By the year 2050, the number of Americans aged 65 and over is expected to double. That's part of the reason programs like Social Security and Medicare are apt to get strained in the coming years and desperately need funding.
But an aging population also offers opportunities for real estate investors -- namely, to put money into senior housing. Though some seniors are able to age in place, isolation is a big issue for many older Americans, and so those with the means often choose to live out their later years in assisted living facilities instead. These senior communities offer a host of amenities, but just as importantly, they offer the opportunity for built-in socialization.
And then there are nursing homes and nursing facilities -- places most seniors don't want to end up but often get there when health or mobility issues make that a necessity.
In fact, there already seems to be a trend pointing to increased demand for senior housing. In October, assisted living and skilled nursing facilities reported an uptick in move-ins, according to the National Investment Center for Seniors Housing & Care. In fact, move-ins reached their highest level since March, and that's despite the coronavirus pandemic.
But is investing in senior facilities a smart move? Or are the risks involved too great to outweigh the potential rewards?
The dangers of senior housing as an investment
From a demand perspective, putting money into senior facilities makes a lot of sense. But given the way COVID-19 tore through nursing homes and senior centers, in the wake of the pandemic, there are apt to be increasingly stringent regulations imposed on that industry that could seriously eat into investors' and operators' bottom line.
Not only will senior facilities likely be forced to invest in added sanitation and air filtration, but they may need to invest in added square footage in the event a pandemic arises to follow up the nightmare that's been the coronavirus outbreak. Throw in the need for added protective gear and training for caregivers and onsite workers, and it paints a very expensive picture.
Granted, many senior facilities charge enough of a premium to recoup their costs. But plenty don't. And given that assisted living and nursing homes are already out of reach financially for a large number of seniors, these facilities can only upcharge so much to recoup their added expenses without driving residents away completely. (Case in point: The average assisted living facility today comes with a $48,612 annual price tag, according to Genworth, while the average nursing home costs over $90,000 a year for a shared room and $102,200 for a private one.)
While the senior housing sector may read like a solid investment opportunity, especially in light of increased move-ins, it pays to proceed with caution. Investors may want to sit tight for a year or two following the current pandemic and see what regulations come down the pike before putting money into properties that may become too expensive to operate for profit.