it, and I know it’s not in the Northeast two-story homes, colonials, basements, attics are the norm, and that’s okay, you can do it there. But the best is that single level, so whether you call it the bungalow or ranch, a single level. If you do have two stories, the bedrooms or where the seniors are going to be, they need to have good access to it.
So if somebody has got to go to a bedroom on the second floor, they have to be mobile, mobile enough to get up a flight of stairs and down, and many seniors are that way. But if they’re in wheelchair, that’s not going to happen, right? So if the bedrooms are upstairs, there are solutions for it. A chairlift, you’ve seen those things in movies where they’re riding up the . . . They’re not expensive. It’s like 1,200 bucks to put in. You can get it installed for like two grand up a staircase.
An elevator, if you’ve got a nice enough home that’s worth spending $20,000 and that’s what it is for a home two, three person elevator, not a hotel one, 20 grand in a nice home, that itself, and many of these upscale homes have the elevators already. But that now brings the whole second and/or third floor into play even with bedrooms. So single level, bigger is better than smaller.
Now I’m going to give you rule of thumb for those of you listening, 300 square feet of living space per resident. Now, the state doesn’t require that, the state’s going to require 100 square foot of bedroom, private room, 100 square foot, 10 by 10 of usable floor space for a private room. A shared room, two people in the room, semi-private, 80 square feet per person. So 160 square feet, 10 by 16. Those are pretty small bedrooms for people. I like to do bigger bedrooms, right? So bigger.
But the concept of the size of the property, if there’s 3,000 square feet of house, I can easily have 10 people living in there, whether they’re private rooms or semi-private rooms, that’s plenty big. The state requirements, the minimums, I can do in a 1,500 square-foot house. So 300 square feet is a good rule of thumb.
So the next thing is bathrooms, not even bedrooms, bathrooms. I can convert the dining room into a bedroom, but bathrooms and plumbing. Now, I’m in Arizona so we have a lot slabs, adding bathrooms is a bigger issues. Places with basements makes it easier. But bathrooms. If there’s two bathrooms, that’s all you need. But the more bathrooms you have, the more I can charge.
So you can retrofit and put in more bathrooms and have half baths connected to the bedrooms. And if they’re private rooms versus shared rooms, that’s just what makes it nicer and nicer, which means we can charge more. So the bigger home, lots of bedrooms is great. But you typically don’t find a 10-bedroom house, you’ll find a three, four, or five. Bathrooms, two is minimum. But if I have a home that’s got three, four, or five bathrooms, even better. Bigger is better, location is critical.
Mike:That’s awesome. That’s awesome. Well, Gene, and I know we can talk about this for a long, long time. One thing I wanted to talk about a little bit is just trends. I mean, we all know that . . . you’ve referred to it as the silver tsunami, right? But we all know that there’s a baby boomer population that’s getting older and is going to need more care. Maybe you can kind of marry that with a little bit about how the industry for providing solutions, not necessarily residential, but even more of the institutional type, is keeping up with that and is there going to be this kind of supply and demand issue? It feels like, like I said, we have a family member that had to get on a waitlist at one point. So I feel like there probably already are some supply and demand issues, or maybe share a little bit about where we’re going.
Gene:Sure. And the big guys, and again, I want to go back to that, when I say the big box, big guys, Atria, Brookdale, Sunrise, these are multi-billion-dollar companies, corporations, publicly traded in many cases that do have big box facilities all over the country and they’re expanding because they know the need is there and there’s more beds needed. They’re building beds. But we have a better mouse trap, if you will.
And you mentioned something before, the reason why, because the question always comes up, Mike, “Why would they move into my single family home versus the big box facility?” Well, number one and you hit it, is the resident to care giver ratio. In a home like ours, we might have five or six residents for every one direct care giver. In a big box facility, it’s 15, 20 or more to one direct. And that’s a scary thing but that is the reality. So we have a much higher level.
Plus, grandma lived in a house for 80 years. She doesn’t want to move into a hotel or apartment building. It looks good for us because we look at that and say to ourselves, “Ah, look at that, there’s a bowling alley there. There’s a dining room there. There’s a movie theater there.” No she wants to be in her own home, she’s only going to this place to make it better for everybody else, but also to give her comradery too. The idea of networking with or being with peers of her own age.
If you’re in a place for 200 people, it’s hard to become friends, but if you’re in a place with 8 or 9 other people, now you’ve got buds, you’ve got friends. So those are some of the reasons why. But you went into . . . I want to make sure I address your question. You can tell I get excited. So you asked. You remember what it was? I forget.
