How Residential Assisted Living Works With Isabelle Guarino

Residential Assisted Living (RAL) is all about converting single-family homes into senior housing with 24/7 care, giving the elderly absolute comfort and peace of mind. Derek Dombeck explores how you can do this yourself with one of the leading experts on this topic, Isabelle Guarino. Listen as the COO of Residential Assisted Living Academy discusses the regulations, staffing requirements, and financial aspects of RAL, as well as its some business scaling and exit strategies. Isabelle also draws attention to the alarming shortage of caregivers as the aging population continues to increase, which could lead to serious staffing problems and adversely impact the quality of senior care.

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How Residential Assisted Living Works With Isabelle Guarino

Welcome to the show. This episode is going to be fantastic because we have a good friend of mine. Her name is Isabelle Guarino. I’ve known Isabelle for several years. We were in a mastermind together. We got to know each other very well during that mastermind. She is one of the most kind-hearted people that you could possibly ever imagine meeting. She’s going to talk all about RALs which are Real Estate Assisted Living facilities, and how you can take a house and convert it into an RAL and cashflow like crazy.

Before we bring Isabelle on, I want to thank everybody. This has been going on now. I want to say we’re on episode 40 or somewhere in there. I can’t tell you how great it is for me to know that The Generations of Wealth family is growing. We’re spreading knowledge all around the country and the world. That’s because of people like you who tune in to our show all the time. If you just found it, thanks for finding it. Get out there. Tell everybody about it, send people to the show, give us the likes, the reviews, and the shares, and help us grow the community. With that, I bring you Isabelle Guarino.

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As promised, we have Miss Isabelle Guarino. Isabelle, thank you so much for joining us on the show.

Thanks for having me. I’m excited to be here.

Residential Assisted Living

I don’t know how much I’m going to tell the audience about our past. We’ve known each other for a few years now. We were at a mastermind together. I’m not going to tell the public anything about us personally but we’ve gotten to know each other in a setting where it’s very intimate. We get to see how good each other is. I would say you are way better than I am on that part of things.

You’re too kind.

If you wouldn’t mind, introduce yourself to the audience.

I’m Isabelle. I’m the COO of Residential Assisted Living Academy. We’re the nation’s leading expert on senior housing in a residential setting. I own and operate a couple of those homes myself and I also teach others how to do that.

I think you’re being a little bit modest because you are considered one of the elite experts in the country if not the world when it comes to residential assisted living.

Thank you. We’ve been training on and I think we’re one of the longest and we’re one of the only people who focuses on teaching business investors and business owners. A lot of other people in our industry show you how to maybe live in a care home or work in a care home. That’s not what we’re focused on. We’re focused on showing you how to run it as an operational business. It’s a little bit different strategy but it’s been a lot of fun to be able to share that industry with so many people who are stuck in the fix and flip. They are stuck in these modes where they were working for a long time, but they’re not hitting the same anymore.

A lot of the people who come to me, listen to our show, and we see at other events who have only been operating in an increasing market or a good market are now starting to see a shift in many of the locations they’re in. Do you think that residential assisted living has the same challenges when it comes to fluctuating markets?

Yes and no, but I’m going to say this. As the cost of living goes up, the cost of care matches it. When real estate is more expensive and food and paying your caregivers are more expensive, the cost or the rate that the residents are paying to live in the home always matches it. This has been true since the 1970s when this industry started.

It’s one of the things that over multiple recessions and different dips in our economy has always held its value. That’s a beautiful thing because when real estate costs more, you can only charge your tenants so much more, but when you’re also providing 24/7 care, the sky is the limit. It’s one of those businesses where our margins still look amazing even though real estate is super expensive right now.

Maybe we should back up one step and explain to people who have no clue what RAL even is.

RAL stands for Residential Assisted Living. It’s senior housing in a residential setting. It’s not that big commercial facility you drive by, the Brookdale, Sunrise, or Atria. That’s not what this is. It’s a single-family home, a large luxury upscale single-family home being used to house somewhere between 6 and 16 seniors in the home, 24/7 care, help with medication management, feeding, toilet, all of those different things. This is for a senior who doesn’t want to go into that big traditional hospital-like environment but can no longer safely stay at home alone. It’s that in-between option.

