What Are Some Passive Ways to Expand into Senior Housing?

Apr 04, 2023

Perhaps you are daunted by running your own AL home or facility. Or perhaps you want to also diversify into some passive senior housing opportunities. Our own group offers a SEC Reg D 506C Fund that allows investors to join us passively. Check this link to find out more: www.pslfund.com 

Beyond that here are some more ways to get involved: 

According to commercial real estate brokerage CBRE, senior housing has become a mainstream commercial real estate asset in recent years, with both institutional and private investors seeking to capitalize on the anticipated "gray wave" of elder Baby Boomers. In 2020, capital investments in senior housing assets mainly came from private equity buyers and real estate investment trusts (REITs), followed by institutional investors such as banks, pension/hedge funds, and insurance companies. 

As the 73 million Baby Boomers in the United States continue to age, there's expected to be robust demand for senior housing in many markets. Senior housing is a unique asset class that combines housing, service and hospitality with healthcare. While there are many different subsets within this asset class, the three primary types of senior housing facilities are assisted living, skilled nursing, and independent living. 

Here are three ways retail and accredited investors can deploy to add senior housing to their portfolios: 

  1. Invest in REITs: Some REITs are listed on both major U.S. exchanges, and investors can buy or sell shares depending on their investment strategies and appetite for risk with assets that are closely correlated to broader market performance. 
  2. Purchase Triple-Net Leased Senior-Housing Properties: Investors can add senior housing to their portfolios by purchasing triple-net leased senior-housing properties. Many triple-net leased senior housing assets are private-pay facilities where residents use a combination of retirement savings and Social Security to pay for assisted living. Investors often bring on third-party management to run senior housing facilities since operations require a depth of knowledge, experience, and understanding of the industry and its many laws and regulations that typically fall outside investor talent. 
  3. Purchase Fractional Shares of Delaware Statutory Trusts (DSTs): Investors can also purchase fractional shares of DSTs backed by one or more assets in this class. Some assisted-living DSTs may have minimum investment thresholds, while others may allow investors to purchase the exact amount of shares needed to satisfy “like-kind” requirements to complete a 1031 exchange. These investments typically have a hold period of seven to 10 years and are considered illiquid investments. 

While the demand for senior housing is expected to increase exponentially in the coming years, investing in this asset class requires extra due diligence to ensure that any facility of interest has a solid track record of successful operations, both fiscally and with the management of its tenants. Market supply and demand are key drivers of occupancy in both primary and tertiary markets. The more information an investor can gather about potential investments in senior housing facilities, the better they can manage their exposure to risk. 

Our own group has over 20 physicians who have safely and securely invested their funds with us. It is backed by the operations of MD Senior Living who are committed to bringing high quality assisted live care and thriving home environments for all our senior residents.  

To learn more check out www.pslfund.com  (Physicians Senior Living Fund) 

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