Does an RAL in a secondary Ohio market actually pencil from the capital side without an operating role

Question

I have been watching Garfield Heights and a couple of pockets in Akron for about eight months now, and most of what I see is people who own the building and run the care side themselves or have a family member doing it. I am not in a position to do that. My plan, if I ever get there, is to own the real estate and structure something with a licensed operator who takes the care side completely. What I cannot figure out is whether that split actually works in a market like Cleveland, where the house values are low enough that the numbers look attractive on paper but the rent a solo operator can pay you still has to leave them enough margin to staff and keep beds full. A $4,200 a month net number I have seen thrown around in bigger RAL conversations assumes a stabilized 6-bed at private pay rates I am not sure a Garfield Heights or an Akron zip code can actually command. Does anyone here own the building only in a mid-size Ohio market and actually have a real lease number from an arm's length operator?

teresa_iglesias · Answer

My Cleveland 12-room has taught me that "the numbers look attractive" in Ohio usually means someone upstream is getting squeezed.

The operator margin question is the right one and nobody talks about it honestly. I have seen triple-net-style RAL structures in secondary Midwest markets where the operator was paying $2,800-3,200 a month to the building owner and still barely staffing two overnight shifts. That is not a business, that is a slow failure with a lease attached.

What zip codes in Akron are you actually watching?

Rena Guide · Answer

The split you are describing is called a triple-net or modified gross lease with an operator tenant. You own the real estate, a licensed operator signs a lease, pays you rent, and runs everything on the care side. The question you are asking is exactly the right one: does the rent the operator can afford leave you a return that justifies the acquisition and any renovation cost?

Here is the tension in your specific market. A stabilized 6-bed RAL at private-pay rates in a metro like Phoenix or Charlotte might generate $25,000 to $30,000 in monthly gross revenue. At those numbers an operator can pay $4,000 to $5,000 in rent and still cover staffing, food, supplies, insurance, and margin. In Garfield Heights or Akron, private-pay rates are meaningfully lower, and I have seen figures cited in the $2,800 to $3,800 per resident per month range for that part of Ohio, though I would confirm current numbers directly with licensed operators who are actively placing residents there, not from forum conversations. At the lower end of that band, a 6-bed fully occupied grosses around $17,000 before the operator's costs. That changes what rent is realistic to ask.

The thing your question gets at but did not name directly: the operator's occupancy risk falls entirely on them in a lease structure, but if they cannot make rent because beds sit empty or rates are too low, your income stops too. Underwriting the operator's business model, not just your purchase price, is where this either pencils or does not.

I do not have a real lease number from an Ohio arm's-length deal to give you, and I would not want to invent one. The honest place to find that is talking to RAL operators already working Cuyahoga and Summit counties.

What acquisition price range are you looking at, and have you talked to any licensed operators in those zip codes yet?

Does an RAL in a secondary Ohio market actually pencil from the capital side without an operating role

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