5 Best Senior Living Investment Opportunities for 2023

Image Credit: Stellar Senior Living

As baby boomers continue to age and our nation’s population grows older, the demand for senior housing continues to soar. The performance of senior living facilities has drawn investor interest to the variety of senior living investment opportunities available today, in part because of strong sector performance data.

During the Great Recession, seniors housing and care was the only commercial real estate asset class to experience positive rent growth.

The senior housing market, once considered a niche sector, is becoming more widely accepted as a specialized real estate market, with the long-term outlook for this asset type becoming increasingly positive. For investors who want to get in on the trend, senior living investment opportunities are plentiful. But first let’s look at some of the reasons why both individual and institutional investors are jumping on the bandwagon.

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    Why Invest in Senior Living Facilities?

    Senior living investment opportunities have been gaining more mainstream attention for the following reasons:

    1. The number of seniors is rising

    The senior housing market benefits from the fact that the U.S. population is aging rapidly. New supply growth has struggled to keep up with demand, but stabilized occupancy has continued to increase.


    The population of America continues to age, with roughly 10,000 Baby Boomers turning 65 every day.


    According to Health System Tracker, the current life expectancy in the United States is around 77 years old.


    Life expectancy has risen significantly, and the speed at which it rises is only further hastened by advances in healthcare knowledge and technology. By 2030, the U.S. Census Bureau projects that 20 percent of all Americans will be seniors, up from 13 percent in 2008. This means that 1 out of every 5 Americans will be of retirement age.

    Statistic: Share of old age population (65 years and older) in the total U.S. population from 1950 to 2050 | Statista
    Find more statistics at Statista

    2. Senior housing investing is recession resistant

    According to PwC’s Emerging Trends in Real Estate 2022 Report, investors have been much quicker in recent years to embrace alternative sectors such as senior living investment opportunities because they offer generally higher returns, often at no higher risk.

    Senior housing investing has performed well over the past three, five and 10 years. It is a recession-resistant investment opportunity, and it will continue to grow in popularity as the number of older adults increases.

    3. Steady rent growth since the recession

    From 2011 to 2019, senior living rent growth fluctuated between 2.0% and a high of 3.9% in 2016. After an increase in rent growth of 3.5% in 2019, rent growth again dropped to 1.8%, as COVID-19 had an impact on all asset classes.

    Rent growth for senior housing is always expected to exceed 1%. For Active Adult, Independent Living and Memory Care assets, 70% of investors expect rental rate increases of 1%-7% in 2022, with 42% expecting an increase of 3%-7%.

    The Best Senior Living Investment Opportunities Today

    If you are planning to invest in a senior living facility or other type of retirement home, here are five senior living investment opportunities for you:

    1. Senior Living Fund

    At Arabella Capital, we specialize in senior living real estate funds. We believe this is one of the very best senior living investment opportunities available today.


    Why? Because until recently, senior living investments have been available primarily to large investors and specialized operators. 


    Senior living developments require strong market demand; well-designed, state-of-the-art facilities; a desirable location; effective operations management and financial reserves to sustain the project. An executable exit strategy is also needed because senior living developments may be difficult to sell if you want to liquidate your investment quickly.


    Many investors are now turning to real estate funds to help them get into this booming industry.


    A senior living fund is a private equity fund that finances the construction and operation of senior housing facilities. In exchange for your investment, you will receive a share of the business’s profits via both cash flow (operating distributions) and long term appreciation.


    Through independent living and assisted living private equity funds, savvy individual investors can earn strong yields in a proven niche without having to worry about the management and maintenance of these properties.

    How to invest in a senior living fund

    The senior housing industry is growing rapidly—and it’s not just limited to retirement communities anymore. More and more people are moving into independent living communities as they age, which means there’s plenty of room for growth in this sector. And investing in a fund that focuses on building and developing these kinds of properties can produce above-market returns with less risk than other types of investments.


    Arabella Capital is one such company that invests in senior living funds and other real estate projects. We’ve been investing since 2009, and we’ve partnered with some of the most experienced professionals in the industry. We allocate funds strategically so that our investors get access to high-quality properties and above-average returns. Learn more here.