You said something that caught my ear. How do you decide how many people are going to go into a home? Who regulates that?

Your state will have a maximum number of residents allowed in the home. For example, Texas has 16 and Dallas has 8, but if you go right outside of Dallas, you’re allowed to have 16. Sometimes the cities will differ from the state. They’ll never go above the state but they’ll sometimes go below. For the most part, your state will give you a maximum number that you’re allowed to have.

Since we’re talking about state regulations, what does it look like as far as having medical staff? You have to have fire protection systems and alarm systems and all of that fun stuff.

You are going to be hiring a licensed administrator. In the real estate world, that’s like a property manager. That’s someone who’s going to be firing, training, and onboarding your caregivers. The caregivers do the day-to-day work with the seniors. They’re helping them with all of their activities of daily living, as well as cooking and cleaning in the home.

Your administrator is running the business side of it. They are dealing with the state and any documents that need to be turned in. They are marketing the home to help fill it with new residents. They’re dealing with the staff. That is your key player. They’re not doctors or nurses and they’re not paid like that either. A licensed administrator can typically oversee 2 to 4 homes full-time. It’s not even one per home. It’s a shared resource. The more homes you have, the better off you are.

As far as physical requirements for the home to get licensed through the state, some states will require fire suppression or sprinkler systems. Whether or not your state recommends it, we highly recommend that you do it anyway because if the state does change its rule, you’re already set up in place for that. For the most part, they want your home to be senior-safe. It doesn’t need to be ADA compliant but you want it as close to that as possible, so ramps, guardrails, handrails, and things to keep the seniors safe.

I don’t talk about it publicly too much, but in my previous life, I spent 22 years installing sprinkler systems in commercial buildings. I have crawled through more attics in assisted living buildings than I cared to admit. There was one time when there was a leak in a sprinkler system in a woman’s closet. That was all of her clothes with an antifreeze solution. The silver lining was she had Alzheimer’s, so she didn’t remember the next day that it happened. The staff washed all of her clothes, but she had no clue what happened the next day. The silver lining, I guess.

There you go.

Choosing A Good Location

I’m a house flipper and I find a good deal on a house. I started thinking this could fit RAL. Short of the obvious answer, get educated and trained by you guys because you’re the best of the best, but how do you even start to analyze it? Is this a deal? Does it make money? How much money can it make?

The first thing you want to determine is if it’s in the right location. At the end of the day, real estate is location, location, location. Specifically for this business, that means everything. When I say that what I mean is you want to be in an area where the majority of the population is 50 to 70 years old, making twice the median income, homeowners, and college grads. That is not the senior living in the home. That’s their adult child. They are the ones who decide that Mom or Dad needs care. They shop for the care and they choose the home or facilities. You want to be five minutes down the road from that. Location is key.

When you’re looking for a home, know how many residents you can have. Is it 6, 10, 16, or whatever? That’s going to help you determine what type of home are you even looking for. We’re not going to find a 16-bed, 16-bath on the market, but could we find something that’s already 7,000 or 8,000 square feet? Maybe it’s a 6-5 and we walk in and say, “Perfect, I can convert this to become a 14-10,” or something like that. That’s what you’re looking for. The home that already has the layout that you’re looking for or the bones you’re looking for. A single level is preferred. If not, you’re going to have to add an elevator or a chair lift, which can get pretty expensive. I prefer a single level, but the location and then the footprint are going to be huge as well.

In my mind, you see a market shift, especially with the larger homes that are starting to sit on the market longer. They’re starting to see price reductions. That’s an opportunity for RAL.

Absolutely. We always say like, “I would buy a house full price to do this because the margins work out so nicely.” To find the average cost of care in your area, there’s a website that you can go to. It will give you a very simple average. It’s Genworth.com/costofcare. On that website, you could type in the average rates in your area. In our country, the average is $5,350 per month per resident. Let’s call it $5,500.

If you had 10 residents at $5,500, that’s $55,000 gross coming in every month. Your mortgage is probably going to be $10,000 a month in most parts of the country. For a large enough home, that can house that many people. It’s going to run you about $35,000 in expenses, paying for your staff, food, electricity, cable, you name it. That one home could be cashflowing you $10,000 a month as the owner-operator. That’s what we show people how to do.

