Investing in residential assisted living with Isabelle Guarino-Smith

Isabelle Guarino-Smith, the CEO of RAL (Residential Assisted Living Academy). She has spoken across the country and has been featured in magazines & articles nationally. She was named both “Future Leader” in the Senior Housing industry and “Top Senior Housing Influencer” under 30. Isabelle is a sought-after coach and trainer for all things "RAL"! Isabelle’s goal is to carry on her father’s legacy by training investors & entrepreneurs how to... "Do Good & Do Well". In today’s show, Isabelle shares her investment story and the many benefits of investing in residential assisted living. Episode Link: https://residentialassistedlivingacademy.com/ --- Transcript   Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by Isabelle Guarino-Smith, and she's going to be talking to us today about all of the things we need to know and be aware of if we're going to get started investing in the residential assisted living space. So let's get into it.   Isabelle, welcome to the podcast. Thank you so much for taking the time to hang out with me. I appreciate you coming on.   Isabelle: Of course, happy to be here. Thanks for having me.   Michael: Oh, it's my pleasure and I'm super excited to chat with you today because we're talking about residential assisted living, which is a newer topic for the remote real estate investor. But before we get into that, give us a quick insight who you are, where you come from, and what is it you're doing in real estate today?   Isabelle: Yeah, I'm the CEO of residential assisted living Academy. We basically teach and train people all across the country how to own and operate their very own residential assisted living homes. We've been in the industry for now, this is our 10th year, we own and operate three care homes ourselves out of Phoenix, Arizona and I say we because it's a family business, I work with all my siblings, most of their partners, so I love that aspect, too…   Michael: So amazing and so you are teaching people how to own and operate versus residential assisted living facilities that is so interesting. So why are you I mean, why residences living? Why, what got you involved in it to begin with?   Isabelle: Yeah, so we actually got involved because my grandmother fell and broke her hip and the doctor called and it's like, she can't go home alone. She needs 24/7 care, help with activities of daily living? She was in upstate New York, and we were in Arizona, and it's like, okay, what are we gonna do? You know, and so a lot of families find themselves in a situation like this, where all of a sudden, poof, a loved one needs help and it's like, are you gonna quit your job and take care of them 24/7? Are you gonna give them in home care, which is insanely expensive or are you going to put them into a…   Michael: Dreaded H word?   Isabelle: Right, the H word, you're like, oh, no. So we were faced with that dilemma. We searched and hunted for like a place we even felt competent or comfortable with up there for her and found nothing that we liked, we were just grossed out of a lot of the options, and came back to Arizona, kind of found a residential assisted living home here. My dad was always a real estate investor. So he talked with the business owner and just asked her like, hey, would you be willing to sell and she's like, yeah, bought the real estate, bought the business had no idea what we were getting into, but got into it, so she could live there for free and he's like, all figured out how to run the business and over the course of the next couple years, my whole family jumped in got involved was like, We love this industry because not only is there great cash flow, but you're offering an incredible opportunity to like the community, the families, you're providing jobs, it was just so impactful and it was like, man, this feels so much better than so many other real estate investment opportunities.   Michael: I love it. It's kind of like the parents that have their kid go to school, and then they buy him a house so they could live rent free and end up becoming landlords like, oh, this is kind of cool. Yeah. Oh, that's awesome. So tell us what kind of services should someone's thinking about getting involved in the industry? Yeah, I'll take I'll use myself as an example. Like, I have no idea how the medical industry works. I just know there's a ton of red tape and dealing with medical insurance companies is a nightmare and a half. So do I need to become a medical expert as someone that wants to get involved in this industry?   Isabelle: Great question and the answer is no. We are real estate investors, I have zero medical background. I am not a caregiver by nature. If I was I probably would have taken care of my grandmother, you know, so? Absolutely not what we teach is how to own the real estate and own the business, you're still going to hire a licensed administrator who's going to run all of the day to day and they're going to hire the licensed caregivers who are going to care for the seniors. So you're really running the business in a way that you're hands off. I visit the home once every other month and talk on the phone with my manager like once a week maybe so we're definitely teaching how to do it as passively as possible.   