Size has consistently mattered when it comes to evaluating the risk of a seniors housing community, which includes independent living, assisted living and memory care. Bigger communities are able to use scale to trim expenses, which could be huge if you have to pay your employees a little more to both compete with other seniors housing competition or businesses in other sectors. Bigger communities, which are favored by institutional owners, can also absorb the pain of a few empty units better than smaller communities.
That is not to say that smaller communities, with their “home-like” atmosphere and more personalized care, don’t have their advantages too. But the smallest communities, under 50 units, sold at the highest average cap rate of 9.3%, according to The Seniors Housing Acquisition & Investment Report, while the largest (over 90 units) sold at 7.35%. Those largest properties also include a number of high-quality, well-operating independent living communities that operated at 45%+ margins, sold for more than $400,000 per unit and were valued at cap rates below 6%. Meanwhile, the mid-sized communities between 50 and 90 units averaged around 8.0%. You can check out this statistic, plus nearly 50 more in the Report.