Build Wealth, Serve Families, Through Residential Assisted Living with Isabelle Guarino

[0:00] Welcome back to the REI Agent. My guest today is Isabel Guarino, CEO of the Residential Assisted Living Academy and one of the most recognized voices in a niche that most real estate investors have never seriously considered. Isabel carries on the legacy of her father, Gene Guarino, who pioneered the concept of doing good and doing well in the senior housing space. She is a two-time bestselling author and has been named a top influencer in senior housing. With America’s aging population creating one of the most durable long-term demand stories in real estate, Isabel makes the case that residential assisted living is not just a feel-good investment, it’s genuinely a compelling asset class. Isabel, welcome to the REI Agent podcast. Thanks for having me on the show.

[0:47] Excited to be here. Yeah, I mentioned this a little bit early before we got on here that it’s a really interesting topic because I think that with interest rates being higher, a lot of people are having to consider other things than just the straightforward long-term rentals to make ends meet. And so I’ve had a lot of fun talking to various people, sober living communities, like a kind of a rent by the room kind of thing, all sorts of different ways people are kind of making things work. And I think, you know, talking to the, you know, the sober living community person, it was clear that there was, you know, it worked better financially for him to do this, but there was also a deep passion behind it. And it was, is really serving the people that was kind of probably the most rewarding part of it. And I think that there’s probably a lot of overlap here. So tell us a little bit about, yeah, kind of how you got started. This obviously has been a family thing, but yeah, tell us a little kind of the origin story and kind of how you got started in this space.

[1:54] Yeah. My father had been a real estate investor pretty much my whole life doing everything from fix and flip wholesale, you know, multifamily, everything. And when my grandmother fell and broke her hip and the doctor called and said, Hey, she can’t go home alone. She needs 24 seven care. We kind of face the situation that many people do where it’s like, uh, what do you mean? Like one of us has to quit our job and go take care of her full time, or we get in home care, which is insanely expensive, or we put her into like a facility and it just felt like these options are not good enough. And so because my dad had that background in real estate, he started looking for alternative solutions and he kind of stumbled into residential assisted living. So a single family home, six to 16 seniors in a residential environment, but you’re getting the same care and probably better care than in a larger facility. And so he purchased his first existing one with the intent to move my grandmother in. Cause he’s like, Whoa, Whoa, Whoa, Whoa, Whoa. I’m not going to pay five, six grand a month for her to live in one of these when we could own it. She can live her free and we can cashflow 10 grand

[3:01] a month. So it really kind of started as a personal need. And then my father just having that financial foresight to understand that this is either going to cost us or we can be in control of the situation. And it really just bloomed like crazy from there. I like your dad. That’s a classic like entrepreneur, real estate investor. It’s the way to look at it. Yep. Whenever there’s a problem, there’s a solution where we can make money. It’s like house hacking, but for your mom. Um, yeah, no, that’s, that’s, that’s great. And it’s, it is true. It’s, it’s a huge demand. Obviously we’re, we’re getting the, you know, the, the baby boomers, um, in, you know, needing more and more, uh, facilities to, to, to house them. So it’s a huge need. Um, walk us through kind of what, uh, uh, a good property that would be like, uh, uh, you’re not building these new, are you, are you converting existing structures or what does that look like? There’s kind of four ways to get started because now I’m in this space, but also for the last 13 years, we’ve been teaching other people how to do it. So I’ve learned a lot along the way, but you can lease a home to use for this.

[4:10] You can buy an existing residential assisted living. So buying the real estate, buying the business, you’re up and running cash flowing day one, you can convert a single family or you can buy land and custom build. But if you are converting the single family, I know you were asking like, what are you really looking for? The major thing you’re looking for is the surrounding demographics that will make or break one of these deals. So we need to be in an area where the majority population is 50 years old and older, making two times the median income homeowners and college grads. And that is not the senior moving in that is their adult child. And we need to be in that affluent kind of older area because they don’t want to drive 45 minutes outside of town because it’s cheaper.

