Seller's payroll number on a 10 bed doesn't match the schedule they handed me

Your reconstruction is the right shape and one input is off. 1,216 hours a month is correct for that posted schedule, and the posted schedule is a coverage plan, not a record of hours paid. Get the timekeeping export for twelve months and total the actual hours. My guess is you'll find something like 850 to 950 paid caregiver hours, with the balance covered by the couple, and possibly one shift a day where the second daytime aide only works six hours.

On pricing their labor, don't negotiate the price down by the value of their shifts. Underwrite the property at replacement cost of management and see what you'll pay for that NOI, then decide. Two people covering roughly 300 hours a month between them at 19 plus burden is about 6,800, and an administrator at 62k is 5,200 a month with taxes. You can't add both without double counting, since the administrator absorbs some of those hours. My number would be somewhere near 9,000 to 10,000 of added monthly cost, which lands you close to your 8.5 cap.

One more thing your P&L is missing entirely. There's no repairs and maintenance line and no replacement reserve on a house that ten people live in around the clock. Carpet, flooring, mattresses and wall damage in these run harder than any apartment I've owned. Put 1,000 a month in and rerun.

A 15.9 cap on a stabilized full house in the sector everyone says has a bed shortage should be the first thing that makes you slow down. If those numbers were real the house would have sold to another operator without ever hitting a listing.

Also ask what the blended rate is made of. Ten residents at 4,790 average can mean ten residents at 4,790, or it can mean three at 6,500 with high care levels and seven at 4,100. That matters because when the high acuity residents leave, the replacements come in at the base rate and your revenue drops without a single empty bed. Ask for the rate roll with care level and move-in date for each resident.

I have no experience with this, so tell me if this is a dumb question. If the owners are the staff, isn't the license tied to them somehow? Does the buyer just inherit it?

@ember in most states no. The license goes with the operator and the address, and a change of ownership means a new application, with the timeline set by the state agency. Some states allow a provisional or transitional license so residents aren't displaced, some don't. That's a question for a healthcare attorney in the state the house sits in.

rigging, the thing I'd add to sextant's list is average length of stay and the move-out log for twenty four months. Ten beds full today tells you nothing about turnover. If average stay is 14 months you're refilling seven beds a year and every vacancy costs you three to six weeks of rate plus a marketing spend. Build a vacancy allowance of 6 to 8 percent into your revenue instead of running 100 percent occupancy, because their P&L clearly does. That alone takes another 3,000 a month off, and your 8.5 cap becomes something near 7.5.

The document that settles this is the timekeeping export cross checked against the state's staffing records. Assisted living homes in most states have to keep daily staffing logs available for survey, showing who was on shift and their credentials, and that log will name the owners on shifts if they worked them. Ask for twelve months of those logs plus the quarterly wage filings. If the logs show the couple covering 300 hours a month and the filings show 19,100 of wages, you have your answer in writing and there's nothing left to argue about. Also request the last two survey reports and any plan of correction, because deficiencies tied to staffing ratios tell you the same story from the state's side.

On pricing it, I manage properties for owners who are absentee by definition, and what I've learned is that the replacement cost of an owner-operator is always higher than people model, because you're not just replacing hours. You're replacing the person who answers a family at 11pm and who knows which aide can't be scheduled with which other aide. In practice that's an administrator at market salary plus a real overtime line, because a hired administrator will not work an unpaid double when someone calls off. I'd carry 62k salary plus 8 percent of caregiver payroll as overtime, which is roughly another 2,100 a month on your numbers.

Run it that way, add sextant's maintenance reserve and ledger's vacancy allowance, and you get an NOI closer to 7,500 to 8,500 a month. At 1.55m that's under a 6.5 cap for a business you'd have to learn to run. That's the number to negotiate from, and I'd say so plainly to the seller rather than picking at the payroll line, because the payroll line isn't the problem. The absence of a management structure is.