Senior Living Brokerage Process

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The Ultimate Guide to the Senior Living Brokerage and Transaction Process

By Scott McCorvie, CEO, Enhance Senior Living

About Enhance Senior Living

Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions by contacting us today.

If you like this news article, be sure to subscribe to the Enhance Senior Living Podcast. The show is on all podcast platforms including Apple Podcasts | Spotify | Amazon Music

Executive Summary

The senior living real estate sector represents one of the most operationally complex and capital-intensive asset classes within commercial real estate. Unlike traditional multifamily, office, retail, industrial, and other real estate sectors, senior living communities combine real estate, operations, regulatory oversight, and market reputation. As a result, successful brokerage and transaction execution requires specialized industry experience and knowledge.

According to the National Investment Center for Seniors Housing & Care (NIC), demographic tailwinds driven by the aging U.S. population continue to shape investor demand for senior housing and care assets. Institutional capital, private equity, REITs, family offices, and regional owner-operators actively compete for stabilized and value-add opportunities across the sector.

This white paper outlines the full lifecycle of a senior living brokerage engagement—from initial valuation through closing—while addressing confidentiality, operational sensitivity, regulatory oversight, and transaction structuring considerations unique to senior living.

Senior Living Property Types

A senior living broker may represent the sale of the following property types:

Active Adult / Lifestyle Living

Age-restricted communities (typically 55+) offering maintenance-free rental housing with social engagement and connection. There's typically an activities coordinator and the community amentities are geared towards the senior population. Dining is typically not included.

Independent Living (IL)

Monthly rental housing for seniors that want care-free housing with connection and engagement with other seniors. The services at these comunities typically include dining, housekeeping, transportation, and social programming. The difference between Active Adult and Independent Living is generally a dining room and commercial kitchen.

Assisted Living (AL)

These communities offer all the senior housing services of independent living along with the addition of nursing care. The nursing care includes support with activities of daily living (ADLs) such as bathing, dressing, and medication management. These communities are typically licensed and regulated by each state.

Memory Care (MC)

These communities cater to residents experiencing early to later stages of dementia and Alzheimer's disease. These communities are generally secured (to mitigate resident wandering and elopement) and offer specialized nursing care and programming focused on cognition improvement.

Skilled Nursing (SNF)

Licensed healthcare facilities providing 24-hour nursing care and rehabilitation services. These facilities are highly regulated and can funded through Medicaid, Medicare, VA, Private Insurance, and Private Pay sources of income.

Continuing Care Retirement Communities (CCRCs)

Also known as Life Plan Communities, CCRCs offer a full continuum-of-care (IL, AL, MC, SNF) on a single campus -- often structured with an entrance fee and ongoing rental fee model.

Summary

Each senior living community offers unique regulatory, market, operational, staffing, and reimbursement considerations that materially impact the valuation and transaction structure. Enhance Senior Living understands these intricacies and provides expert senior living valuation, brokerage guidance, and transaction support.

Understanding the Current Market Value Range

Determining the current market value range in any senior living community requires both real estate knowledge with operational experience, insight, and support.

Data Collection

The Owner provides:

  • Historical financial statements (typically 3 years)

  • Annual operating budget

  • Historical occupancy reports

  • Current rent roll

  • Previous payroll reports

  • Current vendor contracts

  • Regulatory/licensure information

  • Capital expenditure history

  • Debt financing documents

Broker Analysis & Valuation Techniques

The broker applies specialized senior living and commercial real estate valuation methods including:

  • Operational Proforma creation (typically 10 years)

  • Proforma support with expense comparables and industry benchmarking

  • Direct Capitalization valuation analysis

  • Yield Capitalization (Discounted Cash Flow) valuation analysis

  • Replacement Cost analysis

  • Comparable Sales analysis

  • Favorable debt financing valuation analysis

Senior living valuation drivers include:

  • Age, quality, design, and offered amenities

  • Unit mix, acuity mix, and unit sizes

  • Stabilized occupancy vs. lease-up scenarios

  • Competitive market performance

  • Revenue and expenses per resident day

  • Staffing ratios and current market wages

  • Metropolitan Statistical Area (MSA)

  • Local market senior demographics (65+ population trends)

  • Competitive supply pipeline

Presentation of Value Range

The broker presents:

  • Estimated valuation range

  • Comparable transaction analysis

  • Market cap rate commentary

  • Sensitivity analysis

  • Strategic positioning recommendations

The presentation and analysis is not a senior living appraisal but an informed market valuation range designed to guide pricing strategy.

