A Market Segment Ignored
The seniors housing industry is a cycle of prosperous construction. New buildings are under construction every day – for who?
Operators and developers are constantly ignoring an undeserving market despite the growing number of investments in the seniors housing industry.
The Middle Market is Untapped
The middle-class market of the seniors housing industry mainly targets to lower-income residents. Few operators are building new construction for the middle-class market even though it is the largest senior population who need residence.
Most developers opt to construct new buildings. However, with expensive land and the high costs of new construction, service and rental fees also increase. In these new facilities, residents could pay rental costs of up to $10,000 a month. Due to high construction costs, it is nearly impossible for these new developments to target middle to low-income residents while still maintaining its profitability.
Get to Know the Middle Market Residents
On average, residents in assisted living facilities pay $4,000-$6,000 per month. Residents pay through lifelong investments for private-pay seniors housing facilities, whether it be a 401k, real estate, or traditional savings accounts. While middle-class residents have these lifelong investments, they may not be able to afford the same high price tag.
The middle-class market works on a private pay model. Current residents pay an average of $2,000-$3,500 per month. This price range is much more affordable and presents a great opportunity for developers.
The remaining demographic of the seniors housing industry is the residents who receive Medicaid. Seniors receive federal aid because they have little to no net worth. These seniors are most often placed in facilities that operate on government subsidies.
The difference in the pay model for these lower-income/government-subsidized housing is usually discouraging to operators. For the developers, the middle market can be a remarkable opportunity for their next seniors housing investment.
Seniors Housing Investments in the Middle Market
Presently, very few operators see the promise of the middle market. However, it is extremely possible to make big returns on lower-income housing.
To accomplish this, operators/developers can acquire existing facilities on affordable land outside of the bigger cities, without compromising on population. Some renovations can be made, but monthly costs must be kept low for residents.
The need for seniors housing facilities will never decline, as people are living longer lives and will be needing more care. The middle-class market is looking for care but is very underserved.
Navigate the Seniors Housing Industry with The Stahler Group
The Stahler Group is the leading brokerage for healthcare properties. Operators and developers depend on our team of investment specialists to guide them through the complexities of the seniors housing industry. To find your opportunity in the middle market, contact our team.