Pay up for a licensed home with residents in it, or take a plain house through licensing myself

Question

Two houses I looked at this month and they are almost opposites.

The first is a licensed 6-bed with all six beds filled. The seller wants a number that works out to roughly the house value plus about eleven times what the care side cleared last year. Everything is in place, staff, license, referral relationships with two discharge planners.

The second is a plain 4-bed ranch on a corner lot priced like any other house on that street. I would be the one applying for the license, hiring a manager, and filling beds from zero. Licensing steps and timelines vary a lot by state, so I would have to confirm mine in writing with the state agency before I put any dates on a spreadsheet.

Case for the licensed one: occupancy and the license are the two hardest things and someone already did them. Case for the plain house: I pay residential value for the real estate, and the ramp cost is at least mine to control instead of priced into what I hand the seller.

What I cannot work out is how to test whether filled beds stay filled once the seller and their name walk out the door. So for a first one, which side of this do people here land on?

karen_whitfield · Answer

The plain ranch, and I say that as someone who has never bought anything in a hurry. When you pay eleven times last year's care earnings you are buying a relationship business at full price, and relationships walk. Paying residential value for a house means your downside is a house.

dpatel_re · Answer

Test the filled beds before you decide anything. Ask for the resident roster by move-in date with rate and payer source, twelve months of it. If four of six moved in during the last five months at a discounted rate, you are looking at a fill push staged for the sale, not stable census.

The other number that matters more than the multiple is who the manager is and whether they stay. On a 6-bed the manager is basically the whole operating business. Get their compensation, their start date, and whether they have anything in writing about staying past close.

The plain house is cheaper going in and much slower going up. Model twelve months of payroll against beds filling one at a time and see whether you can carry that, because that is the actual question, not the purchase price.

Pay up for a licensed home with residents in it, or take a plain house through licensing myself

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