Selecting a Marketing Strategy: Public vs. Targeted Process

Senior living transactions require careful confidentiality strategy and planning. Operational disruption from premature disclosure could impact occupancy, staffing, and reputation. The owner and broker should discuss if they prefer a public or targeted marketing campaign process.

Public Campaign

Characteristics:

  • Broad email outreach to broker’s full investor database

  • Increased visibility and competition

  • Greater likelihood of maximizing price

Tradeoff: Reduced confidentiality.

Targeted Campaign

Characteristics:

  • Limited outreach to vetted, qualified buyers

  • Higher confidentiality

  • Focus on groups with demonstrated ability to close

Tradeoff: Potentially fewer bidders.

Both processes begin with a high-level teaser and require execution of a Non-Disclosure Agreement (NDA) prior to sharing detailed materials.

Marketing Materials and Secure Data Room

Offering Memorandum (OM)

The broker prepares a comprehensive OM detailing:

  • Property overview

  • Historical financial performance

  • Operational summary

  • Management history

  • Market demographics

  • Competitive analysis

  • Capital improvement history

  • Value-add opportunities

  • Pro forma projections

The OM is reviewed and approved by the Seller prior to distribution.

Secured Data Room

Upon NDA execution, buyers receive access to:

  • Historical financials

  • Occupancy / Census reports

  • Competitive Surveys

  • Payroll and staffing data

  • Rent rolls

  • Operating Budget

  • Licensure documentation

  • Capital expenditure records

  • Property plans and surveys

  • Assumable debt documents (if applicable)

The data room enables buyers to perform underwriting prior to submitting offers.

Buyer Outreach & Offer Deadline Management

The broker actively manages the process by:

  • Presenting the investment thesis

  • Highlighting operational upside

  • Reinforcing offer deadlines

  • Coordinating Q&A between Buyer and Owner

  • Sourcing and providing any additional documents

Active engagement ensures maximum participation and clarity of expectations.

Initial Offers (Letters of Intent – LOIs)

Initial offers are submitted in the form of a Letter of Intent (LOI), typically outlining:

  • Purchase price

  • Deposit structure

  • Due diligence timeline

  • Financing assumptions

  • Management selection

  • Contingencies

  • Regulatory assumptions

  • Closing timeline

The broker analyzes each LOI not only for price, but for:

  • Certainty of close

  • Capital stack credibility

  • Senior living transaction experience

  • Management selection

  • Licensing capability

Second Round & Best and Final Offers

Often, a shortlist of buyers advances to a second round.

The broker may:

  • Facilitate property tours

  • Provide supplemental financial detail

  • Negotiate pricing and structure

  • Request “Best and Final” offers

Competitive tension at this stage often improves pricing and reduces contingencies.

Selection of Winning Offer

The Owner selects the preferred LOI.

The LOI is typically:

  • Non-binding (except exclusivity provisions)

  • Subject to execution of a Purchase and Sale Agreement (PSA)

The buyer is granted exclusivity for a negotiated period.

Negotiating the Purchase and Sale Agreement (PSA)

The executed LOI is forwarded to legal counsel.

Key PSA components include:

  • Representations and warranties

  • Deposit structure

  • Due diligence timeline

  • Prorations

  • Indemnifications

  • Closing conditions

  • License transfer contingencies

Negotiations typically occur through multiple redline drafts.

While the broker does not provide legal advice, experienced brokers offer insight based on prior senior living transactions.

