Underwriting an RAL exit, a multiple of care earnings or the value of the house as a house

Take a 10-bed residential assisted living conversion. The exit assumption tends to do more work than anything else in the model, so it is worth laying out how the two approaches diverge. Version A is the real estate exit. Hold the house, and at year seven value it as a large single family home in that submarket with an adjustment for the conversion work. Some of that work helps a residential buyer, wider doorways and extra bathrooms. Some of it hurts, nurse call wiring and a bedroom count that reads institutional. This is the conservative path, and it ignores the operating business built over those years. Version B is the business exit. Value it as a going concern, care earnings times a multiple, sold to a regional operator or a small fund. That is how the trade actually happens in this sector and it produces a much larger number. It also assumes a buyer exists in that market at that time, that the license transfers or the buyer can get their own, and license transferability on a change of control varies by state and is a question for a healthcare attorney in that state. Version A makes deals fail the screen. Version B makes almost anything clear it, which is reason enough to be suspicious of it. The honest terminal value line usually blends the two, weighting toward Version A unless a specific buyer pool and licensing path can be documented.