Over the past year or so, I have taken many phone calls from owners of vacant land who are sure their property would be great for assisted living. Sometimes the caller is right but usually it’s just wishful thinking.
Over the past few years, owners of vacant land, condo projects and hotels have called us for help finding a new purpose for a failed project or stalled development. Four or five years ago, the original project seemed like a great idea when the real estate market was booming. But the market busted a few years ago and many owners are still struggling to escape a bad deal.
So how do I help an owner decide if their property really would be great for senior housing? Here are three questions that I usually ask.
1. Have you done a feasibility study? The answer is usually no. An assisted living provider or senior housing developer won’t move forward without one. At a minimum, there has to be some information available about the market in terms of both current demand and supply. There is an abundance of distressed property available today. If you want your property to get a buyer’s attention, you need to help them decide if your idea is feasible.
2. Can you be flexible? Sellers sometimes think that an alternate use for their property will yield a better price, or maybe save their original investment. That’s not always the case. Sellers need to be flexible in price and terms if they want to make a deal. They might need to provide some seller financing or contribute their property to a joint venture. Some sellers may turn a lemon into lemonade if they are patient and connect with the right operator who can maximize value over time.
3. Do you have other options? Most of these conversations normally end with an agreement that using a property for senior housing would be a long-shot at best. If sellers have other options for their property, it’s important that they continue to pursue those options and try to identify other options as well. Too many developers are caught up in the idea that the baby boomers will be the answer to their problem property. That’s usually not the case.
Every situation is unique. In case you think I’m being a bit too negative, I’ll admit that there are some great conversion opportunities out there, and fantastic vacant sites that are bargains. But there are many more challenged properties that will remain a challenge until the market improves. If you ask the right questions, you just might find a property that would indeed be great for senior housing.
Carol Pulliam says
My father in law purchased a property that had already been zoned for assisted living in Oceanside, Ca.. He purposed 6 individual homes with 6 beds each. They would be individually owned by 6 different people. Do you know if this type of transaction is possible on 1 lot in California? Where would I get the answer? I am an investor and going to own one.
Carol – This is a long overdue reply. I’m sure you’ve made some progress on this deal and I’m checking back to see how things turned out. Can you reply to this reply? As I’ve replied to others’ comments with similar questions, zoning is almost always a very local issue so talking with staff at the zoning or planning office in your city is probably the first step. If they’re not helpful or uncertain, then the next step may be engaging a local real estate attorney whose specialty is real estate development – a few hours of their time may save you months of frustration. Mike