Due Diligence Period

Upon PSA execution:

  • Buyer wires refundable deposit

  • Due diligence clock begins

Third-Party Reports

Typically ordered by lender and/or buyer:

  • Property Appraisal

  • Property Condition Assessment (PCA)

  • Phase I Environmental Report

  • Survey

  • Zoning Compliance Report

  • Regulatory Compliance Review

Operational Diligence

The buyer evaluates:

  • Staffing levels

  • Wage structures

  • Vendor contracts

  • Regulatory history

  • Quality metrics

  • Resident agreements

Senior living due diligence is significantly more complex than traditional real estate assets due to operational integration. Be sure to work with an experienced senior living broker that has navigated challenging due diligence environments and issues.

End of Due Diligence

At expiration:

  • Buyer proceeds or terminates

  • Deposit becomes non-refundable (subject to PSA provisions)

  • Transaction moves toward closing

This stage represents the final capital commitment.

License Transfer & Management Transition

In many states, closing is contingent upon regulatory approval and license transfer.

Regulatory Considerations

  • State health department approval

  • Certificate of Need (CON), if applicable

  • Background checks

  • Change of operator filings

Timing varies significantly by state and jurisdiction.

Transition Services Agreement (TSA)

If management changes:

  • Resident records transfer

  • Payroll transition

  • Vendor onboarding

  • Accounting systems migration

  • Staff communication

  • Family notification

Certain states mandate advance notice to residents and families.

Operational continuity is critical to maintaining resident, family, and staff satisfaction.

Closing

At closing:

  • Settlement statement executed

  • Funds wired via escrow

  • Title transfers

  • Management transition formalized

The transaction is officially complete.

Senior Living Brokerage Process Conclusion

Senior living brokerage requires a multidisciplinary approach combining:

Given demographic trends and capital market interest, a well-executed senior living brokerage process can materially enhance pricing, certainty of close, and transaction efficiency.

The senior living transaction process is not merely a real estate sale—it is the transfer of a living, regulated operating business serving vulnerable populations. Success requires precision, discretion, and operational experience.

By Scott McCorvie, CEO, Enhance Senior Living

About Enhance Senior Living

Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions by contacting us today.

If you like this news article, be sure to subscribe to the Enhance Senior Living Podcast. The show is on all podcast platforms including Apple Podcasts | Spotify | Amazon Music

enhanceseniorliving.com | seniorlivinginvestments.com | srgrowth.com |

Valuation of Senior Living

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The Valuation of Senior Living

Learn the proper valuation techniques to value any senior living investment

By Scott McCorvie, CEO, Enhance Senior Living

About Enhance Senior Living

Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions by contacting us today.

If you like this news article, be sure to subscribe to the Enhance Senior Living Podcast. The show is on all podcast platforms including Apple Podcasts | Spotify | Amazon Music

Senior Living Valuation Methodology

Senior living (senior housing) valuation is unlike any other commercial real estate asset, as the valuation and community value is largely based ‘market’ operational financial performance and business value. Unlike other real estate sectors, switching the property management (operator) can drastically change the financial performance and results. This does not happen in multifamily, retail, office, industrial, self-storage, etc. Therefore, strong ‘market’ operational knowledge, supported by industry comparables, is required to accurately value senior living. In this article, I’ll discuss the appropriate valuation methodology for any senior living community.

Business Valuation (Going Concern)

Since senior living valuation is largely based on the business entity operating within the real estate, the valuation is largely based on the income approach – or, the potential income the investor expects to receive given the purchase price of the community. In appraisal terms, this is referred to as the ‘going concern’ value — since the valuation is largely based on the business entity and business valuation.

Real Estate Fundamentals

Although senior living is valued as a business, traditional real estate fundamentals still apply. The individual market, market demographics, competitive supply, quality of the building / improvements, age, offered amenities, community design (unit mix, unit size, etc.), and site location all play into the overall financial performance and value. However, the operator’s experience, specific knowledge in sales and marketing, market reputation, staffing ability, and operational efficiency play a huge role in the overall valuation.

In all commercial real estate valuation, appraisers generally rely on three approaches to value – the income approach, the sales approach, and the cost approach. All three approaches to value can still apply to senior living. However, since most of the senior living is ‘for profit’ and purchased and/or developed for an expected return, the income approach generally receives the most weight in the valuation conclusion.  

