How to Value an Assisted Living Community (2026)
The complete guide to senior living & care community valuation: methodologies, EBITDA multiples, cap rates, and the key financial metrics brokers and appraisers use to determine fair market value.
What this article explains:
- •Topic: How to Value an Assisted Living Community (2026)
- Who this is for: Investors, operators considering selling, brokers, and appraisers valuing senior living & care assets
- Problems addressed: Uncertain valuations, outdated multiples, failure to normalize EBITDA, ignoring deferred maintenance
- Systems involved: Income approach (EBITDA multiples), market comparables, asset-based valuation, financial normalization
- Why this matters now: Accurate valuation is critical in active 2026 M&A market; mistakes cost sellers and buyers millions
Valuing an assisted living facility is both an art and a science. Unlike traditional commercial real estate, senior living & care communities are operating businesses where value is driven primarily by operational performance—not just physical assets.
Whether you're an operator considering selling, an investor evaluating an acquisition, or a broker advising clients, understanding the three primary valuation methodologies and the dozens of factors that influence value is critical to arriving at an accurate assessment in today's market.
Three Primary Valuation Methods
Income Approach (Primary)
Values the business based on its ability to generate future cash flow
Formula:
EBITDA × Industry Multiple = Enterprise Value
When Used: Most common method for operating AL facilities with stable census
Market Approach (Comparable Sales)
Values the facility based on recent sales of similar properties
Formula:
Price per Bed or Price per Square Foot
When Used: Used to validate income approach and for distressed assets
Asset-Based Approach
Values based on underlying real estate and physical assets
Formula:
Land Value + Building Replacement Cost - Depreciation
When Used: Used for new construction, vacant facilities, or development sites
Step-by-Step Valuation Process (Income Approach)
- 1
Calculate Trailing 12-Month EBITDA
Start with gross revenue, subtract operating expenses (excluding interest, taxes, depreciation, and amortization).
Gross Revenue: $4,200,000
Operating Expenses: ($2,940,000)
EBITDA: $1,260,000
- 2
Adjust for Non-Recurring Items & Normalization
Add back one-time expenses, normalize owner compensation, and adjust for market rent.
EBITDA: $1,260,000
+ One-time legal fees: $45,000
+ Excess owner compensation: $80,000
Adjusted EBITDA: $1,385,000
- 3
Determine Applicable EBITDA Multiple
Research recent comparable sales and apply appropriate multiple based on facility characteristics.
Example: 72-bed AL facility, 88% occupancy, strong market = 5.8x multiple
- 4
Calculate Enterprise Value
Multiply adjusted EBITDA by selected multiple.
Adjusted EBITDA: $1,385,000
× Multiple: 5.8x
Enterprise Value: $8,033,000
- 5
Validate with Market Comps
Compare calculated value to recent sales on a per-bed and per-square-foot basis.
Enterprise Value: $8,033,000
÷ 72 beds = $111,569 per bed
(Market range: $100K-$130K per bed ✓)
Key Valuation Metrics (2026 Benchmarks)
| Metric | Typical Range | Key Factors |
|---|---|---|
| EBITDA Multiple | 4.5x - 7.0x | Occupancy, market, condition, license type |
| Cap Rate | 7% - 11% | Location, age, census stability, payer mix |
| Price per Bed | $75K - $175K | Geographic market, unit mix, amenities |
| RevPAR | $3,500 - $6,500 | Private pay vs Medicaid, acuity level, competition |
8 Factors That Affect Assisted Living Value
Occupancy & Census Stability
85%+ occupancy commands premium multiples. Census trending up/down significantly affects value.
Payer Mix
Private pay facilities valued 20-40% higher than Medicaid-heavy properties due to revenue stability and margins.
EBITDA Margins
Industry benchmark: 25-35%. Higher margins indicate operational efficiency and drive higher multiples.
License Type & Care Level
Assisted Living > Memory Care > