Edited transcript from the Raise Private Money Legally podcast episode, “Setting Up a Residential Assisted Living Facility”
With Special Guest Isabelle Guarino
Originally recorded: Feb. 16, 2023
Kim Lisa Taylor:
Hello, everyone. Welcome to Syndication Attorney's free monthly podcast where we talk about topics of interest to real estate syndicators with the opportunity for live questions and answers at the end of the call. I'm attorney Kim Lisa Taylor. Before we get started, please note that all of our podcasts will be recorded and may be used for future promotion posted on our website or broadcast in a podcast available to the public. If you don't wish to have your voice recorded, don't raise your hand. Instead, you can either type in your question in the Q&A or you can schedule a one-on-one consultation. Information discussed during this free podcast is of a general educational nature and should not be construed as legal advice. Today our topic is “Setting Up a Residential Assisted Living Facility” with our esteemed guest, Isabelle Guarino. Isabelle, thank you so much for joining us today.
Isabelle Guarino:
Of course. Excited to be here. Thanks for having me.
Kim Lisa Taylor:
Yeah, I'm super excited. I met Isabelle through, I guess, your uncles.
Isabelle Guarino:
Yeah. Yeah.
Kim Lisa Taylor:
Your two uncles became clients of our firm and they kept insisting that we should connect and that we should come and sponsor one of your events. So we're going to be doing that in September, so I'm excited about that. I have never been to one of them before. I'm excited to learn what you guys are teaching. Anyway, so tell us a little bit about you, Isabelle.
Isabelle Guarino:
Yeah, I'm Isabelle Guarino, the COO of Residential Assisted Living Academy, and we're basically the number one educators on residential assisted living. I currently own and operate three care homes in the Phoenix market, and we've taught tens of thousands of people how to do what we do, so I really love this industry. It's close to home for me. We got involved because my grandmother needed care. She fell and broke her hip and needed 24/7 care, and we quickly found that there was not enough quality options in this real estate sector. So I did some math and realized, "Wait, we're going to be paying five grand a month for her to live in one of these homes where we could own and operate it, she could live for free and we could cash flow 10 grand a month." It made a whole lot of sense to get involved at that point. So that's really what got us involved and it's been quite the journey ever since.
Kim Lisa Taylor:
Wow, that's an amazing story that it arose out of your own need and you realize that there's a niche here that we all have aging family members. Of course, we're all aging ourselves, and need to be thinking about what's going to happen to us in the future.
Isabelle Guarino:
Absolutely.
Kim Lisa Taylor:
So what is the difference between residential assisted living and a nursing home?
Isabelle Guarino:
Yeah, great question. The big-box facilities are usually a little bit more lacking in care, let's say, right? The typical ratio is 30 seniors to one caregiver. In our homes it's a four-to-one or five-to-one resident to caregiver ratio. So it's significantly higher quality care. Also, it's not a large commercial facility, right? Long hallways where the dining hall is 30 yards from your room. It's a regular single-family home, just instead of two kids, mom, dad, and the dog living there, you've got six to 16 seniors with their own private bedrooms and bathrooms, but in a residential neighborhood and in a residential home.
Kim Lisa Taylor:
Wow. Well, that sounds a lot better. Definitely. So I guess, what kind of care do you give versus … are you giving medical care or is it really just taking care of people, making sure that they get proper nutrition and safe and sanitary housing? How is it?
Isabelle Guarino:
Yeah. In assisted living, usually, seniors move in when they need help with three to five ADLs, activities of daily living. So that's anything from getting up out of bed to bathing, eating, brushing your hair, brushing your teeth, moving around, whatever the case is so you don't move in until you need usually help with three to five of those. Then if you need more care, medical attention, doctors, IVs, gurneys, that's where you'd need to move into a nursing facility or a nursing home. So we're not licensed for that, but we are licensed for assisted living and/or memory care.
Kim Lisa Taylor:
Tell us again what those five ADLs were.
Isabelle Guarino:
There's a whole bunch of them, but bathing, eating, standing, walking, feeding, I think there's a list of 30 ADLs.
Kim Lisa Taylor:
Okay.
Isabelle Guarino:
Really, anything that you do from the moment you get up out of bed to the moment you go to bed at night.
Kim Lisa Taylor:
That's right, anything that you need help with that you can't really do on your own.
Isabelle Guarino:
Yeah.
Kim Lisa Taylor:
Well, that's interesting. I had never really heard about that before.