Mike:Kind of trends of supply and demand. Like I want investors to not see that this is some fad, I guess. This is like clearly the population is continuing to age. And I think clearly, as I think about myself, I think about my parents, I think about even my grandmother who still lives in her house. She, like, refuses to leave because she wants to be at her home. That’s just a similar thing. But when I think about how people are, I guess, today and the generations that are kind of leading up to this, is I feel like people are much more independent and they don’t . . . that more and more, I think they would much prefer to go a residence in a residential area instead of an institutional place. So maybe just kind of share some general trends there.
Gene:So the general trends. I have friends that have lots of rental units and right now some of them having a hard time renting the thee-bedroom units, even the two-bedroom. They get a lot of calls for single bedrooms and studios. Those were the oddballs, now they’re the demand one. Why? Because people are living by themselves. They’d rather pay a lesser rent, live by themselves, and have that control.
Seniors, on the opposite end, right, at this point where are they? They’ve got a house, they own it free and clear. It used to house, two parents and four or five kids, and now it’s just a big empty shell that they’re living in a small section of. So they’re paying all that upkeep, all that taxes, if not the mortgage still. But the point is there’s a lot of expense, a lot of upkeep, and they want to stay there but they reality is, they need to move someplace else.
So builders now are building homes that are senior-friendly. Smaller, single level. One bedroom, maybe two, that’s for their sewing room or their storage, right? So smaller single level, one or two bedrooms, one or two bathrooms, less expensive and senior-friendly. Wide doors, smooth floors, grab bars already built in.
So now when it comes to the bigger trend, this silver tsunami that we’re talking about, guys, it ain’t a fad, it ain’t going away, it ain’t pie in the sky, and it ain’t anything else other than world changing, because I mentioned to you World War II when the war ended, people came home and this explosion of population is all over the world. This year already, I’ve spoken in over 30 cities in five different countries on this topic. This is happening all over the world. And here’s the deal, as these people age, they need the same exact things—a senior-friendly place to live and care for them. So this is coming. There’s more diapers for adults being sold in Japan that there are baby diapers right now, and it’s coming here too.
So the bottom line is that it’s not a fad, it’s here. If you’re building big mansions, you’re sitting inventory right now hoping for a buyer. If you’re building things that are senior-friendly, now you’ve got a great place to go. I also want to mention one other thing. Some of you, I mentioned “The Golden Girls,” the concept of taking a house and making it senior-friendly for maybe four people. Imagine taking that same house that you’re renting out for two grand to a family and just make four bedrooms, where they share the kitchen and family room, and they’re just paying, let’s say $1,000, or $1,200 each for each bedroom. No care, no license, no caregivers, nothing.
It’s just shared housing where’s kind of like “The Golden Girls,” and they’re going to be there for the rest of their lives. But they’re in a better situation. And then if you have the assisted living home that when they need help, they can move into that, now you’ve got built-in clientele, beautiful way to go, great solution. So there’s ways to step into this or just jump in like I did.
Mike:That’s awesome. That’s awesome. And, Gene, for anybody that’s watching this right now, Gene, your video had frozen up but the sound is fine. So, listen, I know we’re kind of coming to end here, so if you’re watching it right now and you see Gene frozen, then you’re going to have to just tolerate that for another couple of minutes here.
Well, Gene, one other thing that I maybe kind of hit on that I think people are kid of asking is . . . and I know you teach all this and we’re going to tell people, I know you have an event coming up soon here as well, like a convention to teach people more about what you do, which is such a fascinating topic because I think anybody that’s still listening right now probably agrees, otherwise they would have turned off. And I know that you pair people that come to your programs and stuff, but generally, how do the operators . . . if someone wants to be a real estate investor, how does that real estate investor connect with the operator type folks that want to lease these properties?
Gene:Good. And that’s a great question in the concept of getting that tenant first, somebody who’s going to move into your property first is really critically important. And sorry my screen is frozen, by the way. It looks like I’m giving you the three sign right there in the video.
Mike:Yeah, you’re saying peace. No, that’s not peace, that’s the okay sign. All right.
Gene:Yeah, okay. Unless you’re in France in which case is completely different what I’m saying, but anyways. The idea of finding the operator or the potential tenant for that, when you’re looking for that operator, number one, if you were to come to my class, you’re sitting right next to people that are potential operators you could lease to.
Number two, if you were to go to the people that are existing right now in your own state or city that operate these homes and contact them and say, “Hey, are you looking to expand? If I were to buy the property and lease it to you, would you be interested in that?” that might be a good way to do it as well.
