Real estate investors are flocking to the senior housing and care sector. PwC’s Emerging Trends in Real Estate report predicts that investing in senior housing will continue to be one of the best investment and development opportunities for years to come. A recent survey indicates that investors are now more inclined to invest in independent living units, assisted living facilities, nursing homes, and long-term care facilities. Senior housing properties present investors with profitable investment opportunities in the coming years.
In this blog, we will discuss why is it a great investment and why is it becoming investors’ favorite.
Why Is It A Great Investment?
- Longer life spans, a growing number of nuclear families, and swelling wealth levels are the driving factors for the increasing rate of a senior housing community.
- There are an estimated 25 million Americans over the age of 75 and 9.3 million over 85, a common move-in age of a resident to seniors housing.
- Today’s retirees are the richest generation in American history with 80% control of all personal wealth in the United States.
- Many Boomers are firm in their desire not to leave the homes where they worked and raised their children but there are retirees who for whatever reason do not wish to remain in their homes.
These factors are effectively opening the proverbial floodgates for senior housing investments.
Reasons Why Is Senior Housing Becoming Investors’ Favorite:-
Rental Value
Almost all care types experienced an increase in rent. In terms of rental growth, assisted living recorded the fastest year-over-year increase, followed by independent living. As indicated in Aging.com’s report, two million housing facilities will be necessary to provide adequate living space for seniors by 2040. As the demand increases, rental prices will rise correspondingly.
Increasing Demand
As Baby Boomers are retiring in greater numbers, senior housing properties are in high demand. As the largest demographic among Americans, Baby Boomers will need care and housing in the future. With the Baby Boomer generation aging, the number of Americans 65 and older will reach 79.2 million by 2035. Hence, senior real estate properties continue to be in great demand.
Higher Returns
- As reported by the National Council of Real Estate Investment Fiduciaries (NCREIF), the 10-year total return for senior housing real estate was 10.52% – far exceeding the overall property index of 6.09% and apartment total returns of 6.10%.
- Senior real estate investments generated 3.73% of total returns in terms of capital appreciation, compared to 0.54% for the overall property index and 1.03% for apartment buildings.
- Senior housing also produces higher total income returns (6.61%) than both the property index (5.53%) and apartments (5.20%).
All these numbers prove that senior housing investments generate great returns and why savvy real estate investors are capitalizing on this sector.
Recession-resistant Asset
The resiliency of this sector is a major benefit of investing in senior housing real estate. Senior housing investments go through their own cycle just like any other investments. In contrast, their demand is less affected by employment changes and changes in gross national income (GNP).
In spite of the overall economic slump, senior housing remains a strong asset class. So, investing in senior housing properties can actually benefit you, even if the location is not ideal!
Conclusion
Investing in senior housing is a great way to diversify your investment portfolio or to get started in real estate investing. It’s also a low-risk investment that you can always rely on to yield higher returns.
As Baby Boomers age, there will always be a need for senior living properties and there is plenty of room for growth and new developments due to the shortage of supply. Therefore, NOW is the time to start investing in senior housing.
Prashant Kumar, CCIM
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