Isabelle Guarino:
Yeah.
Kim Lisa Taylor:
So what kind of properties? Can you convert any residential facility or any residential house into one of these facilities?
Isabelle Guarino:
You probably could, but I would always focus on something with a larger footprint and then single-level ranch style if possible. Now you can do it with multi-level. We got plenty of students who have two, three, even four-story homes. You just add in the chairlift or an elevator and you can make it work. But being on a one-story home is definitely always going to be a lot better and easier. Then I think that it's also important to know the demographics of the area. That's always vital. I want to be around the 50- to 70-year-olds who are upper middle class who make twice the median income, and that's where I want to focus my efforts.
Kim Lisa Taylor:
Why is that?
Isabelle Guarino:
That is daughter Judy. That's the adult child who's usually putting their loved one in your home. She's the one paying for the care. She's the one searching for the care. So I want to be as close to her as possible because she wants mom right around the corner from her. She doesn't want to have to go far away.
Kim Lisa Taylor:
So you said larger footprint. Are we looking for 3,000-, 5,000-square-foot homes?
Isabelle Guarino:
With six to 16 seniors in the home, you're going to want 300 to 500 square feet per resident. So with let's just say 10 residents, minimum, a 3,000-square-foot home upwards of 4,000 or 5,000, it would be definitely fine.
Kim Lisa Taylor:
Then you said looking for homes that have a separate bathroom for each bedroom?
Isabelle Guarino:
The more bathrooms the better, because you have to think the residents, they're thinking privacy when they move in, so they're going to want that private bedroom, that private bathroom. If they're paying you $5000, $6000, $7,000 a month to live in your home, they're expecting a really nice luxurious home. They don't want a shared bedroom, shared bath. They want their own digs.
Kim Lisa Taylor:
Right. Okay. So what kind of renovations do you typically have to do? Say if somebody went out and found a 5,000-square-foot home they wanted to convert, what would they have to do to make it work?
Isabelle Guarino:
To get ready for it? Yeah. Ramps, guardrails, widening hallways and doorways, chopping up the home differently so there's more bedrooms and bathrooms. Some states will require fire suppression, but you're still going to want all of your regular amenities that you have in a single-family home like the living room and the dining room. A library or movie theater would be nice; an office for your caregiver and your administrator to be able to do that paperwork and have private meetings; a really nice backyard with gardens and walking paths and different things that the seniors can enjoy. So there's a lot of different things that you could do to the home to make it senior-safe. It doesn't have to be ADA compliant. We're not commercial, so we don't have to do that, but you want it as close to that as possible, making sure that it's really, really easy and comfortable for the seniors to get around.
Kim Lisa Taylor:
Then what kind of licensing do you have to get?
Isabelle Guarino:
So the physical home will have a license, and that's based on the egress and the safety, so having two points of egress in every room, having enough square footage, having that safe passage for the seniors. The licensed administrator is basically in the real estate world, your property manager more or less. So they take care of all the day-to-day hiring and firing the caregivers, marketing the home, touring the home with the families and making sure that they're signing up for it, onboarding with the residents. They're doing really all of the day-to-day operations and work. They have a license through the state. Then your caregivers are also licensed through the state, and every state varies on that. It might be you have to be 18, have a GED and four hours of training. It might be you need to be 21 with a bachelor's degree with 80 hours of training. It ranges state by state, but the physical home, the administrator and the caregivers will be those three licenses that you need within the home.
Kim Lisa Taylor:
As the administrators, is that usually just one person who's there like nine to five Monday through Friday kind of thing, or do you have different shifts or there's always someone on site?
Isabelle Guarino:
The administrator is responsible for the home 24/7. So they're on call basically all day every day. Full-time for administrators is usually overseeing somewhere between two and four homes. One home is not full-time for them, so usually we encourage people to have a three pack, at least three of these homes within 45 minutes of each other. It's better for you to be able to share your resources and your staff and that administrator can oversee all three. They don't have to be on site, they just need to be on duty or on call.
Kim Lisa Taylor:
So what kind of financing is available for people who want to buy one of these homes? Do they usually buy them for all cash or can you actually get bank loans to help finance those?