The Income Approach

The income approach includes the direct capitalization and yield capitalization (discounted cash flow analysis) methods in estimating value. Both methods include projecting the cash flow (net operating income) over future years. The senior living community’s historical and budgeted financials are analyzed per department (per-resident-day) to create the go-forward financial projections (proforma). However, since the current operator may not be performing at market standards or operator equivalency, the proforma should be compared and supported to industry comparable data. If the operator is failing in certain areas or departments, go-forward adjustments should be made.

The Direct Capitalization Method

The direct capitalization method is most appropriate for stable or near-stable senior living communities, while the yield capitalization (discounted cash flow analysis) is most appropriate for new development or communities that expect large shifts in occupancy and income over future years. Both methods can be applied to any senior living community. However, the direct capitalization method is most used by senior living brokers and/or senior living investors that aren’t educated on yield capitalization methodology.

For the direct capitalization method, the value is based on dividing the expected Year 1 NOI (Income) by the market capitalization rate (cap rate), or V = I / R. The Year 1 Net Operating Income is projected from reviewing and analyzing historical / budgeted financial statements (supported by expense comparables) and the capitalization rate is extracted and estimated from industry surveys and comparable sales.

Capitalization Rate Extraction

Just as the value can be estimated and derived from dividing the NOI by the Cap Rate, the Cap Rate can be estimated previous sales — dividing the investor’s NOI from the Price / Value, or R = I / V.

The extracted capitalization rate indicates what an investor is willing to pay for the specific senior living community based on the expected Year 1 income. Since investors want a higher yield for higher risk, the capitalization rate also includes the expected risk of the investment. Therefore, the cap rate increases with acuity and age.

Active Adult has the lowest cap rates while skilled nursing has the highest cap rates. This is a direct correlation of the operational and litigation risk associated to the higher acuity. If you would like to know cap rate ranges for each acuity type, please contact me.

The Yield Capitalization Method

The yield capitalization (discounted cash flow analysis) includes projecting the Net Operating Income over a specific holding period (typically 10 years) with a reversion (future sale of the community) at the end of the holding period. The cash flow per year over the holding period, including the sale of the community, are discounted back to current dollars using a specific discount rate.

An appropriate discount rate can be derived from industry surveys and/or interviewing investor peers. But, in general terms, the discount rate is the overall annual return an investor expects to receive over the holding period (including the time value of money). Again, the discount rate includes the risk of the investment – since higher risk warrants higher reward. Therefore, the acuity, age, market, size, etc. all play into an appropriate discount rate.

The Sales Approach

The Sales Approach is generally given secondary weight in the valuation of senior living. This approach includes researching recent sales of similar senior living communities (similar location, age, size, and acuity) and dividing the sales price by the number of units or beds.

Since senior living sales are less prevalent than other real estate assets, and each community offers different acuity mix, unit mix, location, age, quality, and offered amenities, it’s more difficult to to find truly comparable sales and make comparable adjustments. However, adjustments should be made given superior or inferior aspects of each comparable sale to the subject property.

The reconciled value per unit should then be multiplied by the number of units at the subject property to derive a total value via the Sales Approach. Although this approach can provide an estimate of value, it’s generally used more to support the income approach of value. If the income approach value per unit is much higher or lower than recent comparable sales, the valuation variables, assumptions, and methodology should be reviewed.

The Cost Approach

The Cost Approach is most appropriate for new development and newly constructed senior living communities. This approach includes estimating the replacement cost of the community (including the land value, hard construction costs, soft costs, and developer incentive) and estimating a depreciation (effective age divided by the total economic life) to be subtracted from the replacement cost to conclude on an estimate of value.

Since senior living requires large capital expenditures each year, and investors generally purchase senior living for specific investment returns, this approach is given less weight in the final conclusion. However, this approach is appropriate to analyze new development and recently constructed senior living communities.

Senior Living Valuation Summary

Overall, senior living is unlike any other real estate sector – as the financial performance (and value) is largely dependent on the operational knowledge and operational efficiency. Therefore, operating experience, knowledge, and industry-benchmarking is required to provide accurate valuations. Since senior living is a business entity held in real estate, and largely purchased for an investment yield, the income approach is given the most weight. However, the valuation should be based on ‘market’ operations as adjustments to current performance could impact future value. Additiionally, all three approaches of value can be applied to reconcile a final value.