Michael: Okay, okay. Love it and can you give us an idea let's talk numbers because people I think love numbers they can wrap their head or round numbers, let's dig in. So it sounds expensive. But just from what I've heard about how much people are paying to stay in these types of facilities, so give us an idea. If someone is just getting started, wants to wants to get involved, but doesn't have a several million dollars, you just tell us what some of the numbers look like from a purchasing standpoint, from a revenue standpoint, expense perspective.   Isabelle: So I always say it depends what route you want to take to get involved, right. Some of our students like in the Midwest, they want to buy land and build custom homes from the ground up, there's still land to buy out there and so they'll, they'll do that. So that's obviously the cost of the land and then building it that could take anywhere from a year to two years and be pretty expensive. But then the home is perfectly suitable and custom done and yeah, pretty those homes that I've been into are like incredible, they're so gorgeous. Another way you can get involved is buying a single family home and converting it to become an assisted living home. So that might be adding on square footage, more bedrooms, bathrooms, or it might be ramps, guardrails, light minor renovations, it just depends on how the home started. I like to say three to 500 square feet per person is comfortable. So if you have 10 residents, minimum 3000 square foot home upwards of 5000 is pretty comfortable for that.   Michael: Okay, that's a great kind of metric to go off of, and then that bed bath count does that play into that as well?   Isabelle: Most seniors are going to want private bedrooms, private bathrooms, but you can get away with like one or two shared options within the home, but as many private privates as you can, is better, the other ways you could get involved is buying an existing one, like I shared with you, we did so you buy the real estate by the business, you're up and running cash flowing day one and then the fourth one is maybe you don't have as much cash and you're going to lease the home, from someone who's retrofitted, got it licensed, it's ready to go and you're going to lease it from them, and just pay them, you know, the lease fee every month, and you're going to run the business and they own the real estate. So that's another way you could get involved but numbers wise cashflow I know you're in California, yeah?   Michael: Yes.   Isabelle: Okay, so California average, the state average is about $5,000 per month per resident is how much it costs to live in an assisted living home right now. But San Francisco's average is closer to like 6800 per month per person and that's for an average home and I told you, my grandmother, those average homes were yucky. I didn't want my goldfish there. Let your mother so let's say most of these homes that we're teaching our students do, they're more upscale, they're like luxury. They're beautiful homes. So let's say you have six residents there in California, and they're all paying $8,000 a month to live in your home. This is not unheard of, this happens all the time. That's 48 coming in each month, right? 48,000 but let's minus 15,000 for a mortgage or lease because you're in San Fran, it's expensive. Yeah, so 15,000 can get you a pretty nice home that could house six people comfortably right? Minus about 20,000 in your expenses, that's including your staff, including, you know, everything else that you need insurance activities, food, cable, everything, that's still leaving you with $13,000 of monthly net on that home. So it's very, very lucrative and that's what just six residents, every state varies between six and 16 on your maximum amount allowed, so if you get hired…   Michael: Oh my gosh, wow… But I'm like, yeah, for those that watching, I gotta pick my jaw up off the floor, because I've just gasping here. So it's about talk to us about like, you mentioned, you'd hire that third party licensed person that would then administrator, thank you, and then they go hire all the staff. So can you I mean, how do you find these people? Do you just like indeed.com or monster.com, third party administrator for RLS?   Isabelle: Yeah, you can definitely use job search engines, you can honestly go to licensing schools. So there's like caregiving, schools and administrative schools and you can get a fresh list of graduates. You can also just talk to other homeowners in the area and say like, Hey, is there anyone you know, looking for a job or things like that? It's a really tight knit community. So networking is like vital and we have our first manager, we asked around and found a guy, and we loved him. He was amazing, he moved on and started his own business, and we were so happy for him to do that and now we have a wonderful gal who oversees all three of our properties. So once you find a good one, they're really with you for a long time and you can lock them in and just share the vision of what you're looking to create and then they'll get excited about it too because they're really running all the day to day like they feel a lot of ownership for the business. You know um, so it's good to have them like on your team and getting excited and involved in stuff.   