Isabelle Guarino:
You can get bank loans and SBA loans are very friendly to this. In our training, we always share about the SBA 7A loans, and a lot of our students like to go that route as well as, of course, what you guys do, syndication. That's a beautiful way to be able to get into this industry. A lot of people have a lot of money that they're looking to invest and they want someone who's trustworthy and is going to do something that makes sense. So being able to offer them an opportunity to invest in this industry is a great way to go about this, so I see a lot of SBA and I see a lot of syndication.
Kim Lisa Taylor:
You may or may not know the answer to this, but just in general, do you have a sense of what percentage of the acquisition and renovation costs will the SBA loan cover?
Isabelle Guarino:
I don't know offhand because it totally ranges depending on the four ways that you get involved. If you're going to buy land and build a custom home from the ground up, that's going to be a pretty penny, somewhere between $1 million and $3 million. If you are buying a single-family home and converting it, it depends on where you are, so the price of the real estate plus how much renovation we're doing. Third, if you're going to buy an existing business — so buy the real estate, buy the business, you're up and running day one— that might cost a pretty penny, but it's nothing to do with renovation. Fourth, the fourth way to get involved is leasing a home for this, so working with someone who's going to own the real estate and lease it back to you.
Kim Lisa Taylor:
Interesting. Okay … we've set up a fair number of these for people who've wanted to syndicate them, and some of them are using that lease model. So they'll come in, they'll buy the home, they'll lease it to an operator, but the operator could also be something that they're part of.
Isabelle Guarino:
Right.
Kim Lisa Taylor:
So in that case, how do you know what is the right prices to charge for this kind of stuff? Are you using normal lease rates or ... ?
Isabelle Guarino:
Good question. So if you're going to own the real estate and lease it to an operator, I would say you could charge them up to twice the fair market rent because you've taken the property, retrofit it, got it ready, got it licensed. You've done a lot of the hard work and labor and they're willing to pay you for that. Now, if you are the landlord and the operations company, you're going to give yourself a deal. You're not going to be charging yourself more. Maybe you will, but you don't need to be. But if these are two separate people, two separate companies, then up to twice the fair market rent is definitely very reasonable. One of our homes we do that model with, we own the real estate and we've sold the business to someone else. The home, the mortgage is only about $4,500, maybe $5,000 a month. We're charging them $8,500 a month, and they're happy to pay it 'cause it's an established business. We just collect our check and have nothing to do with the day-to-day, and that's pretty cool.
Kim Lisa Taylor:
Okay. Well, I promised you that I would show our people who are listening what a typical structure for this looks like. So I'm just going to share my screen for a moment and show you guys this. This is a typical structure for a residential assisted living project. Any of you that have done syndication before, you might be familiar with this. We have an investor level LLC, so this is where your investors would be investing. We would separate that into two classes of members. There's Class A, who are all of the cash-paying investors, including you if you're putting your own cash in the deal. You can have different subclasses of Class A members here. Class A1 might get a fixed return, Class A2 might get a share of equity, or you might offer different subclasses based on how much people invest. People who invest more, maybe they get a different preferred return. So there's all different things we can do within this Class A, but we like to leave investors in Class A. Class B is the part that we carve out for management.
This is the members of your management team, and this is where the Class A and Class B members share profits, so this is where the profits are split between Class A and Class B. This syndicate is a manager-managed LLC. The manager itself is a separate LLC. So this is the members of the management. These are the people who are actively involved in acquiring the property, doing asset management on behalf of the Class A and Class B members. They're the ones responsible for getting insurance and paying taxes and getting the loan on this property that's going to be acquired. The operations manager, this is the business. This is the one that's getting the licenses that Isabelle was talking about, that's going to be actually running the day-to-day operations at the house once it's up and running. So sometimes this manager LLC for the syndicate and the operations manager are the same people, sometimes they're not. Sometimes you could hire a third party, as Isabelle mentioned. Then the title holding entity is where you're actually going to hold title to the property.
We're going to have this one step removed from the investors, and this just helps separate the liabilities a little bit here. If something horrible were to happen at the property, then this is the entity that's going to get sued. The other investor LLC hopefully would be staying out of that. So that's how that looks. All right. Well, cool. Thanks. So if anybody wants a copy of this slide, I am happy to share that with you. You could email me at kim@syndicationattorneys.com, and I would send that off to you. All right. So if you are going to be the landowner, you don't have to work in the home, you can hire third parties. We've already established that. We talked about the syndicate structure. Then, we talked a little bit about how much money people might need, and I guess that's largely dependent on what size property you're going to buy and whether you're going to build it from scratch. But what would be typical? You see people getting into these with $1 million or $2 million or sometimes less?