How Involved You Must Be

You said owner-operator. Do I have to be involved in operating the actual care in the day-to-day business of the home?

What we do and what we show you to do is not be involved. We’re showing you how to hire that licensed administrator who hires those licensed caregivers. You don’t have to. I spend about five hours a week in all three of our care homes and visit them every other month maybe. They’re 45 minutes down the road from me. It’s just enough that I’m not tempted to go out there but if I have an appointment out that way, I’m like, “I’ll swing by.” That’s what we show people how to do. Some people want to be more hands-on and you can do that. For us, I want to run this as possibly as possible.

I see a lot of people that get sucked in, not just to this business but any business. The house flippers who are stroking their own paintbrush or swinging their own hammer don’t have the ability to scale because they’re always doing the labor. For RAL, the sky is the limit, I’m assuming. Some of your clients are students that you worked with in the past. How big do you think you can get?

We’ve had students. I’m thinking of a couple right now. They’re out in Colorado. They have a goal of having 100 of these. They’re on home number 26, and they started in 2017. They are out in Denver. You can go crazy. Most people are like, “Let me get 3 to about 6,” because the numbers I shared with you, that $5,500 with 10 residents, that’s average. The average includes our friends on government funding as well as our private pay friends. That’s bringing us that middle of the line number.

We don’t focus on any government funding. We only do private pay. Most of my students are all across the country, all 50 states. Their rates are not $5,500. Their rates are more like $7,000, $8,000, $9,000, and $10,000 a month per resident. Their numbers are a lot higher than $10,000 a month. I like to share something that’s like you could do this no matter where. This is what it is. When you come to the training, you see that the sky is the limit. Twenty-six homes, I think they have the most. I’m thinking of this other group of guys out in Wisconsin. When they started, they bought 10 homes that were packaged together. I think since then, they bought in 12. They’re only at 22. They haven’t been in Mitch and Jen yet. We’ll see. There’s a competition.

I’m curious, since I’m in Wisconsin, who that is. I don’t think I know them.

Rick and Paul. I’ll connect you with the after.

An Imminent Crisis In Care

That’d be great. I always enjoy meeting locals in my market. Where do you think the business is going as far as the need for RALs?

There is a massive lack of caregivers in our country today. It is the number one most in-demand job on every chart that I’ve ever seen, and people continue to send it to me daily. It is a huge need, and there are not enough young people going into this industry. It’s becoming now a course at many community colleges. They’re starting to get caregiver training sources. Gen Zs don’t want to do it. They don’t want to do it. We do not have enough people to care for the coming silver tsunami of seniors.

Currently, the silent generation, 47 million of them, are in assisted living. It’s the last of them. In the next 10 years, most of them will be passed on. The Baby Boomers are just barely starting to come into the market. We have a 20-year run ahead of us. There are 76 million in the Baby Boomer generation, 47 million over here, 76 million over here. We’re almost almost doubling the amount of seniors that are going to need care and assistance, and we’re currently 1.3 million beds short. When we talk about a lack of caregivers, there’s a lack of beds and there’s a lack of caregivers. This is a mega-crisis that our country and our communities are going to be facing.

Because of the way our world is right now, call it whatever you want, inflation, and all this stuff going on, people can’t afford to just quit their jobs and go take care of a loved one at home anymore. Whether it’s a child or an elderly in your life, it doesn’t matter. They’re saying, “I need to go make that double income. We both need to be out here working.” It is going to be a mega-crisis. When I see a crisis and we fix the crisis, this is a huge opportunity.

We need to find ways to staff these homes, and we need to find ways to get way more homes because this is like a crystal ball that we’re looking at. They called the transfer of wealth from the Boomers to Gen X and Millennials. It’s not. It’s taking a massive pit stop in assisted living. The average day is three and a half years. If you’re paying $5,000 to $6,000 a month, that is a huge chunk of your resources that’s going to assisted living before it even touches your kids.