[4:57] They want to drive five minutes on their way home from work. So you really need to be in their area. And then logistically, it’s just a large floor plan, as much square footage as you can. A lot of bedrooms and bathrooms, you’re going to be doing a renovation anyways to add more, but the easier it is that you don’t have to do as much. So like 300 to 500 square feet per resident is a good rule of thumb. Okay. Okay. That’s good to know. And typically, are you seeing, I think I’ve heard maybe, are there shared rooms? And then there’s also like, is it both or what does it typically look like for, yeah, how many people can be in a five bedroom house or whatever? Yeah. So typically these seniors who are in private pay, residential assisted living, they don’t want to share. They want a luxury upscale home. So you’re going to take that maybe six bed, five bath and convert it to be a 10, 10 bathrooms are okay to share. They don’t all need their own bathrooms, but even if you converted it to a 10, five, still you are doing some renovation to a property to get it where you want it to be. So even though the state allows you to share and

[6:04] you will find these homes with shared bedrooms, you’re going to get a lot lower rates. And it’s just more work for you to really market and sell that bed because people do not want to share at this point in life. That makes sense. I don’t blame them. Let’s go back to college. And when we’re older, we do not like sharing and in the middle, we might not like it either, but we just zip our lips about it. Yeah. Yeah. Now what about stairs? I mean, like, is that something that I would imagine most large homes are going to have stairs? Yeah. If there are stairs, you’re going to need to add in a residential elevator, which might run you anywhere from 50 to 150. Right. But it’s a one time, you know, investment that maybe opens up an entire second level that now is going to bring you in a whole lot more income.

[6:52] So it can be worth it if the property, you know, if you cannot find any ranch style homes in your market, but I have never been into a market where there’s not one ranch style home. There’s definitely always one around. Yeah. Yeah, for sure. It’s just the ones that are large enough. Like, I mean, that’s, you know, to, to really accommodate, that’s, it seems like a pretty, pretty large ranch. Right. I mean, and, and most of them would have basements too then. Right. I mean, so, um, depends on your market. You know, we teach this in all 50 States. So I have students everywhere. Some do, some don’t. It just really depends on your market. But if you’re taking that large luxury home, you’re doing that renovation anyways, to really make it what you want. So we’re never going to find traditionally a 10, 10 on the market, but you can always find something that’s 6,500 square feet and convert it to be whatever you want it to be. Yeah. Okay. Yeah. That makes sense. Um, yeah. So what, what do you find a lot of, is it, is it pretty even as, as far as when people are wanting to get started in the space as to how they start, which direction of the four that you mentioned? Um, or is that

[7:56] kind of, uh, depend, like, do you see people gravitate towards more, one more than the other? There’s a lot of, it depends on that. If you’re going to buy an existing care home, right? There’s markets that have a lot more than others. For example, here in Arizona, where I am, there’s 3000 group homes in the one County I’m sitting in. So there’s plenty for sale. I could probably find you five listings in the next 10 minutes if you wanted to, versus you go to, you know, New Hampshire, there’s three of these in the entire state. So it’s going to be a lot harder to find an existing one for sale. So that one is kind of market specific when it comes to leasing a home for this, right? Someone else bought the property renovated it for assisted living in there, leasing it to you. Who’s going to run this business in the home. That really where people kind of enter who say, I don’t have money and I don’t have the real estate know-how to buy and reno. So I’m, I really want someone who kind of fills in that blank for me. Now, when it comes to converting a single family or custom building, that’s really just on your comfortability with renovations.

[9:02] Some people have never done a ground up custom building that freaks them out. And so they’re like, no way I can, you know, add bedrooms and bathrooms to something that exists, but doing a full build, that’s a lot. So it’s really kind of personal preference, market preference, and then your financial preference. I could see too, you know, there being people that like, I could see myself, for example, if I had a large home, I was like, what am I going to do with this thing? Like, maybe I found one that to flip. And I could almost see, okay, well, what if I do, do the renovations for this and then offer it to lease to somebody who wants to run the business? I don’t know if I really want to do the business. That’s kind of like maybe another even angle here, right? Absolutely. Yeah. I mean, walk us through a little bit of the operating the business side here, because it certainly isn’t the same as having a long-term tenant traditional rental. Yeah. On the operation side. So you, the real estate investor, owner, operator of the business, you’re not living in the home, working in the home, being a caregiver. You’re not a doctor or a nurse,

[10:08] none of that, right? You literally own this business. And so what do other business owners do? Well, they do weekly meetings with their teams to make sure that things are afloat. They’re checking in on KPIs and marketing efforts. They’re making sure that the PNLs look right. That’s exactly what you’re doing in this space. So how we show people to enter into this is to obviously create that business, hire the staff, create your policies and procedures and your KPIs, and then really run and manage it as a true business. So my homes are about 45 minutes from where I live here. I visit them maybe twice a year. And I spend about five hours a week virtually on zoom with my administrator really running the business. And so that’s what we show people how to do now, just because the owner’s hands-off doesn’t mean it’s a hands-off business. It’s a very hands-on business, but that’s what the licensed caregivers are doing with the seniors, cooking, cleaning, caregiving, and laundry service. The licensed administrator in the real estate world, it’s kind of like our PM, our property manager. They run all of the hiring, firing, training,