Isabelle Guarino:
Yeah, it really ranges on which of the four routes that we talked about earlier, as well as what part of town you're in. Oklahoma's completely different than New Jersey, so it really, really ranges. But I would say I've seen people on the leasing end for as low as $100,000, and I've seen people in on the building end for as high as $3 million. So it's a huge range.
Kim Lisa Taylor:
Okay. So that's all doable, especially if you're going to be getting a bank loan for part of that. Then a $1 million to $2 million raise is very comfortable for syndicators.
Isabelle Guarino:
Yep.
Kim Lisa Taylor:
Do you have some kind of models that your students use to figure out what kind of income this is going to generate? What kind of returns they can offer their investors?
Isabelle Guarino:
Yes, we do have a profitability calculator that we like to use. It's a little free tool that you can plug and play and say, "We're going to spend more on this and less on this. The money's coming in from this person or X, Y, Z," and you can find that. I'll drop it in the chat if everyone ... I don't know if everyone will be able to see. Oh, no, I can only chat with host and panelists, maybe in the Q&A.
Kim Lisa Taylor:
I'll put it in there.
Isabelle Guarino:
Oh, okay. ral101.com. You should be able to grab that there. There's a bunch of free stuff for you. You can grab the profitability calculator. There's a free webinar, a free book, or you could schedule a discovery call if you ever want to chat with me or any of the team members.
Kim Lisa Taylor:
Oh, perfect. Okay, great. So how many people are on your team?
Isabelle Guarino:
We have about 30 people.
Kim Lisa Taylor:
Wow. That's great. Okay. So I guess part of these people are involved in the academy, part of them are helping with the facilities that you own?
Isabelle Guarino:
No, with the homes, that's a totally separate company. Just those 30 or for the academy. All of the people who teach and train with me, they were past students. So they came to the class, they learned how to do this. They went back and opened their own homes in their perspective states. So I don't own any piece of their home, and they don't own any piece of mine. We're just all in the business together teaching others how to do it.
Kim Lisa Taylor:
Excellent. So do you do these academy locations all around the country?
Isabelle Guarino:
We host them in Phoenix only every six to eight weeks or so, because we take you on a tour of my homes. So you'll drive by my homes and a bunch of our students' homes. So we have them out in Phoenix. Our next one is March 2nd through the 5th and they're awesome. About 150 people each time. All different types of people from all walks of life. It's so much fun to have everybody there in a room together really just looking to do impact investing, do good and do well. They're tired of either not making enough money from their current investments and they want to make more, or they're really ready to just build a legacy and appreciating assets and give back to their community. So it's a really cool blend of people that we have in our class.
Kim Lisa Taylor:
Can they get information about that at ral101.com?
Isabelle Guarino:
Yes, there is information about that there. I know you're going to be joining us at our national convention in September, which I'm so excited about. That's a much larger event. There's usually 700 people there, and all of those are care home owners and operators and people in the industry. It's not as educational from my perspective, it's from your perspective. So you're able to teach them all sorts of different things that they're going to need or that are involved in the journey of being a RAL homeowner. So that'll be really fun too.
Kim Lisa Taylor:
That one has a different website.
Isabelle Guarino:
That one's got a different website, ralnatcon or natcon.com for RAL National Convention. Yeah, that one's going to be really fun. We will be there, so hopefully a lot of you'll be able to join us there too.
Kim Lisa Taylor:
Excellent. Okay. I'm jumping ahead here, but I got excited about what you guys are doing. I know that some of the people that are on the call are going to be interested in attending some of these. I'm thinking about it too, for sure. Okay, let's see. How in the world can you figure out what you're able to charge per bed?
Isabelle Guarino:
Great question. So there is an awesome website — genworth.com/costofcare — and Gen is spelled G-E-N worth.com/costofcare. When you go to that website, you'll be able to type in the area where you live and it will pop up with your average cost of care. The really cool thing about this site is there's a toggle button. So my mom isn't going to need care for another 25 years, so I can take that toggle button and say, "How much is it going to cost in five years, 10 years, 20, 25 years?" The cost of care has gone up 79% over the last 10 years, and it's only going to keep going up because the baby boomers are not in assisted living yet.
