Before the COVID pandemic temporarily derailed the commercial real estate industry, residential assisted living (RAL) and senior housing, in general, were poised to build on the strength of 2019 – one of the strongest years for senior housing on record.

With the world returning to normalcy, senior housing is expected to make a strong rebound, with a full recovery expected by early next year. From there, the sky will be the limit as Baby Boomers are expected to retire by the millions. Forecasts predict strong performance in the sector minimally, for the next ten years.

RAL investments are poised to reward their investors for the next ten years, and investors are flocking to the sector in droves.

If you’re considering investing in the RAL sector but are unsure how to participate, first consider the following questions before settling on a particular path:​

  • How much time and energy are you willing, or do you want to commit in connection with your RAL investment?
  • How much capital do you have and want to invest?
  • Are you willing to commit the time and capital to acquire the education and knowledge required to become an active investor?
  • Do you require complete control over an investment to be comfortable investing in a particular asset?
  • Is liquidity important to you?
  • How important is it for your investments to be shielded from stock market volatility?
  • Are you comfortable committing your capital for a minimum of 5-7 years?

DIRECT INVESTING.

If you need to micromanage your investments and you have the time, capital, and brainpower to commit full-time to your RAL investment? If so, then direct investing might be right for you.

Direct investing is the direct ownership of an asset. Direct ownership also entails everything it takes to get to the ownership part of an investment, including knowledge acquisition, prospecting, analyzing, due diligence, finance, closing, operations, disposition.

​​Of course, many direct investors outsource many of the operations and property management functions of RAL investing. Still, as a direct investor, you are ultimately responsible for overseeing every aspect of your investment.

Besides the high human cost, direct investing also has a high capital cost. Most investors don’t have the cash to acquire or develop an RAL asset on their own and will, accordingly require secured bank financing to facilitate the venture.

​​Commercial real estate loans typically require a 20-25% down payment and often require personal guarantees, so banks aren’t exactly giving away money to investors without requiring some skin in the game – no matter how good your business plan is.

REITs.

REITs offer investors the opportunity to take a bite of the RAL investing pie without the high human or financial capital barriers associated with direct investments. Investors are drawn to REIT stocks traded on Wall Street because of the low barrier to entry and for their liquidity.

Investors are also drawn to REITs because of the 90% rule that requires REITs to distribute 90% of their taxable income to investors as dividends. But “Buyer Beware!” as many REITs swallow up significant chunks of “taxable income” through management and asset management fees – leaving investors with very little in terms of returns.

One additional drawback of REITs is that they are just as vulnerable to stock market volatility as every other publicly traded stock because they’re traded on the public markets. Recessions and downturns won’t protect REIT income or growth as REITs are known to suspend dividends during hard economic times.

PRIVATE PASSIVE INVESTMENTS.

For the investor looking for a hands-off solution but one that is insulated from market volatility – the kind of volatility driven by social media and herd behavior – there is the private option.

The private markets offer qualified investors a passive alternative uncorrelated to Wall Street. Ultra-wealthy investors are particularly drawn to private CRE investments like residential assisted living because of the twin benefits of income and appreciation.

​​In addition, private investments – typically structured as partnerships – offer investors significant tax benefits not available in the public markets.

Through the right promoters – ones with the requisite experience and expertise – private RAL investments have the potential to generate above-market returns with less risk and volatility.

In the wrong hands, RAL, or any other investments for that matter, can be a money loser.

​​Private RAL investments require potential investors to do their homework and conduct proper due diligence to find an opportunity that matches their investment goals and risk tolerance.

For investors seeking a passive route for their RAL investments, consider opportunities in the private markets like those offered by RoundBox. Free of the headaches, personal risk, and high barriers to entry associated with direct investments and insulated from broader market volatility associated with public options like REITs, private RAL investments offer investors an ideal passive opportunity.

By offering the potential of above-market returns through a combination of income and appreciation while also allowing investors to keep more of what they make through generous tax benefits, it’s no wonder sophisticated investors like the ultra-wealthy and institutional investors opt for the private option.

Suppose you’re willing to leverage the expertise of experienced and successful promoters in the RAL space and are willing to let go of the steering wheel by committing your capital for a minimum of five years or more.

​​If that’s the case, then you should consider partnering with a private fund like those offered by RoundBox. Contact us today to find out how.