Michael: Totally and you can, you would feel confident to go to them saying, hey, I know nothing about this business. But I understand real estate investing, I understand numbers, like you're going to do all of the stuff and I'm going to be like the money and kind of deal structuring person…   Isabelle: You can go to them like that, or I would encourage you to come to our training first to learn everything. So that way, you're not walking in so blindly because you know, a lot of the things that you're going to be asking them to do, like, I want you to have some form of background knowledge just so that you're not coming from, like, you have no idea if they're doing it right or wrong, like you want some knowledge. So we teach and train all those different aspects of it. So at least you have a base knowledge. So when you go to them, you know, what you're looking for, and can kind of help guide them in that way. But you don't need to know the English intricacies of their job at all.   Michael: Okay, all right. Love it and where can people find out about that training?   Isabelle: Yeah, so a great free place to start is RAL101.com. We've got books, webinars, you could have a discovery call with me, I'll chat with you all about it but RAL 101 is a great place to kind of get started.   Michael: Love it, so I've got a million questions, we're gonna try to get through as many as we can on the show. Zoning comes to mind, because this is different than a traditional single family home with a single resident, what are some things that you need to be aware of at a high level because I can imagine market to market is different but what are some things we should be aware of?   Isabelle: It's still zoned residential and I know everyone is like, but you're running a business here and it's like, yeah, but an Airbnb is the same and that's not zoned any differently. So it's still zoned residential. It's still in a residential neighborhood. It's just there's a license on the physical property that it will vary state by state what is required or isn't required. More or less, if you've got to be Tom Cruise to get out of the house that is not SR safe, right? We want to make sure that it's like grandma's. We want to make sure grandma can get in and out nice and safe. You know, the hallways are wide enough the doorways that there's windows and accessible egress, and different things of that nature. But you'll get the home physically licensed through the state and they will approve based on square footage and safety and things of that nature. Occasionally, they'll ask for things like fire suppression system and it to me it's like put it in if that's if that's a requirement. Just do it. Like I you know, keep it safe. We want our grandma's safe.   Michael: Right, right. We want our grandma's and our goldfish is safe. Yeah. So how much if someone's looking at an existing home? I know you mentioned retrofitting is maybe one of the ways someone can get involved in the business. What should people be looking for? I know you mentioned 300 to 500, square foot bed, bath count private, private, what are some other things that people should be keep an eye out for?   Isabelle: Demographics are key in our industry. So you want to make sure that you're in an area where there's a large amount of 50 to 70 year olds, who are upper middle class and typically home owners. That demographic is what we call daughter Judy. That's usually who's paying for mom or dad to live in your home. So she you're marketing to her you want the home close to her because she's usually searching for the home choosing the home paying for the home and coming to visit mom, so she doesn't want to go 45 minutes outside of town, just because it's cheaper. She wants to go five minutes on her way home from work to visit mom or dad. So demographics is vital in our industry and really kind of doing that market research to determine what area and then even deeper like what neighborhood what, what like literal area is she in, you know, and really kind of narrowing down in that way.   Michael: Okay and then what about some property specifics are single level homes better are we want pools to be like Jacuzzis. Talk to us a little bit about some of the physical attributes, physical aspects of the home.   Isabelle: Definitely one story is a lot easier if you do multi-level like we have a guy in Jersey who's got a four story home and he added an elevator, right? We have some people in Texas who have elevators so you can do an elevator. It's just if you can get a single story home, that's obviously better and easier. It's just an extra fee. But some states and cities it's like that's impossible. Like you know, they all have multilevel homes, you're just going to have to deal with it. The three to 500 square feet and then don't think like oh, let's cram all these people in a home like you still want it to be a home. You want a living room, a dining room, a kitchen. If you can add in a library, a movie theater, a hair salon, different amenities like that. That's awesome and that's a major selling feature or factor to you. You want the backyard to maybe have some rose gardens or walking past a swimming pool won't get used very often. but it's a feature and you could you better pointed out to daughter, Judy, when you come to tour Look, grandma can be swimming and enjoying. So there's a lot of different things that they'll use more, and they'll use less but no matter what you're going to market them all and make sure that you're pointing them out and featuring them as amenities if you have it.   