It's the silent generation right now, and there's 47 million of them, but there's 76 million baby boomers, and we're currently 1.3 million beds short. The NIC's projecting we're only building 50,000 beds per year. This is a massive supply and demand issue. It's going to be the biggest crisis our country, our world has ever faced. It was a world war that made the baby boomers such a large generation, so this is going to be a huge opportunity. I always tell everybody, even if you don't want to own a residential assisted living home, that's fine. Do something in this sector, follow the money. The silver tsunami of seniors is coming, and we cannot stop it. So you might as well ride the wave and take advantage some way, somehow.
Kim Lisa Taylor:
Wow. Well, that's some staggering statistics there.
Isabelle Guarino:
Yeah.
Kim Lisa Taylor:
So if someone were to buy just a large home and then renovate it — I know things are weird right now because of supply chain issues and all that, but in a normal world — what would you expect would be the timeframe from when you acquire to when you're actually able to open the doors?
Isabelle Guarino:
Great question. If you're starting with that larger footprint already, for example, the two homes we bought that were single-family homes and we just converted them a little bit differently. So they started as a six bed, five baths, and we turn them into 10 bed, 10 bath without adding on an addition. It was just chopping it up differently. We still have all of the regular rooms, the living room, dining room, kitchen, everything that you need. So those only cost about $200,000 to renovate. But if you're adding on a 3,000-square-foot addition, that's completely different. So it does still range, but I would say the larger footprint to start with is always going to be better because then there's less that you have to do. It's just adding drywall to make some new bedrooms. Then the bathrooms are where it's going to get pricey, depending on how many you need to add.
Kim Lisa Taylor:
So would you say six months to a year would be typical for a renovation, maybe a couple of years if you're doing a new build?
Isabelle Guarino:
Six months to a year is great timeframe for a renovation. Yes, a build can take one to three years depending on what you're doing.
Kim Lisa Taylor:
Do you get neighborhood pushback? Are there restrictions? How do you get around that?
Isabelle Guarino:
Great question. HOAs, cities, counties, states actually can't tell you no because of the federal Fair Housing Act. It's discriminatory against disabled people to say that you can't do one of these homes. So the HOA can have a rule that says the home can't look physically different from the outside. So there are rules you may have to follow, but they can't tell you no. So as long as you're following all of the state rules on distance and licensing, you should be able to do it.
If for any reason you run into trouble, we have a team of lawyers over at the RAL National Association that represents all 30,000 of these care homes across the country. So if you run into any issues, you give them a call and they help you fight that HOA or angry neighbor. I will say, if there's a neighborhood with an HOA and one without, go to the one without. I know that's not possible in every part of town. Some people are like, "Every neighborhood has one," I get it. But the more that you can do to avoid a fight, avoid it.
Kim Lisa Taylor:
So yeah, path of least resistance is always the best way to go, right?
Isabelle Guarino:
Yes.
Kim Lisa Taylor:
So tell us a little bit more about this RAL National Association. What do they do?
Isabelle Guarino:
Yeah, so that's one of our companies. It basically is just a free resource for care home owners. It's got a bunch of different discounts and opportunities for those care homeowners to get connected in the community, and it has legal updates. So anything that's happening all across our country in our industry, we update it there. Because if a law gets passed in Georgia, you might feel like, "Well, I live in Florida, it doesn't matter to me," but it might because if it's passed somewhere, the odds of it being passed somewhere else are way higher. So when there's a law that we think is not good and it's going to harm us, we get everyone there to sign or do whatever we need to petition things. So we've got some lobbying and legal backing and power for you there. There's also continuing education, courses on memory care, filling your home fast, how to market your home, how to give great tours. So it's just a really cool resource and network for care homeowners.
Kim Lisa Taylor:
Now is this an organization that you run or that you're a part of?
Isabelle Guarino:
Nope, we own and operate it.
Kim Lisa Taylor:
Oh, that's amazing.
Isabelle Guarino:
Yeah.
Kim Lisa Taylor:
Excellent. Okay, so what's the website for that?
Isabelle Guarino:
ralna.org. ralna.org.
Kim Lisa Taylor:
Okay, great. All right. So I guess we've given quite a few websites in there. I hope you guys are saving all of that. If you don't know how to save the information in the chat, if you go down to where you would type in a message, there's three little dots off to the right. If you click on that, you get a popup and it will say “Save Chat.” So you should be able to save the whole chat there, or you can go to the three little dots next to whatever it is you want to save in the same thing. Okay. So what would you recommend, if somebody is super psyched about doing this, what would be their next steps?