I know you’re dealing in private only and not taking government subsidies. I envisioned the government is going to have to start subsidizing even more as this need gets bigger and bigger and worse and worse. Specifically on the private pay side, where are most of these people coming up with the $8,000 to $10,000 a month? As you said, most of your students are getting that. Are they liquidating all of their assets, their homes, their stock portfolios, and their 401(k)s? At the end of their nest egg, what happens to them? Let’s say they have enough money to live in a private facility for two years, but they live for five years. Do they exit and go into a public run or a subsidized home?

You are correct in your guesses. Most people are paying this with their cash, their savings, their IRAs, their investments, or they’re selling their physical homes. We have to remember that 60% of the real estate in the US is owned by the Boomers. Most of them don’t own one home. Many of them owned 2, 3, 4, 5, 6 homes. They’ll sell all of those homes and now they have capital to pay for this. That is a lot. They also own most of the businesses in our country today. They sell their business and they have a big exit. There are many ways that they’re coming up with the capital to pay for this, and they hold a lot more money than people realize, which is important.

Most of the time, 10% of the population has long-term care insurance. If you have that, it’s a beautiful way to pay for your care needs, and not have to tap into your own resources. Most seniors are using their own resources to pay for this. The other category of seniors is letting their adult children figure it out. We have a lot of adult children who are paying the bills for their parents. That’s why so many people come to us to learn how because they say, “I’m paying $5,000 a month for her to live in this home when she could live for free if I owned it and I could cashflow $10,000 a month, I’m getting in.”

It’s a good opportunity to serve your own families’ possible needs or have a solution for them if they need it, then also leave your kids a blessing, not a burden. Call it what it is. It is a burden when you’re a senior. They need care. Where do you come up with $6,000 a month? For most siblings, this is where you get a lot of resentment and fighting and all of the stuff going on because it’s a lot to become your loved one’s caregiver. If you’re quitting your job to go do that, there are a lot of feelings involved. Putting them into a home, you may also have a lot of feelings involved, a lot of guilt, anger, and frustration. Being able to control as much as you can by having a home that has top-quality care and top-quality food, and your loved one doesn’t have to pay a dime, that’s cool.

I think probably the biggest fear as I’m thinking this through is the staffing side of things. You find the right house, you find the right location, and everything is ready. Can you find the staff?

Staffing is going to be the trickiest thing over the coming years as there’s such a lack. Eighty percent of this industry is run right now by immigrants, people from other countries who may have been a doctor or a nurse somewhere else. They came over and that didn’t translate. Now, they have a heart for seniors and they want to help and they become a caregiver, an LPN, a home health aide, an HHA, and all sorts of different things. They come and work in these care homes and serve our seniors. I don’t have a solution and Asian countries are looking into robot caregivers. Maybe that’s the way we go. I don’t know, but that is by far going to be the biggest opportunity. It is finding amazing staff and keeping them for sure.

I think maybe we have to change our vision and we have a new business idea. We got to come up with robot caretakers.

I know. They exist in other countries but then it freaks me out because I’m like, “Is this iRobot in real life? Are robots going to take over?”

I go back to a cartoon. You may not remember the Jetsons, but they always had their little robot maid to take care of everything.

It’s going to be that, They were ahead of their time.

Master Leasing

Can you master lease properties and not buy them and turn them into RALs?

We do show people how to do it on both ends of it. On one end, they buy and rent the real estate, and then lease it to someone who’s going to run the operations business in your home. On the other end, if you’re saying, “I’m tight on cash,” or “This isn’t the right time to buy,” lease from someone who set it up for you. These leases are typically 3, 5, 8, or 10-year leases. They’re not one year. They’re usually longer because the person who’s running the operations company doesn’t want to be kicked out.

The business is based on the location, the brand, and the reputation. They’re trying to like plant roots, so they don’t want to have to move locations. It’s nice for the landlord because it’s like, “I ran out of it. Now I’m making money over and over every single month instead of a regular rental or fix-and-flip where you make that money one time. Where’s the next check coming for 3 to 5 months? This is an opportunity to have the best of both worlds.

I’m starting to kick myself a little bit as we’re talking because I have a facility that I set up as a pad split, leasing out rooms in that regard, and there was a 14-bedroom building that was designed and built as an RAL. This is going back about two years now that I was making offers. Ultimately, my intention was to turn it into a short-term rental for pad lists. I didn’t buy it. It didn’t sell for the longest time and it sold about four months ago now. It was designed and built as an RALl and I’m shocked that it sat there as long as it did, which tells me there’s very little competition in my market for that stuff.