[11:12] onboarding of your staff, as well as your marketing to fill those beds with the seniors. So they’re doing kind of all of the day-to-day ops so that you can kind of stay in that owner’s box, working on, not in the business. Yeah, I like that. That’s really interesting. I mean, so that’s definitely not the way you’ve run it. And I would imagine there are some people that are going to be maybe a little bit more involved. Like you said, do you have like a administrator that, so that runs like all of them kind of for you that you meet with? Is that how? Yeah. And most people, you are correct. 80% of this industry is hands-on. We are kind of the new age, the new wave people saying, you don’t have to do that. There’s another way. I promise it’s better and it’s different. And people kind of hate me in our industry for that because for a long time, they’ve been saying that’s impossible. That’s impossible. If you own a business, you have to work in it. You have to be hands-on. And I’m kind of out here being like, no, you don’t.

[12:10] I’m doing it in thousands of my students are literally living in other states. I’ve got students who live in RVs and have homes in six different states. Like you do not have to be hands-on. You get to do whatever you want in every single business. If you build it around you, guess what? It’s around you, baby. But if you don’t want to be in the day-to-day, then you just build systems and follow the systems. That’s it. It’s just like everything else. Yeah. I love that. I think one of the ideas that concepts that I write about in my book and talk about on the show is Robert Kiyosaki. I think he might’ve been the one that created it, but he at least talks about the cashflow quadrant. So you’ve got being employed, you’ve got going into the self-employed world. So agents, getting into that self-employed world is often a huge, huge thing. It’s really difficult to break out and feel like you’re just completely self-reliant. And that can be a big challenge. But I’m encouraging us to also start working on the investment side of things and the business owning side of things, which is on the right side of the quadrant. And when you’re investing, you’re leveraging money.

[13:17] You’re leveraging money to create more money. And obviously we understand that in stocks and that kind of stuff in real estate. But in the business world, you’re leveraging other people. And I think that this is kind of a cool, unique way of checking both those boxes in real estate. And that’s where you can really truly start carving out that freedom that a lot of people want to feel, that financial freedom. And that’s awesome that it’s possible in this business. Absolutely. Truly, truly it is. Yeah. Yeah. So what would be some things that, you know, somebody considering this type of investment should really know? Like, I mean, is there like a, don’t do this unless you understand this or, you know, is there anything like that?

[14:05] Yeah. I mean, there’s a reason why we teach and educate in this space. It’s because there’s a lot to learn before you get in. It’s definitely not something that’s like, let me just take a whack at it. Like, no, you really should learn everything, single thing you need before you get started. But I will say one of the biggest mistakes people make upfront in this business and any business is under capitalization. So for us, you know, you’re going to need the money for the real estate, the renovation, the carrying cost, because you’re not cash flowing day one, your furniture, fixtures and equipment, and you need to get paid throughout this entire project. You can’t just go no paycheck the entire time. So an SBA loan, 7A or 504 will cover that entire cost. And so that’s a beautiful way to get started, but you really need to know and understand how to run those numbers and make sure that you don’t have to go back to your lenders or your investors to say, whoops, I miscalculated and I need more. That’s like the kiss of death in any, you know, investing opportunity. So you have to have to have to really understand the numbers. You know,

[15:11] a lot of investments, people try to make it an emotional decision. They fall in love with the house. They fall in love with an idea. It is not emotional. It is a literal numbers decision. If the math is math and great, if it is not run away, like it has to be about the math, that’s it. Right. So undercapitalization upfront is one of the biggest mistakes that people make in this industry by far. Yeah. I would imagine that there, especially with renovations and new construction, there would be also a lot of, it’s going to take longer than you expect or longer than they say it’s going to take. Always, right. Always twice the price and twice as long. You never know. So it’s better to just bake it in and go back to your investors or lender and be like, look, I can pay you back earlier. I can pay you back more than we projected than to ever have to go back and have to ask for more. Yeah. Yeah. Totally. That makes sense. Um, yeah. Uh, so when, when did you purchase your first one? Um, I know that it’s been a family business, but like, did you break away from your dad doing it and buy one on your own or what would that look like?