    2. Senior Living REITs

    Senior living REITs are a good senior living investment option for those who want to invest in real estate without directly purchasing property, or for individuals with limited capital.


    Senior living REITs are similar to mutual funds because they pay dividends to shareholders and appreciate in value. Like a diversified mutual fund, REITs hold different property types, ranging from apartment complexes to retail centers, to infrastructure such as cell towers or energy pipelines.

    How to invest in a senior living REIT

    Senior living REITs—that own and operate senior living facilities—are generally a part of the healthcare REIT sector. This means that, as with any other publicly traded company, you can buy and sell shares in it on an exchange.


    Investing in publicly traded REITs is similar to buying stock in any other company. Start by researching the company’s management team and asking questions about their strategy and history.


    Ventas, Sabra Health Care, and Omega Healthcare are some of the largest REITs focused on senior housing.

    3. Convert an existing property into a senior living facility

    Investors can convert a property they already own into an assisted living facility or senior co-housing. This process is often called repurposing or adaptive re-use. Hotels are prime candidates for conversion to assisted living facilities because they contain the same core structure, amenities, and building codes as an assisted living facility.

    How does this work?

    If you are looking to convert an existing property into senior housing, it is important to consider local demand and access as well as zoning regulations. Zoning regulations can affect the cost per unit of a project and licensing requirements vary from state to state.


    Homes designed for independent living must have smoke detectors connected to the alarm system and grab bars in bathrooms, wider doors for wheelchairs, and slip-proof flooring.

    4. Buy commercial property, pass off operations to a third party

    Senior housing is service-oriented, so achieving target profit margins depends on how efficiently you operate.


    Third-party managers can help investors mitigate the risks associated with operating a senior housing facility by assuming responsibility for the day-to-day operations and performance of the facility.

    How does this work?

    In a third-party management situation, an investor can earn passive profits with less risk and liability. A management company will handle any day-to-day issues that arise, freeing up valuable time for the owner.


    When choosing a senior living operator, investors should consider the candidate’s management experience and financial position. Senior housing is heavily regulated, and as a result, demands a high-quality operator who understands the nuances of these regulations in order to remain in compliance.


    Senior housing operators must also be adept at attracting and retaining qualified employees because labor is one of the biggest operating expenses. Operators must balance the need to maintain safe, legal environments with the desire to create warm and caring spaces that customers will find inviting.

    5. Buy and operate a senior living facility

    Buying an existing senior living community is the most direct way to invest in senior housing. You’ll control the facility’s operation, but you’ll also assume responsibility for any liabilities. An 80-bed assisted living facility can cost $11 million ($130,000 to $145,000 per bed).

    How does this work?

    When you’re starting a senior living facility, it’s important to get your hands around the cost of running the business. You’ll have several recurring costs that include wages for your employees, utilities such as electricity and internet service, things like nurse call buttons and security cameras, computers, food and drink for patients, bedding and medical equipment. You’ll also need to purchase software designed to make the management process easier for employees.


    In addition to these costs, failing to acquire necessary permits, licenses and certifications can result in hefty fines or even shut-down of your business.


    Running a senior living facility requires deep knowledge of both the regulations in the industry and the medical care requirements for residents. It also involves a much higher level of risk. It’s a full time business responsibility.

    Start Investing in Senior Living Facilities Today

    The senior housing sector was once considered a niche product, but it has become more mainstream in recent years, attracting attention from individual and institutional investors alike. The aging of the baby boomer generation and advances in medical technology have led to an increased demand for senior housing. This means that interest in senior housing is likely to continue at least for the foreseeable future.


    This article has given you insight into the senior housing industry as well as how to profit from senior living investment opportunities. If you’re looking to invest in senior housing, working with an experienced real estate investing group is your best bet.


    Arabella Capital specializes in the ground-up development and acquisition of independent senior living communities. Arabella is a $10MM fund that allows individuals to pool their money with other investors, thereby diversifying their portfolio. Learn more about Arabella Capital here.

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