Isabelle Guarino:
Great next steps is to go to that first website we dropped in the chat — ral101.com — and really find out if this is the right fit for you. So we do host three-day trainings, like I mentioned before in Phoenix, Arizona. We also have an online home study course. If taking that next step is the right move for you, definitely schedule a discovery call and chat with the team and see what might be the best option for you so that we can get you connected and start getting you involved so we can get you learning everything you need to learn and then get you rock and rolling to opening your first home.
Kim Lisa Taylor:
And come to the national convention.
Isabelle Guarino:
Yes.
Kim Lisa Taylor:
Okay. Again, when is that one going to be?
Isabelle Guarino:
The national convention is September, I guess it'd be eight and nine. Seven, eight and nine.
Kim Lisa Taylor:
And it's Phoenix, so get your tickets for that. We'll definitely be there. I'll put this in the chat. Okay. Anything else that we didn't cover that you think we should tell everybody about?
Isabelle Guarino:
I'm happy to answer any questions that you guys have. I know there's been some good ones in the chat. I've been typing as we've been able to be here. We can read them out loud for anybody else who might want to.
Kim Lisa Taylor:
Yeah, we always want to ask the questions live. All right. So Deepak asked, "Where would we look to find current market rents for assisted living facilities?"
Isabelle Guarino:
So rentometer.com is a great website that will show you comparable rents in the area for single-family homes — not for RALs, but for single-family homes. So then you're able to see what the average rent for that area is, and then up to twice the fair market rent once you renovated it, got it licensed, all ready to go would be something that you'd be aiming for your rent there.
Kim Lisa Taylor:
Okay. Let's see. An anonymous attendee says, "I couldn't find the worksheet on the website. Could you direct?" So I think he's talking about the…
Isabelle Guarino:
A profitability calculator?
Kim Lisa Taylor:
Calculator. Yes.
Isabelle Guarino:
So that's at ral101.com. When you're on that site and you scroll just maybe one, two down, you've got the free book. Then right there in the middle it says, “See Potential Profitability,” and then you can click on that.
Kim Lisa Taylor:
Okay. Ian says, "Your passion is showing, Isabelle. Good for you." So yes, that's always good.
Isabelle Guarino:
I love this industry.
Kim Lisa Taylor:
Great. Rashish says, "Does the caregiver have to be present at the care home 24/7?"
Isabelle Guarino:
You do need 24/7 awake staff, but the caregiver does not have to live there. You're going to do shift work eight-, 10-, or 12-hour shifts, and you'll want that ratio to be four-to-one or five-to-one.
Kim Lisa Taylor:
Then what about background checks? Do you do background checks on everybody or what's recommended for the industry?
Isabelle Guarino:
You can do them on your caregivers. You don't have to, but you can. But always when I hire people like to call previous recommendations, see where they came from, what their background is in working. Did they have a good experience at their last job or not? It's a very tight-knit industry, so people will be pretty open with you.
Kim Lisa Taylor:
Okay, good. Let's see. Somebody says, "Thank you." So Neil asks, "Can I ask a syndication question?" Of course, Neil, you can ask me anything you'd like. So let's see. Let's see. Rashish asks, "Is video surveillance legal?"
Isabelle Guarino:
Yeah, you can have videos in the home, but not in the bedrooms or bathrooms. But I do tell my staff to pretend that there are cameras everywhere 'cause cameras are very small these days and you never know where daughter Judy might hide one in the room. So you want to act like you are on camera 24/7 and behave that way. But for us, we do have them in the home, interior and exterior. Most of our homes have 20-plus cameras 'cause I want to see everything that's going on. But no bedrooms and bathrooms, that's a HIPAA violation.
Kim Lisa Taylor:
Right, unless they want to put it in themselves. Okay. All right. So Neil asked, "How do you set up a syndication for something like residential assisted living where the return won't be seen for a year or two? If I buy a multi-unit apartment building, I can get cash flow right away. I need long-term investors." It's the same as for a development project, Neil. You just tell people that we're in the setup phase. There's not going to be any returns. Your returns can accrue during that time period, but you're not going to pay them until there is either sufficient income from cash flow or some kind of a refinance or something like that. Then you would go back and you would make up arrearages in any kind of preferred returns that weren't paid during the development time period or the renovation time period. So it's very common in development or a heavy renovation project that you wouldn't have ... Isabelle, let me handle these questions.
Isabelle Guarino:
Yeah. Okay.