If you would like to learn more about senior living valution, or the current and/or future value of your senior living community, contact us and learn more about our investment solutions.

By Scott McCorvie, CEO, Enhance Senior Living

About Enhance Senior Living

Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions by contacting us today.

If you like this news article, be sure to subscribe to the Enhance Senior Living Podcast. The show is on all podcast platforms including Apple Podcasts | Spotify | Amazon Music

enhanceseniorliving.com | seniorlivinginvestments.com | srgrowth.com | generationalmovement.com

Improving Senior Living Operations

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How to Improve Senior Living Operations and Operational Efficiency

By Scott McCorvie, CEO of Enhance Senior Living

Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions and contact us today to learn how we can help you enhance senior living today.

Executive Summary

Senior living operators are under increasing pressure from rising labor costs, margin compression, staffing challenges, and heightened consumer expectations. While these industry headwinds are real, many communities have significant untapped opportunities to improve financial performance through better operational discipline, smarter use of technology, and stronger alignment between care delivery, staffing, and pricing.

1. Reducing Payroll Overtime Through Smarter Workforce Management

Labor is the largest operating expense in senior living, and uncontrolled overtime is one of the most common drivers of margin erosion. In our experience, chronic overtime is rarely a staffing shortage—it is an operational systems issue. Leverage technology platforms to reduce payroll costs.

Technology is a critical component:

  • CRMs forecast occupancy and upcoming move-ins, allowing staffing to scale appropriately.

  • EHRs track resident care needs and caregiver hours, aligning staffing with real-time acuity.

When staffing is data-driven, overtime and agency costs decline quickly.

2. Leveraging Technology Platforms to Increase Efficiency

Technology should simplify operations, not create additional work. Communities that fully integrate technology across departments see measurable improvements in both efficiency and margins.

Enhance Senior Living recommends:

  • Modern, transparent websites featuring virtual tours, services, testimonials, and clear base unit and care pricing

  • Senior living CRMs to automate follow-ups, manage leads, and streamline marketing workflows

  • AI-enabled tools to reduce administrative burden and reallocate staff time toward care and resident engagement

  • Resident engagement and family connection platforms to improve satisfaction, communication, and retention

These tools also reduce reliance on expensive external marketing channels and placement agencies.

3. Ensuring Accurate Care-Level Billing and Revenue Capture

One of the most overlooked margin leaks in senior living is undercharging for care.

This typically stems from a disconnect between:

  • Clinical teams focused on care delivery

  • Business offices focused on billing and collections

Enhance Senior Living addresses this by:

  • Integrating EHR data directly into care billing workflows

  • Reassessing resident care levels and charges on a consistent basis

  • Increasing the frequency of care evaluations as resident needs change

Accurate care billing ensures communities are properly compensated for the services they deliver every day.

4. Eliminating Dependence on Placement Agencies

Placement agencies can significantly reduce profitability, often charging the equivalent of one month’s rent per move-in. At today’s margins, it can take five to seven months to recover that cost.

Enhance Senior Living helps communities reduce or eliminate placement agency reliance by:

  • Improving website transparency around services, pricing, and care options

  • Implementing video tours and resident testimonials

  • Building internal referral programs that leverage existing residents, families, and team members

Redirecting placement fees into referral incentives produces higher-quality leads at a fraction of the cost.

5. Implementing Strategic Rate Increases

Rate optimization is essential for long-term sustainability. Communities that fail to regularly evaluate pricing often undercut their own margins.

Enhance Senior Living conducts:

  • Quarterly competitive market surveys

  • Detailed comparisons of strengths, weaknesses, and service offerings

  • Pricing alignment based on acuity, service level, and market position

We also work with operators to limit concessions and ensure rates accurately reflect the value delivered.

6. Expanding À La Carte Service Offerings

Bundled pricing models often leave revenue on the table. Enhance Senior Living encourages communities to adopt a more flexible, à la carte approach.