[16:15] So that first one was with the intent to move my grandmother in. She passed before we could move her in, but we kind of fell in love with this industry. And I started working with my dad right after that. It was, I was out of college. I had a couple of jobs, but he really needed support. So I came by his side. We then purchased two more that we renovated to become RALs. And now we’ve invested in over 47 across the country. My father passed in 2021. Um, and we had started this business probably 2013 ish. So it’s been a minute, but in 2021, when he passed, I kind of took over all those businesses as well as, you know, our, we, we run the nation’s largest association on this entire topic. The nation’s one and only conference on this topic. We have our Academy. Uh, you know, I’ve written books on it. I host the number one assisted living podcast in the nation. So we’ve kind of really blown it up over the years. So I have those three, we’ve got all these investments. And then we’ve taught thousands of people how to do this over the years, but it’s always stayed a core family business because that’s what it’s about at the end of the day. It is about that family legacy

[17:21] and being able to pass this from generation to generation, which is unheard of in a lot of other family businesses. So I’m really proud that we’ve been able to have that transition, um, with, with little to no handoff, you know, he passed suddenly. So there was no conversation about what happens, you know, who gets this, who gets that, but everything transitioned seamlessly. Praise God. Yeah. Well, sorry to hear about the losses. Um, but that is a beautiful like family legacy that I think, you know, people aspire to have for sure. Um, what, what, what, what does it look like to, to sell? I mean, you mentioned that you could find, you know, five in your area pretty easily. Um, what does it look like to sell this typically? And cause I mean, I think part of the investment thing is, you know, we’re building up equity. How do we value this? Is it valued like, um, you know, a commercial thing would be with cap rates or is it, um, you know? Yeah. So tell us a little bit about that. Yeah. You do have to be a commercial agent to buy and sell these basically, but we actually have a course on that showing agents how to buy and sell these because it is a huge

[18:25] opportunity for them to 10 X their cashflow. So the business is valued as two to five times the EBITDA, their earnings before interest taxes, depreciation, and amortization. And the real estate’s worth what it’s worth, right? You’ve done renovations to it. It’s going to look a little different, but it will never be sold as a single family. Again, it will always be sold as hopefully an existing residential assisted living worst case as a home that’s going to be used for some form of group housing. If the person ran the business to the ground, then the business has no value, but that home would be kind of marketed as a group housing opportunity. So yeah, but that business side is where really the cashflow starts to come in for the agents because this isn’t just, you know, a $2 million home. It’s a $2 million home plus the business and they get to sell it kind of packaged together. And so that’s where that opportunity for income really grows for a lot of agents right now. Yeah. And it’s also kind of, you know, so you have, uh, two ways of appreciating, uh, your asset with your, the owner, right? I mean, so you can, you can, you know, obviously the real

[19:31] estate over time will, will go up in value. Um, historically it has at least. Um, and, and then you have the business. Uh, so like if you’re operating the business, you know, like, well, um, then you’re going to see better results from it. I would imagine then as well, like if, if somebody was interested in, in buying multiple, um, I know that in, in various businesses, like if you, if you achieve X amount of business a year, like you’re the amount that your, uh, business is worth, uh, multiplies at a different rates. Like if somebody were to buy, you know, multiple of these and want to sell them as like a package that that could possibly be a thing that they could work towards as well. Right. Yes. Yes. And, and it definitely brings in a whole lot more income.

[20:14] We have a student who got started with us, I think in 2019 and they’re on home number 26. Wow. Their goal is to have a hundred package it up and sell it to the hedge funds. And I often, I’m speaking with family offices who, you know, they would love to get investing in this space, but onesie twosie is just not enough. They do want to see the packs of 50, the packs of a hundred, where they can just boom, make that large, you know, multi, multi, multi-million dollar purchase and go from there. So there is definitely lots of ways to kind of do this, whether you want to build up a portfolio and have a huge sellout, or maybe you just want to have one or two of these to cashflow well for you, hold the real estate and have a place for your own loved one. If they ever need care and assistance, I mean, reality is we’re all getting older or we know someone who is right.

[21:05] And you know, we’re all going to need care and assistance, at least 70% of us. Well, so if the odds are that 70% of your mom, your dad, you know, your partner’s mom, partner’s dad, you, your partner are going to need this. Probably one of you, at least if not more of you are going to need this and you’re either paying for it or you could own the place where they could go for free. So to me, I’m like, everyone should have one in their portfolio, no matter what. But if you really want to go crazy, there’s a lot of opportunity down that path as well. Yeah. Yeah. That’s interesting. You’re getting my brain, my brain turning. Yeah. I mean, like it’s, it’s true. Like, I mean, I think, you know, we all, and it’s also, I would imagine there’s not, it’s not just elderly, right. I mean, there’s other people that need to have, like, if there’s like a paralyzed accident, like there could be younger people that would need assisted living as well. Right. Is that also in this umbrella? Yeah. So group housing is the umbrella. And then there’s probably 500 types of group housing. Like you mentioned in the beginning, clean and sober, pads, shared living.

