- Chris & John
Ep 26: Investing in Assisted Living Facilities with Rich Foster
Today's guest, Rich Foster, works in one of the most interesting and uncommon niches we have come across – assisted living facilities. Rich considers himself a serial entrepreneur. He has started and exited several successful businesses ranging from clocks to coworking spaces to venture capital. Currently, he is invested in assisted living facilities in secondary and tertiary markets. In this episode, we learn about what it takes to invest in assisted living facilities. We discover that this type of asset is different from other real estate investments because there are two facets: the real estate side and the operations/healthcare side. This adds an additional level of complexity to the investment because of the various compliance standards that have to be adhered to.
In Rich’s specific niche, the mid-range bracket, these standards prevent overcrowding in the space. Rich shares why this middle-market works best for his company and what they do when they put boots on the ground. Aside from being recession-proof, this segment of the assisted living market is scalable and simple to build into a portfolio because of the small number of competitors in the space. We also discuss the ways that Rich increases monthly income, the benefits of having strict acquisition criteria, and why securing conventional debt for assisted living facilities can be difficult. Rich rounds the show off by sharing his vision both for the future of his company and the assisted living market generally. To learn more, join us today.
Key Points From This Episode:
Rich’s diverse entrepreneurial background and the path that led him to real estate.
Insights into Rich’s first assisted living facility deal and the growth that came from it.
Find out how Rich got into the less ‘traditional’ space of assisted living investing.
Some of Rich’s main deal acquisition criteria and why he is so strict on them.
Learn about the structure of Cedar Communities and their long-term goals.
Why it is important to have a consistent, cohesive assisted living portfolio.
The barriers to entry help regulate the competition in assisted living.
Reasons that Rich focuses on secondary and tertiary markets, rather than primary ones.
Two main ways that income can be increased: rate cards and maximizing bed counts.
Discover the ways that Rich protects the assets from a downturn in smaller markets.
The perspective that Rich brings to deals and how his insights increase profitability.
How cash flow is reinvested and distributed with Rich’s assets.
Why Rich chooses not to renovate any of the assisted living facilities.
Expected returns and some of the other figures from assisted living facilities.
Rich shares how bed licenses work and how they can be increased if needed.
Learn how debt works in assisted living space and why it’s considered a high-risk asset.
Rich’s outlook, how they are looking to expand and build in the space.
“We are very, very focused. We have no problem saying no. We have no problem waiting until the right deal comes along.” — Rich Foster [0:06:55]
“One of the smartest things in any business is knowing what you’re good at but more importantly knowing what you’re not good at. The guy who thinks he knows everything at the table is usually not the smartest in the room.” — Rich Foster [0:08:38]
“We focus on that mid-market and what’s really interesting about that market is we’re really insulated from the economic downturn.” — Rich Foster [0:21:56]
“Our goal is that our residents don’t have to touch their savings at all.” — Rich Foster [0:22:37]
“Nobody wants to buy an asset that they think is maxed out already.” — Rich Foster [0:42:24]
Links Mentioned in Today’s Episode:
Foster Management and Holdings
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