In poker, a stacked deck is a set of cards arranged into a specific order – rather than being placed randomly as they should – to give one player or the house advantage. A stacked deck may be illegal in poker, but in investing, it’s a wise strategy.
Playing with a stacked deck in investing means lining up as many advantages as you can to ensure the highest likelihood of success. This means targeting assets or market segments that exhibit multiple positive metrics that – while offering no guarantees – give the investor the best chance at success.
What Are Some Desirable Cards That An Investor Would Want In Their Hand?
Before answering that question, ask yourself the following questions about the asset class or market segment in which you’re considering investing:
- Does the asset class or market segment fulfill one or more basic human needs?
- Is the timing right? Did you miss the peak?
- Are there metrics supporting the long-term sustainability of the asset class or market segment?
Based on the preceding questions, if your targeted asset or market segment exhibits the elements below, you’ll be investing with a stacked deck with positive prospects for success:
- The asset fulfills one or more basic human needs.
- The timing is right. You haven’t missed the market’s peak for this asset.
- There are economic and demographic metrics to support sustainability.
How Does Residential Assisted Living Stack Up?
Does the asset class or market segment fulfill one or more basic human needs?
Residential Assisted Living (“RAL”) facilities are private facilities that provide long-term live-in care for individual patients, mainly seniors who require medical attention as well as shelter.
RAL facilities fulfill the basic human need of shelter and meet the basic human need of healthcare. Consequently, RAL facilities fall within two distinct asset classes/market segments:
- Commercial Real Estate.
- Healthcare Facilities.
Is the timing right?
The timing of an investment is off if there is no more room for growth in your targeted market segment. Fortunately, there is still room for growth in the RAL market segment – driven by demand in two red-hot subsegments:
- Memory Care.
- Small Assisted Living Facilities.
According to Kaiser Health Network, the growth in the memory care subsegment that includes dementia and Alzheimer’s care contributes to the breakneck growth of the RAL segment. This growth doesn’t appear to be subsiding anytime soon with an increasingly aging Baby Boomer population.
Another subsegment fueling RAL growth is in the small assisted living subsegment. Small assisted living centers typically consist of 4-25 residents.
The boom of small centers can be attributed to the advantages they offer over larger facilities, mainly:
- A more intimate home-like setting.
- A deeper relationship with caregivers.
- A higher level of staffing with faster response times.
- The ability to live in a residential neighborhood.
- Easier control of viruses.
- Easier to accommodate visits from family members.
- Home-cooked meals.
Are there metrics supporting the long-term sustainability of the asset class or market segment?
The “Silver Tsunami’ of retiring Baby Boomers should sustain demand for RAL facilities for the long term.
The wave of retiring baby boomers is the most critical driver of RAL demand. Baby boomers began turning 65 in 2011, and by 2029, the remainder will also reach age 65 and account for more than 20 percent of the total United States population.
By 2050, the 65-plus age group is estimated to equal 88 million, nearly double its current population (49.2 million). Additionally, by 2056, the 65-plus age group is estimated to be larger than the population under age 18. The projected growth in this age group will be staggering and will create an unprecedented need for RAL facilities.
RAL facilities and various peripheral product and service markets that support these facilities offer a stacked deck for investors considering the asset class.
It meets TWO basic human needs, is still on the uptrend and strong metrics indicate it will reward investors for the long-haul.