[22:12] A lot of times there’s like, you know, when people come out of prison, they need somewhere to go, battered women, foster kids who’ve aged out of the system. I mean, there’s a million ways, Parkinson’s disease, rehab. I mean, there’s so many, we focus on one thing and one thing only senior housing, residential assisted living, because the numbers are so in our favor, not that they’re not in all these other categories. They definitely are, but you know, we’re currently 1.3 million beds short, and we’ve got 76 million seniors coming into this market. The wave kind of hits the shore, the silver tsunami hits the shore in the next four years. So there’s not enough money in the world to be able to build these beds fast enough for this coming need. This is going to be a mega crisis in our country, not only because there’s not enough beds, but there’s not enough staff and there’s not enough money to even fix this. So what’s going to happen? Well, when the supply is low and the demand is off the chart, the price, the cost of care just goes tick, tick, tick, tick, tick. It’s already gone up over 84% over the last 20 years. And it’s projected to just skyrocket over these next 20 years.

[23:25] So it’s going to become whoever can pay can stay. And everyone else is going to have to figure out another solution because caregivers is going to be one of the hottest things that people are looking for wanting the best of the best. And let’s be real. Young Americans are not thrilled about becoming caregivers to elderly people. And right now, 80% of the industry of caregivers are immigrants from other countries. And, you know, everyone can believe whatever they want to believe politically. That’s not, I’m not here to argue anything, but if we don’t have that funnel coming in legally, of course, but we need that funnel coming in to help us with this mega problem that we have. And so there’s really kind of a lot of economic things at play in this industry that make it a really fun one to watch. And also a fun one for me to be positioned for, because I’m, I’m in that perfect position where it’s like, got the brand, got the reputation. I’m ready to go. Now, people who want to get in, in 15 years, you’re going to be one in a million. Everyone and their mom’s going to want to get in, you know, right now we’re kind of one of the only people talking about this,

[24:31] bringing it out, but I’m pretty sure you’ll have lots of guests talking about this in the future. Yeah. I mean, like you just outlined again, why you said everybody should have one, like if you have parents and that kind of thing to, to, to the need to have care in the future. Yeah. It’s going to be more and more challenging. That’s really, it’s a really good point. What, what other golden nuggets do you have for our listeners today? You know, I would say that if you’re listening and you are new to real estate investing, don’t feel like, Oh, I need to start at the bottom. I need to learn fix and flip. I need to learn wholesale and then this, and then that, and then I can get to these, you know, bigger, better cash flowing opportunities. Why jump right to the top. There’s people who will teach you right at the top, what to do, how to get involved. It’s just a couple extra zeros. There’s literally no difference between you and everyone else who I teach how to do this opportunity. Do not let your brain stop you from your success. Do not feel like you need to work your way up. No, no, no. Find an opportunity

[25:32] that calls to you that you’re excited about that interests you and go for it. Go get educated and go for it. I love it. I love it. Now, uh, what about a favorite book? Um, anything that’s fundamental that everybody should read, uh, or just one that you’re currently enjoying? You know, there’s so many amazing books. I look to the sides of me because that’s where my bookshelves are, but the one that I’m really liking right now, um, is who, uh, who not how, uh, I’m sure you’ve read that one. So great. And, and especially for agents listening, because a lot of times we do think it falls on us. We think it falls on, you know, we have to make it happen. And it’s like, Nope. As soon as you can really break free from that, you can really change your life. And so I, I recommend everybody reads who not how.

[26:16] Absolutely. It talks about, yeah. I mean, it’s, it’s talking about that, like, you know, business quadrant as well. Right. Like I mean, like that’s a classic. Um, so absolutely. Um, and, and then you wrote a book, uh, right. Um, what, what’s that and how can people find you on websites and social media? Yeah, a couple of books, but my newest one is assisted living revolution. It’s kind of like a chicken soup for the soul fiction book about assisted living and families who are going through those situations and kind of the choices that they make and what happens to them. When a loved one needs assisted living, it’s a really great book based on the thousands of stories that I’ve heard over the years of people going through this exact situation. So assisted living revolution, that book, and so many other resources are available at RAL101.com.

[27:04] You can schedule a call with me or my team. There’s webinars, books, all sorts of stuff. So RAL101.com and you can follow us on social media at RAL Academy on any platform that you like. Awesome. Well, thank you so much for being on the podcast. It was a lot of fun talking to you and it’s really eyeopening. And I think you’re right. I think we’ll be hearing much more about this industry. Thanks for having me. Thanks for listening to the REI agent. If you enjoyed this episode, hit subscribe to catch new shows every week. Visit REIAgent.com for more content. Until next time, keep building the life you want. All content in the show is not investment advice or mental health therapy. It is intended for entertainment purposes only.