Common examples include:

  • Parking

  • Transportation

  • Enhanced dining options

  • Specialty or convenience services

This model increases revenue while giving residents greater choice and perceived fairness.

7. Reducing Advertising Spend Through Community Engagement

Many communities overspend on paid advertising with limited return. Enhance Senior Living focuses on lower-cost, higher-impact alternatives.

Effective strategies include:

  • Leveraging social media for organic reach

  • Using CRMs to promote events directly to prospects

  • Hosting community events and inviting local organizations such as:

    • Realtor associations

    • Rotary Clubs

    • Toastmasters

    • Faith-based organizations

Activating existing community spaces builds awareness and trust at a fraction of the cost of traditional advertising.

8. Utilizing Procurement Services to Lower Operating Costs

Smaller communities often pay retail pricing for supplies, limiting margin control.

Enhance Senior Living helps operators:

  • Transition to procurement services with national pricing contracts

  • Leverage bulk purchasing and economies of scale

  • Reduce supply costs across food, medical, and operational categories

Even modest procurement savings can have a meaningful impact on NOI.

9. Optimizing Insurance and Real Estate Tax Expenses

Insurance premiums and property taxes are frequently overlooked cost-saving opportunities.

Enhance Senior Living works with owners to:

  • Shop property and liability insurance regularly instead of auto-renewing

  • Leverage brokers who provide free market comparisons

  • Review real estate tax assessments, which are often inaccurate for senior living properties

Specialized consultants can analyze and appeal assessments at no upfront cost, sharing savings only if reductions are achieved.

10. Auditing Payroll and Full-Time Equivalents (FTEs)

Every Enhance Senior Living engagement includes a detailed payroll and staffing audit.

We compare:

  • FTEs per resident day

  • Payroll expense by acuity level

  • Community performance against industry benchmarks

We leverage resources such as the ASHA Annual State of Senior Housing Report, which provides:

  • Occupancy, revenue, and operating income benchmarks

  • Payroll data by care type (IL, AL, MC, CCRCs)

  • Comparisons by community size and geography

This data-driven approach allows operators to make informed staffing adjustments without compromising care quality.

Conclusion

Improving operational efficiency in senior living is not about cutting care—it is about aligning systems, staffing, pricing, and technology to support sustainable performance.

At Enhance Senior Living, we partner with senior living owners and operators to identify inefficiencies, implement best practices, and deliver measurable improvements in margins and operational performance. Senior living communities that execute on these strategies position themselves for long-term success while enhancing the resident and family experience.

About Enhance Senior Living

Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions and contact us today to learn how we can help you enhance senior living today.

enhanceseniorliving.com | seniorlivinginvestments.com | srgrowth.com | generationalmovement.com

Creating a Dynamic Senior Living Budget

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How to Create a Dynamic Senior Living Operating Budget

By Scott McCorvie, CEO, Enhance Senior Living

Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions and contact us today to learn how we can help you enhance senior living today.

If you like this article, be sure to subscribe to the Enhance Senior Living Podcast. The show is on all podcast platforms including Apple Podcasts | Spotify | Amazon Music

The Senior Living Operating Budget Process:

  1. What is a senior living budget?

    1. Annual operational financial projection broken out per month that includes all the revenue and expense estimates based on a certain set of assumptions. Typically created in Excel and reported in either Excel or PDF format

  2. What is the senior living budget used for?

    1. It’s an annual understanding between the operator and owner on the financial expectations for the upcoming year. It’s used by lenders, investors, capital provides, etc. to calculate investment returns, KPIs, and other tracking ratios.

    1. It’ a chance to compare the actual monthly performance to the budgeted performance and look for variances. Create action plans to quickly identify and mitigate any areas of operational inefficiency.