Michael: Okay and in terms of the actual care of the individuals, who are the residents? How do you decide or determine how much care to offer or what additional care offerings you have, like, I know there are a specific system living locations for like memory care, or for then different needs. So how do you determine what yours looks like?   Isabelle: So when someone comes to tour the home, you'll do? Well, you won't, the administrator will do an assessment with that senior to determine their level of care. So are they awake at night? Are they a two person assist, right, do they need help walking or is it just they forget their medication sometimes or like you mentioned? Is it a memory care thing, like, are they physically fine, but they're not mentally there anymore. So there's different varying levels of that they'll do that assessment with the senior in the family, when they first come into the home to make sure that we can accommodate them that we're able to do this, you know, and that it is going to be a good fit for them because you don't want a house full of people who have a super high level of care, that's going to be tough on your staff, right, you want to make sure that if you have one or two people who are super high, maybe everybody else has kind of less level of care. as they age and live in the home, their level of care will change and it will, you know, go up and down depending on all sorts of things. So you'll want to redo those assessments with the family and if anything has drastically changed, their rate to live in the home may also change because the level of care and then the type of physical bedroom that they are going to be in Is it a private, private, private, shared, shared, that's going to determine their rate to live in the home.   So you're going to want to be doing those assessments with the senior maybe every six months or something. There's usually doctors who can come to the house who can help do an assessment with you and kind of determine you know if it's a good fit, but we don't want to be on nursing home level doctors IVs gurneys. No, you can't we that's legally you shouldn't be doing that. That's not what you're licensed for, you can get licensed for memory care and we have a lot of students who have memory care homes who focus on those with Alzheimer's or dementia and those residents actually charge you charge more if you're a memory care home about 500 to $1,500 per month more, if that's how you're licensed because the home has to have different physical requirements like locks and things of that nature and the caregivers have to have an extra license level. So because of those things, it actually costs more to live in a memory care home. So a lot of our students like to go that route.   Michael: Okay, and that makes total sense and you touched on it, but I just want to circle back to it, that at what point does your licensure stop and say ABA level of care does it need to be hey, you now need to go do something additional.   Isabelle: It's really like there's only two way people leave the house they pass on you know to the other life or they go to a nursing home. So once you need doctors IVs gurneys, you know, you're hooked up that we can't accommodate that anymore. So basically, once something like that happens, where it's a true like medical need, where they need to be in a hospital, we can't help that anymore.   Michael: Got it and as far as like day to day stuff, I know the administrator is going to be taking care of a lot of this but are we providing three meals a day activities, like what is the day to day look like? Are people free to come and go as they choose?   Isabelle: Definitely three meals a day snacks on tap whatever they want to need, right? They can pull up to the little fridge and get whatever they want. It's not like a big facility where it's like lunchtimes at noon and it's like, no, if you're not hungry, you're not hungry. We'll feed you when we want to feed you and when a new resident comes in, we always ask them what's your favorite food and we'll add it to the menu, you know…   Michael: Like a tech startup?   Isabelle: Yeah, beer on tap perfect.   Michael: Happy hours.   Isabelle: Yeah. No, we do, we like to have fun with them and we like to let them enjoy. Especially food so important for seniors when your health is like taken from you. If you've ever had a health scare or family member has a health scare, it's like, that's all you think about like forget what you're wearing that day or what you're driving, it's like, oh my gosh, that's all consuming and that's their lives, you know, like it's painful for them to walk and, you know, they're hurting and whatever and so, like food, that's such a simple thing that makes you so happy when it tastes delicious and it looks beautiful and it's really important to have great food in the homes and whatever food they want and need. Activities wise, we do have activities that come to the home, we've got pet therapy, SR yoga, music therapy, we do all sorts of fun stuff in there, just contractors who will come and do a little, you know, class or interaction with the with the residents and it's really cute and fun and, and I love that.   