Kim Lisa Taylor:
“Does the syndication model do pre-development entitlement costs?” It can. So you can actually use the syndicate to acquire raw land. You could use it to acquire an existing building. You can do it for renovation costs. Whatever you are not getting from a bank is what you're going to need to get from your syndication model, or you're going to have to put up your own cash to do that. So yes, and if you're going to be doing a development project, you're going to be doing it one by one or like in a stage. So you only raise what you need when you need it. You never want to have money hanging around in a bank account that isn't invested because then it's not generating a return and it's diluting the returns to everyone. So you raise the money when you need it.
If you only need to raise a couple $100,000 to do the entitlement costs, then that's what you raise right then. If you need more, then you'd raise it. Then a lot of times, if you're doing a development project, by the time you get the project entitled, it's actually worth more than what you paid for it. So sometimes that would be sufficient for your down payment for a construction loan, so you wouldn't even need to raise more money, or if you do need to raise more money, then you would go out and you would do a second raise at that time. Okay. So that's fine. “After taking your course, what percentage of your students actually start a residential assisted living facility, and what percentage of them are actually in business successfully after three years?”
Isabelle Guarino:
Great questions. So in our training, we're teaching you everything you need to know step by step, how to own and operate your home. Then after the fact, we do offer coaching or mentorship. So for those who go forward with our coaching, I'm in touch with them all the time. Those students are almost all successful within three years if they decide to continue doing it. Of course, there's some people who say, "I don't even want to do this anymore," and they decide to quit, and that's fine. But for those who come to the class and don't move forward with our coaching or mentoring, I don't really see or hear from them much after until they come to our national convention or something like that and run over to me and say, "Hey, I opened my home," and then I'm excited for them. But if they don't do coaching or mentoring, I'm not in touch with them as much, so I don't have that statistic. But for those who do work with us, it's extremely high of who is successful.
Kim Lisa Taylor:
I can tell you from our experience that those who have coaches accelerate their growth and are much more likely to grow bigger, do more deals, and eventually do bigger deals than those that don't have coaches. We see a lot of people that'll do one or two deals that don't have a coach, and that's about all they ever do, or we see people that have a coach that will use their coach for the first two or three years, and then after that they've got enough experience. They don't necessarily need it, but they keep coming to the events for just for the excitement and getting together in the community and keeping those relationships alive.
Isabelle Guarino:
Yeah.
Kim Lisa Taylor:
So yeah, we've seen a lot of that. So yes, if you want to increase your odds, get a coach in any syndication model or real estate model, and certainly with this, because there's even more moving parts to this than there are in just buying and renovating an apartment building and then hiring a property manager to run it. Yes. So yes, Neil, can we help set it up? Yes, we set up all those structures that we showed you in that slide. We do all of that, plus we do the private placement memorandum, subscription agreements, all of your entire offering package. We help you understand what the rules and the securities laws are that you have to follow and how you have to document that to make sure that you're following all the applicable rules when you're raising money from private investors. So yes, we do all of that.
“What is a security?” It's when you're exchanging a piece of paper and exchange for somebody's money, whether that is some kind of a promise to give them something in the future to understand securities laws. I'm going to highly recommend that you read my book and it's called “How to Legally Raise Private Money.” You can get a free copy at our website at syndicationattorneys.com. You can get a free digital copy. So if you go to syndicationattorneys.com and then go to the “Free Book” tab, then you can read all about syndication or you can buy it on Amazon. It's an Amazon No. 1 best seller. We actually are working on a second edition, we'll be sending out eventually when it's done. We'll be sending out physical copies to those that sign up for those. So let's see. Ian, I'm not sure what that means. Rashish asks, "Which geographical region has more demand?" Well, I wouldn't imagine that since I'm in Florida, well, that's an obvious question, I think. There's a lot of seniors in Florida, a lot of seniors in Arizona, where there's more seniors, warm climates.
Isabelle Guarino:
Yeah. I always joke, I say, "Raise your hand if you're getting older or know someone who is," right?
Kim Lisa Taylor:
Yeah.
Isabelle Guarino:
If you grew up in Charleston, South Carolina, your whole life, you're not moving to Florida just 'cause you turned 85 and you need assisted living. You're staying in Charleston, South Carolina. So really there's a need for this everywhere, markets like Florida and Arizona where in Arizona we have 3,000 of these care homes in one county, in Maricopa County. In Florida, you guys have 3,000 homes throughout the state. So there's a massive amount of homes already there, so your competition is going to be a lot more steep versus if you go to a place like New Hampshire where our student created the first residential assisted living care home, she's got a waiting list out the door.