  3. When is the senior living budget season?

    1. Typically Sept 1 to Nov 30 of each year for Jan 1 to Dec 31 of the following year.

  4. What is the process of a typical budget season?

    1. It’s typically multiple rounds, discussions, and revisions between the owner and operator. The owner could be an individual, partnership, JV, corporation, REIT, non-profit, P/E Firm, Asset Manager, etc. The historical financials and last year’s budget is typically used as a starting point

  5. Are other decisions made during budgeting season that impact the community

    1. Yes, the capex budget and allocation is usually created and negotiated during this time too. The capex budget focuses on any physical upgrades including new carpet, painting, furniture, amenity areas, landscaping, etc. The target annual allocation is typically documented in the Management Agreement – or $350 to $1000 per unit per year. Industry average is around $500 per unit per year.

  6. What’s the best way to create an accurate operating budget

    1. Break down monthly detailed historical financials per department and per line-item on a per resident day basis (or per occupied unit basis). Why do we do this? To get a better apples-to-apples comparison with variable occupancy and properly perform portfolio and industry benchmarking analysis.

  7. How to calculate the revenues and expenses on a per resident day and per occupied unit basis

    1. I wrote an article about this – enanceseniorliving.com – news sectionPRD = dollar amount / number of resident days (monthly, quarterly, annually, etc.)Resident days = average bed occupancy per month multiplied by number of days in the month. Average bed occupancy for the year multiplied by 365.

    1. Per Occupied Unit – Annual dollar amount / number of occupied units (monthly, quarterly, annually, etc.)

  8. Revenue assumptions

    1. Use the latest rent roll to calculate concessions and other losses to market rent. Create rental increases per unit to both in-house and new residents. Use a competitive market survey to see areas of enhancement. How are your rates compared to the market? Include the new unit rates in the budget. Calculate a stabilized senior living occupancy and any absorption (95% is highest).Audit care charges and look for areas of missed opportunityRevenue concessions to community fees. Consider increases to ancillary revenue like second resident fees, special services like transportation, guest meals, etc.

    1. Consider charging more ‘a la carte fees for technology / connection services

  9. How to use the Per Resident Day analysis to make smarter go-forward projections

    1. PRD gives more of an apples-to-apples comparison metric that can be adjusted by occupancy. There’s not a straight correlation with PRD and occupancy, so trend adjustments and variances are necessary with occupancy changes. Calculate and review the PRD for the T12, T6, T3, T1. Look for trends and season aspects.Using the sample set, select an appropriate PRD amount. Multiply that amount by the number of days in the month along with any resident occupancy changes per monthUse this for all department line-items – most accurate with stable or monthly stable communities

    1. Per occupied unit is a similar concept, but does not take number of days per month into analysis (Feb is always lower in expenses – lower amount of days).

  10. How to review the accuracy of the budget

    1. Analyze last years budget to actual performance – where were the hits and missesOperating Margin – depends on the acuity and occupancy – but, should be running 20-40%.

    1. Industry Resources – ASHA State of Senior Housing Report – reports historical financial performance of the industry – per occupied unit basis. I use this to do industry comparison and benchmarking analysis in all of my underwriting to look for areas of improvement.

    1. Sister communities – How does this budget and assumptions compare to other communities in your portfolio? Have open group discussions with Eds on things that area working and not working – transparency and collaboration enhances performance.

  11. What are other things to consider?

    1. Makes sure you involve the ED in the entire process. The ED should really sign off and own the budget each month and be ready to discuss any variances along with plans of correctionWatch for operator budget sandbagging. Operators always want to outperform – especially when there’s incentives tied to outperforming the budget. A lot of the incentive fee structures are tired to outperforming the budget – so, operators want to maximize that delta and fees.Give it time. Be prepared to spend several weeks to a few months going back and forth on the operating budget. Make sure everyone is on the same page for it’s finalized. Analyze, discuss, and opine on any discrepancies.Be prepared to defend or share the budget when asked – lenders, investors, capital provides, etc.The Senior Living Operating Budget and Operating Budgeting Process is one of the most important factors in the senior living industry.

    1. Having an accurate and realistic budget is one of the most valuable assets in senior living.

Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions and contact us today to learn how we can help you enhance senior living today.

If you like this article, be sure to subscribe to the Enhance Senior Living Podcast. The show is on all podcast platforms including Apple Podcasts | Spotify | Amazon Music

enhanceseniorliving.com | seniorlivinginvestments.com | srgrowth.com | generationalmovement.com