Michael: I've man, I love it too. That's great. If someone is listening and thinking that these types of homes are a great fit for maybe someone in their family, or maybe for them as an individual, can you walk us through what the payment looks like? So IE is their insurance? Can this be built through insurance.   Isabelle: So about 10% of the population has long term care insurance, so not many people, but if you do have it, they will pretty much take care of your family to live in a home like this, which is excellent. That means the family or you don't have to pay anything. So if you don't have long term care insurance, get it because we're all going to need it. The only other ways really that people pay for these homes is if you served in a time of war, you might have VA benefits. If you have Medicare Medicaid, but they don't pay very much about $1,800 a month, but it might help supplement and then cash IRAs investments, paying off their needle selling their home and using that money and letting their kids figure it out a lot of people rely on their kids and it's God Children.   Michael: Daughter Judy…   Isabelle: Yeah, daughter, Judy.   Michael: Yeah. Okay, interesting, interesting and from a kind of, again, again, kind of getting back to the numbers and how to physically do these deals, and I'm sure you cover it in your academy, but we'd love to get a little bit of a preview or like, can you go to a bank and say, hey, bank, I'm gonna buy this property. Oh, and by the way, I'm not going to put a traditional long term tenant in place, I'm going to put in five tenants in place, and I'd be paying 1000, they're paying five grand each, like, how does that work?   Isabelle: Because the will first it's going to be like, you know, when you're purchasing a home, it's like personal secondary investments. So you're purchasing onto that investment category. So they know that you're not going to be living in it as your primary, you know, house, which is fine and that's one way to get the loan. A lot of people use different ways to fund these projects. They'll use SBA loans, some government funding. Sometimes people will use syndication, crowdfunding, private money, hard money, all sorts of different stuff. But you can get a bank loan to get started, you know, in this industry, specifically for the house, that is fine and, and it happens all the time. But the seniors in the home, they're technically not tenants. So like, you don't deal with the eviction moratorium at all. They're residents, and they're signing a residency agreement. So if they're no longer fit, you can kick them out, you have all the right in the world to kick them out. Because it's a very strict document. That's basically saying, we can only provide XYZ and you have to do XYZ and if you don't, it's right there, you're out not that we're kicking a lot of Grammys out…   Michael: To the curb…   Isabelle: I remember when COVID happened and so many of my single family rental friends were like, I'm screwed. Like, no one's paying me. I have all these homes, like I'm just screwed right now and I was like, dang, that sucks. Like, we're not having that issue because I mean, even looking at our world right now, things are getting a little scary, right? Like people are like, where should I invest? What's safe? What's recession resistant? I love Airbnb. But like Airbnb, that's what you do, when money is flowing. The when you're ready to go on that vacation, when you have extra money to spend and you're going to do all this stuff. Soon as money's tight, you're not going on that trip to La Jolla, you're not going to Europe, like you cut back on those things. necessities are always good to invest in because they're not going to go away. No matter if money is high or low. It doesn't affect it. So your mom or dad's care needs and home isn't necessity, you're not going to not pay for that. Like, we don't have that issue and it's pretty wild, because so many people are like, how does the recession affect you guys and it's like, what recession like no one stops paying for their mom or dad like, you just don't, especially at the higher end level. You don't it's pretty incredible.   Michael: Wow, so okay, talk to me again about the residency agreement versus considering them tenants because I want to convert all my tenants over to resident agreements like ASAP. How does that work?   Isabelle: Because we're taking care of them physically because there is that I don't want to say medical but there's that component of care. You're not only paying for the home, you're paying for the care as well. So that's kind of where that falls into place is that it's not that I'm you're just leasing this property from me and you have all these rights and stuff. No, it's the care component combined and that's kind of our saving grace in that regard.   