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Thinking Of Buying An Elderly Care Home? Tips To Remember When Buying

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Comments & Replies: 3     Views: 3654     Posted By: Broker/Consultant  

Are you thinking of buying into one of the fastest growing industries in California? Joel Miller a Senior Care Specialist covers this topic in his latest Discussion on BizBen. This Discussion covers: What to look for when touring a Care Home, how to proceed with pre and post due diligence issues.

Topics: Buying A Business     Tags: buying a business

Contributor: Broker/Consultant: Elderly Care Services

According to the Population Reference Bureau report, "The number of Americans ages 65 and older is projected to more than double from 46 million today to over 98 million by 2060, and the 65-and-older age groupís share of the total population will rise to nearly 24 percent from 15 percent."

Are you ready to buy your first Elderly Care Home?

Assuming you already have an interest in the Elderly Care Home industry and have a general idea as to what a care home is; here are some tips when looking at a care Home to purchase:

1) Use your senses.

a) How does the home or facility smell? Does the home smell of urine and fried food or roses and chocolate cake?

b) How does the facility look from the street? Is the facility nice and tidy or full of weeds and junk? First impression is everything in this industry.

2) Employees.

a) Do the Employees greet you at the door professionally and with authority or do they appear tired and disinterested?

b) Do the Employees protect their Residents privacy and watch over you carefully or give you free reign to tour the home as you wish?

3) Residents.

a) Now please be very careful here and do not disturb the Residents, but do the Residents look happy and content or are they in bed and unattended?

b) Are the Residents asking for help and fidgeting or relaxing in a big Lazyboy enjoying an old movie?

4) Books and records, Medication management and safety requirements

a) Unauthorized personnel are not allowed to view Residents and Employee files, but does the facility have all files nicely organized and presented in a professional manner?

b) Do you see fire extinguishers and an evacuation plan hanging on the wall along with emergency contacts?

c) Are the medications in a secure area, well organized and with appropriate forms for documentation?

d) Does the home appear to be Elderly friendly with hand rails, custom toilets and showers? How about ramps leading into or out of the home?

In addition to the above, check out:

5) What's the reputation of the facility?

a) A great resource for checking on a facility is the California Department of Social Services website. They offer a free site that provides basically a report card of all Care Facilities in California.

b) Call placement Agencies and see if they know of the facility and what is the reputation of the facility.

6) With permission from your Broker ask to speak with the Seller direct to find out why they are selling, what challenges they have had in the business and what they (the Seller) see as future growth opportunities.

7) How are the Employees paid? W-2 or 1099? This will affect your bottom line and exposure.

8) When was the last time Resident monthly charges were increased and for what reasons?

9) How long have the Employees been at the facility?

10) Any violations or troubles with Department of Labor?

With proper due diligence and business planning you can get off to the right start and enjoy a solid business within a growing industry.

It has been said that in the US, 10,000 people per day turn 70 years old and will continue as such for the next 20 years. If you are looking for a business that has all the trends working in your favor, this one would be it. There are many good items to look for in this article and I would advise potential buyers to make a list of all the things discussed in the article and use the negatives to justify your offer price.

However, the more negatives you have, that can be easily or inexpensively fixed the more opportunity you have to make a better return on your investment. Many business owners have neither the desire nor the inclination to make simple cosmetic changes to a business if it doesn't immediately impact financial performance and this is to a new owners advantage. Also with all other things being equal look for one that has vacancy. A location that is 100% occupied is great but making small, inexpensive cosmetic changes will not necessarily justify an increase in rent, but may make it easier to shore up vacancies.

An important factor to consider when buying a business very dependent on a building customized for a particular purpose is the enduring value of the underlying real estate, whether or not the business is successful or sustainable. A really good (and slightly out of context) example is a church.

The traditional steeple-and-bell-tower iconic church serves its purpose very well. But, when the congregation changes, grows larger, or grows smaller, that building needs to be sold. Just how "convertible" is the typical church to other purposes? That's why we see more and more small community churches built as generic warehouse or retail spaces with minor structural and decorative changes to serve the purpose of gathering and worship. This stratagem makes sense for at least two good reasons: financing and re-sale.

Financing is much easier to obtain because the lender can see the intrinsic value of the real estate separate and apart from the existing or planned "business" (i.e., a church) and, in the event of a foreclosure, they will find a multitude of potential buyers, not being limited to a religious organization. Similarly, because the building is "generic", the congregation can re-sell or lease out the premises at its highest and best commercial value as office, industrial, or commercial space.

The same principal applies to an assisted living facility. The buyer should very carefully review the real estate market, zoning requirements, and structural particulars to be sure that when it does come time to sell that, even if the business my no longer be viable (e.g., the market has evolved, insurance reimbursements have changed, lifestyles are different), the underlying real estate can be easily and inexpensively "re-purposed" and, therefore, re-sold at top value.

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