The state is begging her to open more. She can be charging $12,000 per month per resident because of the demand. So it really depends on what you want. Do you want to do it in a place that's very easy to set it up, there's rules and regs and you just follow it, and there's not a lot of hoops to jump through in Arizona like Florida, like Texas, or do you want to be one of one with a waiting list in extremely high rates? It just depends. But people are getting old everywhere, and there's a massive need for this everywhere. You really can't go wrong.
Kim Lisa Taylor:
Yeah. I always say it's easier to be a big fish in a small pond than it is to be a big fish in a big pond. So if you're in Florida or someplace where there's already a lot of seniors, there's already a lot of facilities, you're going to be competing; whereas, if you go someplace up in the northeast where there isn't so much, people still want to be near their families and their families want them to be near them. Just because your parents moved to Florida because they wanted to be warm doesn't mean that the kids are going to move to Florida in order to be close to their parents when they're in care. Right?
Isabelle Guarino:
Yeah.
Kim Lisa Taylor:
So they might bring their parents home if they could be near them.
Isabelle Guarino:
Exactly.
Kim Lisa Taylor:
Here's a question that occurred to me is, what about visiting hours? What kind of rules do you have to put in place for people who come to visit?
Isabelle Guarino:
For us, we have an open door policy in our home, but you have to think when you're starting this home, it's your baby, it's your business. You can set whatever rules you want. We don't allow pets in our home, but if you want to be Dr. Dolittle's assisted living home, you can do it. You can do whatever you want. You are starting your own business, so you get to set your own rules. We allow open visiting hours. I've never had anyone come in the middle of the night, but I do have some families who have, let's say the husband is in our care and the wife comes every single day.
She eats all three meals with us, and she hangs there from 8:00 or 9:00 a.m. to 8:00 or 9:00 p.m. and I'm perfectly okay with that, because guess what? She's probably going to be my resident one day too, and she's already comfy in the home and she already knows the caregivers in the home. So to me, paying for those three extra meals, worth it; worth it all day. But some families will come once a month to drop off the check. So it's that 80/20 principle. You're going to have 80% of people who barely ever come and never visit, and 20% of people who are there every day.
Kim Lisa Taylor:
So Ian clarified his question, "What is the security for the funds?" Ian, in any syndication … There is no security for the funds. You're buying interest in somebody's company. You have to trust those people to do the right thing with the money. It's not like you're loaning somebody money, you're going to get a promissory note or something like that. You just need to understand how syndications work. Again, I would direct you to read my book, and then I think you'd have a better understanding of that. Neil says, "Yeah, the book is a great resource. I recommend it highly." Thank you. Deepak asks, "Are there any tax incentives from the city or the county that it's in?"
Isabelle Guarino:
We do not usually lean in that direction because we're going all private pay. So we're not using any government funding grants or loans, but there might be if you go that direction.
Kim Lisa Taylor:
Yeah. I would imagine that if you explored that, you would find some tax incentives and tax credits. That in itself is an art form, is learning how to tap into those. But there could be some available, especially if you're going to be building in maybe an opportunity zone or something like that, you could certainly take advantage of some of those other tax benefits that you would have there as well. So let's see. The title of my book is “How to Legally Raise Private Money.” So again, you can get that at syndicationattorneys.com. You can click on the “Free Book” tab to get the digital download, or there's a link there where you can go to Amazon and purchase it. So I think we've covered all the other questions that there are. I don't see anything else in the chat. It looks like we've covered everything. Anything else that you want to share with the audience, Isabelle?
Isabelle Guarino:
I really appreciate you guys letting me be here, and hopefully this piqued some of your interests. I always say, "I guarantee you're going to get involved in senior housing one way or another. You're either going to be lying in the bed or having a loved one lie in the bed, writing the check for them, or you could be owning the real estate in the business cash flowing and giving your own loved ones a place to live if and when they need it." So be sure to just check it out, gather whatever information that you need, and I hope to see many of you at our national convention with me and Kim. It's going to be a lot of fun. So if you guys need anything, schedule a call with me or the team — ral101.com. Look forward to chatting with some of you then.
Kim Lisa Taylor:
Okay. Thanks so much. Thanks, everybody. Have a great day.