Potentially, it could be telling a lot of things, if the locations are not right or the rates aren’t high in that area. It could be saying a lot of things. Hopefully, it’s not and it is going to make whoever bought it a lot of money. We’ll have to see.

Getting Into ARL

I’m going to go back and do some research now and see what they paid for it. I was involved in a construction site. I build a lot of RALs through the late ‘90s and up to about 2010. There was a lot of them going up. Interesting. As we wind down, I ask most of my guests the same question. What should I have asked you that I did not? It does not have to be about the topic we’re talking about. It could be about anything.

I feel like you asked great questions. I thought it was awesome, but I would say in general, I know that I can make this industry sound easy because I’m talking about it every day and I’m in it every day. To me, after ten years, it is somewhat easier. This is not an easy industry. There’s a reason that the reward is so high. It’s because there is a lot of work that has to be done upfront to make sure that things are done correctly. You have to get it licensed through the state. There is staffing involved. We talked about liability and all of these different things that are not involved in any of the traditional real estate investing opportunities.

Keep that in mind. If you are thinking about doing this, there is a lot involved. It is important to learn all of those steps so that you know exactly what to do. Above all else, make sure that this checks your heart box because it’s going to be one of those industries that test you. We say to do good and do well. There’s a lot of cashflow and that’s awesome, but there’s a lot of cashflow in a lot of different opportunities. This has to also be your opportunity to make an impact and do something good and important in your communities.

If it is ticking your boxes and it is making sense to you, take that next step and move forward in your educational journey to decide where you want to do this, and how you want to do this. Look into that further. If you are going down the path of, “That sounds too hard,” stay away. It’s okay. It is not for everyone because you have to be willing to get punched in the face and get back up and go again. That’s what this is. It’s tough, but once it’s up, it’s the best thing ever. It’s that payoff that you need to be prepared for.

That was remarkable because I would have never thought of that question. Let’s say ten years from now, you want to exit. Are they bankable? Are they financeable? Are these buildings being valued as buildings or are they being valued as a business?

There are two components when you want to exit. There’s the real estate side of it. The home is being sold as a home. Whatever the value and the equity you build in the home, the home price is hopefully going to increase over time. If you bought it at $1.3 million and it’s twenty years later, maybe it’s now $2 million, or whatever the case is.

The real estate is on one side, but then the business is sold as a separate transaction. That is worth 2 to 5 times the EBITDA. If you’re selling, you want it high and if you’re buying, you want it low. It’s worth what someone is willing to pay, but we help people work through business valuations all the time to break that down and know and understand. It’ll usually fall around 3 to 4 times the EBITDA right in the middle right there. It is in that range for sure.

That’s awesome. I say it on a lot of my shows, but I love this because I get to pick people’s brains like you. It’s helping the whole world but I’m the one who gets to ask all the questions and I have my own questions here. The curiosity gets handled right away.

That’s being a podcaster.

Episode Wrap-up

It’s glamorous and easy to do and it’s almost no work, just like RALs. I know you have some information and we’ll have a link at TheGenerationsOfWealth.com/RAL, but for people to be able to go get more information, can you explain what’s available?

We have a free course available for you guys there, as well as free book downloads, so definitely check that out. If this is interesting to you and you want to learn those next steps, it’s TheGenerationsOfWealth.com/RAL.

You said it better than myself. I didn’t say it better myself. You did it perfectly. You always do perfectly. Isabelle, it is so great to see you. Thank you for being on the show. I can’t wait to see you in person, hopefully, sooner rather than later. It’s been a little while. I think it’s been 6 months or 12 months since we’ve seen each other in person. Thank you for giving us a portion of your day. You’re a godsend.

Thanks for having me on.

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To everybody else, thanks for being on this show. Remember to please get out there and share this show. Spread The Generations of Wealth message. Live your vision, love your life, and we’ll see you next time.

Important Links

• Reicot.com
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• TheGenerationsOfWealth.com/RAL

About Isabelle Guarino

Isabelle Guarino is a 2x Best-Selling author named one of the “Top Influencers in Senior Housing”.