Most everyone knows investing in Senior Housing is a good idea I’ve learned this watching the inarguable expressions I get when people ask me what I do, and I respond, “I manage a senior housing portfolio.” Fortunately, the wind has been at our backs for many years in this sub-sector of Commercial Real Estate.
As an Investment Adviser I manage individual investor’s savings, I also find senior housing developers; vet them based on their merits following our 100 point proprietary analysis, and then syndicate shares in those properties to individual investors who want to invest in real estate. They’re “passive investors” because they simply put up their money for investment purposes, and don’t get involved in putting the deal together or have anything to do with managing the developers or the buildings.
I happen to live in Vancouver, Washington but the properties that I invest in and syndicate are in Arizona, New Mexico, and Utah. Those states have high populations of baby boomers, and are also regulatory friendly states. That simply means there are not a great deal of additional costs in getting approvals to build properties and red tape that slows down their construction.
We’ve been able to return a great deal of money back to our investors over the years. Our success wasn’t without making some mistakes along the way, but I’ve learned a couple of things from those mistakes and implemented the necessary policies to help avoid making them again.
Lesson # 1: Hire the best people you can and listen to them
When first starting out in almost any business, one tends to wear a lot of different hats. You have to, as you’re concerned about every penny you spend. But as time goes on, you learn to hire the best people available, and you learn how to delegate responsibilities. As everyone in business will attest, you can’t do everything yourself, and you get what you pay for! You also have competitors, and you want to win, so have the best people on your team.
However, what you can do after selecting these people, whether they be employees, partners, directors, or contractors, is listen to what they tell you. If you learn how to let go of every job function, rely on those that specialize in that area of your business, you’ll find you can focus your time on the big picture and let others take care of the other aspects at which they excel. For me, that function is advising the investors and communicating the value of our investment opportunity.
We have great investment opportunities. I know they’re great because I see them all, but my clients would never know if I wasn’t out there educating them about the deals on a regular basis. And it’s possible that these deals would never get done. We take great pride in providing a valuable public good, but I see great deals go unfunded all the time. We currently have opportunities that are having to wait until our current projects payoff.
Lesson #2: Learn to be Patient
Last year, 2019, was another year that senior housing continued its steady price increases and cap rates remained compressed. The price increases were due to a variety of factors. First, publicity about senior housing properties brought many new investors to the table who were willing to pay more than the asking price, just to say that they acquired the property. The volatility the stock market has experienced drove capital to seek a more stable investment; almost any type of real estate. The fact is, senior housing provides excellent investment opportunities for passive investors, including depreciation and passive investor status. It is also a stable investment, and mostly provides steady monthly income. However, getting into bidding wars to acquire a property is not a smart investment strategy. We were patient, and now it is paying off. You know what they say? “The best deal you’ve done is the one you didn’t do.” I refused to overbid and waited patiently for the right deal to come along.
If I do my due diligence and the numbers don’t make sense, I just don’t pick up the phone when the seller calls. I stay informed of the deal. I monitor it from afar, and the deal either gets more attractive, or we find another opportunity. There are always other deals available. I feel vindicated with my patient approach to negotiating with the Corona Virus now at peak status. We’re already getting deals similar to those we were seeing in 2014 and 2015. I learn that growing smart is not always growing fast. So be patient. Bidding wars are not a smart way to enter any market. Excellent deals will always be available.
Surround yourself with the best. If you’re open and you trust their input, you will be more successful. And be patient. Don’t jump at every opportunity that comes along. Do your due diligence and make sure the numbers justify the investment.
Are you an accredited investor and interested in learning more about passively investing in Senior Housing properties? Text “seniors” to 360-721-2170.