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Investing in Senior Housing Properties - Part 2

As with any investment, it’s important to do the proper due diligence to know where your hard-earned money is going. When it comes to senior living investments, some think it’s similar to the traditional multifamily, office or industrial properties they have invested in before. Although in some instances this may be true, senior housing and care have some specific differences from other property types that are important to know before you invest.

Investing in the Senior Housing Operator

Much like hotels, when you invest in senior housing, you aren’t just investing in the real estate, but the operating company tied to the real estate as well. Managing a senior housing facility is extremely complex. There are strict state and federal regulations to comply with, a complicated reimbursement structure, and special equipment needed to treat or care for the residents properly. In addition, it’s important that the operator has trusted relationships with local doctors to receive hospital discharges and referrals. The doctors want to be certain that their patients are receiving the utmost quality of care. The operator is the life-blood of the underlying real estate and can be the sole reason if the facility is profitable or not.

Fragmented Market

The senior housing and care market is a highly fragmented, “cottage industry” market. The top 10 senior housing owners control 44.78% of the independent living, assisted living and memory care total supply.1 Being a successful operator takes an intimate knowledge of the local market, a strong marketing strategy, and the right doctor relationships. Regulations change by the state, so not every facility operates the same. These are a few reasons why we see expert local and regional operators thrive.

Acquiring Senior Housing Real Estate is Highly Specialized

Since the operations are tied directly to the underlying real estate, it’s important to have an acquisition team highly experienced in the senior housing real estate space. Understanding the operating business is crucial to making a smart investment. The acquisition team is basically underwriting the business when purchasing the facility. While there are a plethora of acquisitions professionals in standard asset classes, well-qualified senior housing acquisition people are limited. Creating and maintaining relationships with local and regional operators is a key strategy for senior housing acquisitions. Many transactions are done with a sale-leaseback structure. In this scenario, the operator who owns the facility could sell the building and free up cash to expand their operations.


While senior housing is quickly becoming a mainstream asset class for investors, it’s important to know what sets it apart from other investments. With the combination of the operating business being tied to the real estate, the market being highly fragmented, and the specialization required of the acquisition team, senior housing creates a unique opportunity for the few capable teams able to make informed acquisitions.

At 1031 Crowdfunding, we offer exclusive senior housing DSTs. Our acquisition team is led by Peter Elwell, our President of Senior Housing. Prior to joining the Company, Mr. Elwell served as the Chief Investment Officer of a publicly registered, non-traded healthcare REIT, where he purchased and managed a portfolio of nearly $200 million of senior housing real estate. His relationships with local and regional healthcare operators are a key factor in successfully purchasing off-market deals at favorable cap rates.

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1. CBRE Senior Housing Market Insight 2019 Q2 Review https://www.cbre.us/-/media/cbre/countryunitedstates/media/files/services/senior-housing/shmi-q2-2019_final.pdf

This material does not constitute an offer to sell or a solicitation of an offer to buy any security. An offer can only be made by a prospectus that contains more complete information on risks, management fees and other expenses. This literature must be accompanied by, and read in conjunction with, a prospectus or private placement memorandum to fully understand the implications and risks of the offering of securities to which it relates. As with all investing, investing in private placements are speculative in nature and involve a degree of risk, including loss of your principal. Past performance is not necessarily indicative of future results and forward-looking statements and projections are not guaranteed to achieve the results described and your actual returns may vary significantly. Investments in private placements are illiquid in nature and there may be no secondary market or ability to sell the investment should the need for liquidity arise. This material should not be construed as tax advice and you should consult with your tax advisor as individual tax situations will vary. Securities offered through Capulent, LLC, member FINRA, SIPC.