Michael: Got it, got it. Okay…. Yeah. Maybe people like foot massages? I don't know. We'll have to see. We'll take a poll.   Isabelle: You can add in.   Michael: Yeah, exactly. Exactly! Alright, well, Isabel, I mean, we've talked about all of the great things. I think all of the Silver Linings give us what the downsides. What are the risks? What keeps you up at night?   Isabelle: Yeah, I think in any business, always, the difficult thing is people, right, and people across the board from the seniors, families, right, the expectations that they have, and making sure that you're accommodating to them, and things of that nature, all the way down to your staff, making sure that they show up, they're happy, they're enjoying their time, and they're representing you and your brand well, so I think people in any business is always going to be your most difficult or keep you up at night item, right because it's just, it's challenging and if you're anything like me, I'm very type A I like to be controlling, it's hard to run a passive business where somebody else is representing you. You're always worried. Are they representing me, right? Are they saying everything right? Are they doing everything? Right? So I think it's just learning a little bit to like, let go let things happen. You've got your policies in place, you've got your cameras in place, you can check in as much as you want but also, it's just going to drive you crazy. If you do so, just let it go a little bit.   Michael: Yeah, yeah. without violating any like HIPAA laws requirements, can you give us like your most outrageous family interaction story?   Isabelle: Oh, yeah. Okay, we had a family, this is the only family that we've ever asked to, hey, you're gonna have to move the senior, the only family in 10 years and 10 years in three homes. 10 years. That's pretty crazy. So okay, this family, um, they were very boisterous and loud. So they would come over and be like, tell our chefs get out the kitchen, we're cooking, and start cooking their traditional food, and there'd be like 10 or 12 of them and they would just like take over and start cooking and they would curse and they would scream, put on their music and be really loud and we were like, What is going on? Like, no, you're welcome to come over and join us for a meal but like you don't kick out my chef who I'm paying like, and they're like little coke, it's fine. You get out the night off but then they're like cursing and saying like, and it's like that's no that's not happening.   So we had a convo with them, hey, this can't happen anymore. You if you want to bring over food to share with everyone love it, love that. So, you know, then they do that but then it's you know, still the cursing the loud music that this it's disrupting the home and the other residents so we had to have more conversations with them and eventually say, this is no longer the fit for you guys, which sucked because the senior was precious and nothing was wrong with them like and so but it's like, like, that's just not going to fly in our house maybe in another house. That's fine but hear it was not a good fit and yeah, so that's my own. That's my one that experience.   Michael: Wow, that's pretty impressive and 10 years and three homes.   Isabelle: I know. Isn't that crazy?   Michael: That's awesome. Yeah, okay Isabelle. This has been so much fun. Anything else you think folks should be aware of to that should they should be aware of as they're interested in learning more.   Isabelle: I definitely want to share this live where you want invest where makes sense. If your market is not good to invest in right now or ever. Don't worry, you can do this remotely. 31% of RAL owners are remote owners. So it's totally possible and if you're remote, it does keep you more hands off because you can't just run over to the house if something's going on, you know, you're maybe a flight away or whatever and so you have to deal with things on Zoom or on the phone and figure things out that way so it does encourage you to be even more hands off if you are remote so I do I always like to share that especially I know you're in California and it can be a tough market so...   Michael: Preach to sabel I love it. This is the it's the perfect it's the perfect tagline for the real estate investor. Yes, we love it. We love it. If people want to learn more about you or RAL Academy where's the best place for them to do that?   Isabelle: RALacademy.com is a great place to learn more about us and RAL one on one if you want to chat with me more schedule a discovery call and I'd love to chat with you guys.   Michael: Amazing. Well thank you so much for this as well. This was awesome, really appreciate you coming on.   Isabelle: Happy to be here, thanks for having me.   Michael: You got it, take care.   Okay, everyone, that was our show a big thank you to Isabelle coming on super interesting insights and perspective and a very interesting asset class that I'm gonna have to go take a closer look at. As always, if you liked the episode, we'd love to hear from you a rating or review our big helps, and we look forward to seeing the next one. Happy investing…