It’s no surprise that many buyers who contact us at Senior Care Realty are investors. Assisted living facilities and other senior care real estate can be great investments. But most investors are looking for an investment, and not a job.
Investors Are Seldom Managers
Assisted living facilities have a lot going on. Resident care. Staff management. Purchasing. Insurance, licensing, accounting, marketing, resident events, wellness programs…..and the list goes on. Most of these activities are the responsibility of an onsite administrator or executive director or some similar title. And, if you’re an owner-operator, then the whole list is your responsibility.
Investors that don’t want have the expertise or the desire to get involved in operations need a manager, and that’s often a third-party, professional management company. There is an increasing number of quality management companies that will take on the responsibilities of operations for an investor. But investors always want to know…
How Much Does an Assisted Living Management Company Cost?
Management companies are normally paid a percentage of revenue billed – often between 5% and 8% depending on the size of your assisted living facility.
Sometimes there is a minimum monthly fee when facilities are starting up or being turned around. There can also be extra fees for start-ups and turn-arounds because of the extra effort during those times.
Financial incentives can also become a part of the fee. Incentives might be paid for reaching occupancy goals or net income targets. These bonuses can be a fixed amount, a percentage of the net income, a percentage of the amount that net exceeds budget, or many other amounts. In my opinion, it’s good to part of the compensation, even if it’s just a bonus, tied to the net income to help keep an eye on expenses and not just revenue.
But I’ve seen compensation formulas become so complicated that nobody really knew how much the management company was making. Keep it simple – don’t create a complicated formula that will only cause extra work and potentially disputes later.
Already own an assisted living facility? If you want to find its current market value, visit Senior Care Realty to learn more about the market today.
This post is not intended to provide legal or tax advice, and the information provided is only a limited discussion of the issue. Please consult with your attorney, CPA or other professional advisor before making business decisions.