There’s a lot of people who to get in into this industry who don’t have the real estate expertise confidence that you and I do, to buy a house for no money down and go through all that. Maybe they don’t have the down payment or don’t have the money for renovation. If you’re going to do all that and they’re willing to pay twice the fair market rent, it’s a win-win situation. That’s what that’s about.
Mike:Yeah. Yeah, I mean, as you know, in every business that I can think of from restaurants to a whole bunch of stuff, people that are operators, they want to operate the business, they want to deal with staffing issues and marketing their services to clients and stuff. They don’t want to deal with the real estate side of it.
Gene:Absolutely. And the business itself is so lucrative and what they really want to do is help those other people. So that is what it’s about.
Mike:Yeah, yeah. Well, Gene, again, you have an event coming up here soon and I want to give folks the chance to learn a little bit more. I know we talked beforehand, you had . . . maybe you could tell us what’s at the event. But I want to give a link here and I know it was kind of a long link so we decided to create a redirect. If you go flipnerd.com/ral for like residential assisted living, I know that Gene uses that acronym all the time so I created as well, flipnerd.com/ral, you can learn more about Gene’s upcoming event and more about his coaching and just more about this opportunity. But maybe, Gene, tells us a little bit more about the event that’s coming up here.
Gene:Yeah. And I really want you to hear this because I know some of you are very interested in what I’ve spoken about so far. You’re at the point where you were saying, “This makes sense to me and this exactly what I’ve been looking for.” Awesome. Reach out to us directly and let’s get started. We’ll give you more information.
We do have a three-day live training that we do and it’s a phenomenal event. It sells out. We do it six times a year. The other option is a home-study course, and we just came out with our brand new version, Mike. It’s off the chart. I’m so proud of it. It literally was just released two days ago, so that is another option too. We call it the Assisted Living Business Accelerator Live Version Home-Study Course.
But what you were just talking about is the first national and I’m so excited about this, Residential Assisted Living National Conference. And this right here, this convention, we’re coming together, Scottsdale, Arizona. It’s going to be November 10, 11, and it’s going to be the first time we’re all coming together, learning how to fund these, how to find these, how to fill these, the management aspect and networking with people from around the country. It’s just a phenomenal opportunity. I really want everybody to come to that but we only have so much space for it but do go to that link. And also we can connect them with that checklist for the properties as well.
Mike:Great, great. Well, Gene, so we’ll add a link. Everybody, we’ll add this link down below here and maybe we’ll add a link too. I don’t want to try to sort this out with Gene right here on the show, but we’ll try to add a link too to learn more. If you can’t make to the event that’s coming up but you want to learn more about the other products that Gene just mentioned and kind of some his training, which is fascinating, we’ll add some links for that too. So those will all be down below in the show notes here and just click below and check it out, or if you’re listening on iTunes, go to flipnerd.com and then do a search for Gene Guarino, G-U-A-R-I-N-O. You can just do a search on FlipNerd and it will pull up the content that he’s done with us. So just look for this show number 371 and whatever links we’re going to create, you’ll find them there. So, Gene, hey, great to see you my friend.
Gene:Great to see you too. Sorry about the frozen video at the end but at least you got through with the three sign at least for a while.
Mike:Yeah, yeah, absolutely. Everybody, thanks for joining us for this episode and check out Gene’s stuff. I’m fascinated by it myself. If you kind of imagine the guy spinning plates, I’ve got a lot going on otherwise I think I would . . . every time I talk to Gene, I’m like, “I need to learn more about this opportunity.” In fact, I have a couple rentals, Gene, that I think are kind of bigger homes, they’re bigger than what I traditionally have for my rentals. And, hey, you’re back, you’re back. And I have like one specific house that is a big one, it’s probably my highest kind of ARV house that, truthfully, I could sell. I bought it at just a killer price. It’s worth like three or four X what I paid for it and a couple times I’ve thought . . . every time I talk to you I’m like, “Yeah, that would be a good property to convert, maybe.” So anyway, maybe we’ll talk about that offline.
Gene:Happy to do that. Thanks so much for having me on and for those of you who want to learn more, please do click on that link and find out more. There’s a lot for you there.
Mike:Awesome. Awesome. And, everybody, this is episode number 371, we appreciate you. I try to remember to ask at the end of each show now, if you love our show or even if you just like it a lot, I guess, if you could give us a rating on iTunes or Stitcher Radio, Google Play, anywhere where you’re watching at, those ratings help us how up higher in the ratings and make me feel better. So if you want to make me feel better and want me to keep these shows coming at you, that’s one way to kind of keep me energized. So I appreciate everybody and we’ll see you on another show real soon. Have a great day.
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