My whole pre-opening budget for a 6 bed, please tell me which line is wrong

The line most likely to be wrong is working capital, and it's wrong because two of your other assumptions feed into it.

Start with coverage. Six licensed beds in most states still requires someone awake and on site overnight, and the required caregiver hours per resident day is set by state rule and by each resident's assessed care level. That means your labor cost is close to fixed the moment resident one moves in. Take three shifts a day at 8 hours, one caregiver each, and that is 720 caregiver hours a month before any overlap for showers, meals or med passes. At 18 an hour with payroll taxes and workers comp at roughly 15 to 20 percent on top, you are near 15k on labor alone. Your 15k monthly figure appears to have no food, no utilities on a house running 24 hours, no liability and property insurance, no supplies, and no mortgage payment. Rebuild it line by line and I'd expect something between 22k and 28k a month at low census, depending on wage rates in your market.

Second, fill pace. Both answers you got are plausible because they describe different things. Six weeks happens when an operator opens with a waiting list built from discharge planners and placement agents they already had relationships with. Nine months happens when marketing starts after the license arrives. Whichever you assume, the whole model turns on it, so write down the referral sources you have today by name and count.

At 6 beds and 4,600, full revenue is 27,600. Compare that to your rebuilt burn and you'll see how narrow the gap is at 100 percent occupancy, which is the real reason the runway line matters more than the conversion line. Confirm insurance and licensing costs in writing before you fix any of these numbers.

4,600 is a market assumption, not a national one. Rural rates in my area top out closer to 3,400 to 3,800 private pay, and the pool of families who can write that check monthly for four years is small. Where are you, and is that 4,600 what comparable homes charge or what the pro forma needed?

The line nobody's priced is you. 395k of capital plus a full time job running a care business, and the pro forma has no owner salary in it. If you paid a market manager to do what you're about to do, that's another 55k to 70k a year, and any buyer of this house later will underwrite it that way. So either your return includes your unpaid labor, which is fine as long as you know that's what you bought, or the deal doesn't clear.

I look at passive positions in this sector and the first thing I ask is who the operator is and what they get paid. Answer that for yourself.

120k of conversion on a house that isn't already set up for this is light in my experience. The items people underestimate: the electrical panel almost never has capacity for the alarm, the call system and a second laundry, so you're looking at a service upgrade. Egress windows mean cutting foundation if the den is below grade. ADA bathrooms fail on turning radius, not on grab bars, so you often end up taking a wall out rather than remodeling in place.

Also, ask the building department whether your work triggers a sprinkler requirement at your resident count. That answer varies by state and by which code year your jurisdiction adopted, and it's a 35k to 50k swing that will not fit in your 120k.

Two paper items that belong in the pre-opening budget and are missing.

Insurance. Once you're delivering personal care you're buying professional liability alongside general liability and property, and carriers price it off resident count, care level and whether you accept residents with dementia. Get a real quote now, not a placeholder, because a few carriers won't write a first time operator at all and the ones that will want to see your policy manual.

The loan. Ask your lender in writing whether the house being converted to a licensed use is permitted under the loan documents and what the debt service covenant is if there's one. A residential loan on a property you're about to license as a care facility is a conversation to have before closing, not after. Terms differ by lender and by state so get it on paper.

How do people normally fund the 395k? Everyone I read about seems to have partners, and I don't understand where the split falls between the person putting up money and the person running the house.

@sable the version I've seen described is one entity owning the house and a separate entity operating, with the operator paying rent. The money person tends to sit on the real estate side because it's the part with collateral.

tally, I run small multifamily and the thing that stops me cold here is the burn. My worst month on a 6 unit is a vacancy and a water heater. Your worst month is 25k of payroll against 9,200 of revenue with two residents. I don't have the stomach for that, and what I'm flagging is a stomach question, not a math question. The math might well work.

I came in here looking for income without a second job and this thread has cured me. This is a second job with a license attached.

What's your exit? If you fill it and stabilize, who buys a 6 bed licensed home in your market and at what multiple, and does the license transfer to them or do they reapply? In most states the buyer files a new application, which means your sale can hinge on their approval timeline. That's worth knowing before you spend 120k making the house hard to sell to a family.

How did you find the house, and what were your must-haves? I'm building a list and single story with a wide hallway and a big lot seems to be what everyone says, but I'd like to hear the criteria that actually eliminated houses for you.

The version of this I'd consider is owning the house and leasing it to an established operator at a rent that covers debt with room to spare. You give up the care margin and you also give up the 25k a month payroll risk and the survey visits. I don't need the whole return, I need the part that keeps working when I'm not paying attention.

@verity that's a real option and the trap in it is that good operators in a supply constrained market don't need your house, and the ones who do need your house are the ones you should worry about. I looked at this sector because my ceiling turned out to be management capacity, and RAL solves nothing there. It's the most management-intensive thing I've priced.

tally, if you go forward, hire the administrator before you open, not after census three. The person who fills beds is usually the person with the discharge planner relationships, and that person has a salary.

Running a small team, the number that ruins months is overtime from call-offs. Six caregivers on paper, two quit in month four, and you're paying time and a half or working the floor yourself. Put 8 to 12 percent of payroll in the budget as an overtime line and a real recruiting cost per hire. Mine runs about 900 a hire once you count the background check, the onboarding hours and the shifts someone covered while I trained them.

Does anyone put in a generator on these? If you've got residents on oxygen concentrators, a two day outage seems like a serious problem, and a whole house standby unit installed is 12k to 18k around here. Wondering whether that's a requirement anywhere or just prudent.

I built your burn out because I couldn't stop myself. Using 18/hr, 720 hours, 18 percent burden: 15,300 labor. Food at 12/resident/day scales with census so call it 700 at two residents. Utilities 900. Insurance 1,100. Supplies and incontinence products 400. Mortgage on 360k at whatever your rate is, say 2,300 principal and interest, plus taxes and insurance escrow. Admin, software, phone, marketing 800. That's roughly 21,500 a month with two residents in the house.

Revenue at two residents is 9,200. Gap of 12,300 a month. Your 90k of runway is seven months of that gap, and only if the gap closes fast. Fill one bed a month from opening and you cross breakeven somewhere in month five or six with nothing left. Fill one bed every two months and you need roughly double the working capital you've budgeted. I'd carry twelve months, not six.

@windlass that's the clearest post in the thread. What it shows me is that the return here comes from the care business, and the real estate is collateral that happens to sit underneath it. Full house is 27,600 revenue against maybe 24,000 of cost at that census, so the margin lives entirely in whether rate increases outrun wage increases.

Which is a different investment than I thought I was reading about when I clicked in. tally, I'd want to see one full year of somebody else's actual operating statements before I committed 395k to this, and I'd ask them for the census by month, not the annual total.