INVESTORS: Have you capitalized on senior living?

The Growing Demand for Senior Living

Tap Into This Lucrative Market With a Strong Foundation

This month, the Everest team is turning their focus to the growing demand for senior living. As the American population ages, the need for senior housing is rising dramatically, presenting investors with unique opportunities in a sector known for its stability and resilience, even during economic downturns. Together with our featured expert, Everest Commercial Loan Originator Zishe Jacob, we’ll explore the market dynamics driving this trend, important factors investors should consider, and the different types of senior housing available. 

Senior Populations Are On The Rise

United States Resident Populations

By Generation

*Statistics provided by Statista and DemandSage

So, why is senior housing in such high demand? The answer is two words: Baby Boomers. According to the Population Reference Bureau, there are approximately 76 million Baby Boomers in the United States, with the youngest of these now entering their mid-60s. This wave of senior citizens will eventually need some form of specialized housing that caters to their specific health and lifestyle needs. Senior housing as an industry – spanning from independent living to assisted living, memory care, and skilled nursing facilities – offers varying levels of support to meet those evolving demands. 

While some seniors seek out senior living for social or economical reasons, one of the biggest drivers behind the trend is the increasing prevalence of chronic diseases. These conditions currently affect about 50% of the U.S. population, with seniors being the most common community members afflicted. As healthcare costs tied to chronic illnesses continue to grow, the demand for facilities capable of addressing the specialized needs associated with them will only increase. 

“Senior housing stands out as a needs-based investment,” Explains Zishe. “This means that the demand is less vulnerable to economic shifts and recessions.”

But, of course, no matter how smart an investment may be, certain considerations must be taken to help ensure the continued resiliency of your overall portfolio. Let’s talk more about that now:

What You Should Know Before You Invest In Senior Housing

1. Keep Compliant With Healthcare Guidelines

Unlike traditional multifamily properties or commercial spaces, senior housing is closely tied to the healthcare industry. This means that operational considerations, such as regulation compliance and staff management, are critical aspects of property management. Though the specifics vary depending on what type of property you invest in – but we’ll get to that later. 

“Investors must have confidence in the management of these properties,” Zishe says. “Their success is not only tied to the real estate, but also to the quality of care and services provided to the residents. 

2. Stay Alert for Healthcare Trends

While the demand for senior housing is strong, just like any investment, it comes with risks. Staffing shortages, regulatory changes, and lawsuits tied to quality of care are all challenges that senior living facilities deal with on a regular basis – and all of these can affect your investment.

“The COVID-19 pandemic highlighted how legislative risk and health crises could impact occupancy rates and cash flows.” Zishe explains, “That is why it is so important for every investor – but especially those invested in healthcare commercial buildings – to keep up their research on industry changes.”

3. Consider Alternative Investment Methods

For investors who want exposure to this sector of real estate without owning or managing a facility outright, investment vehicles such as Real Estate Investment Trusts (REITs) or Delaware Statutory Trusts (DSTs) may provide a more accessible route to investment. These products allow investors to pool resources and gain passive income while a more experienced sponsor handles the day-to-day operations of the actual property. 

“Trusts are a great way to invest with limited resources,” says Zishe. “This makes it a great option for more novice investors or those who are getting their feet wet in a new industry.”

Now, you know us: we don’t make promises we can’t keep. We mentioned that we were going to talk more about levels of care. Thankfully, we’ve got Zishe to help us do it. 

What are the different types of senior living?

As we’ve already implied, senior housing isn’t a one-size-fits-all industry. It spans multiple categories, each with different levels of care or assistance – known as “acuity”. 

“Understanding the categories of senior living is an essential step when investing, since the acuity level impacts the complexity of operating the facility and the potential returns for the investors,” explains Zishe.

Essentially, there are 4 different types of senior care: independent living, assisted living, memory care, and skilled nursing. Each of these include different accommodations, staff, and services. Let’s delve into those a bit:

1. Independent Living Communities – These multifamily properties cater to active adults who require minimal assistance. The focus in these communities is on convenience and connection. 

“Independent living usually offers things like housekeeping, social activities, and transportation – but not usually healthcare services,” Zishe says. “These properties are ideal for investors who are seeking a lower-acuity option with fewer regulatory hurdles. 

2. Assisted Living Facilities – These facilities are designed for seniors who need help with daily activities such as bathing, dressing, or managing medication. 

“Unlike independent living, assisted living communities usually offer basic medical care services, in addition to social activities,” explains Zishe. “The precise level of assistance varies by facility. This factor is also influenced by State regulations, so investors should really make themselves aware of these kinds of laws in whatever State they’re investing in.” 

3. Memory Care Facilities – These groups specialize in caring for individuals with Alzheimer’s and other forms of dementia. They require more staff and security measures to ensure resident safety. 

“Memory care tends to have higher operating costs, but also higher potential returns,” says Zishe. “This is usually because of the specialized nature of the care that residents are receiving here.” 

4. Skilled Nursing Facilities (SNFs) – Offering the most intensive level of care, these facilities are designed for seniors that require 24/7 medical attention. 

“SNFs are kind of a double-edged sword” explains Zishe. “Since they often cater to both short-term rehab and
long-term, chronic care, they can be highly profitable. However, they’re also heavily regulated. These strict compliance requirements bring on a high level of risk for investors.” 

Should I invest in senior living?

If you’re considering an investment in senior living real estate, our experts recommend a thorough evaluation of the specific property and the business that is operating it. Unlike other real estate sectors, senior housing requires a deep understanding of healthcare, compliance, and residential needs – for financial investors and building managers alike – to improve a facility’s chances of long-term success. 

“Working with professionals who are experienced in the senior housing industry is crucial for success,” urges Zishe. “From the moment you apply for a loan, you need to feel confident that the professionals assisting you are fully aware of the risks, considerations, and specifics of your investment.”

Whether through direct ownership or passive investment vehicles like REITs and DSTs, senior housing provides a stable, needs-based option for those looking to diversify their real estate portfolios. With the right strategies and partners, investors can tap into this growing market and benefit from long-term, recession-resilient returns.

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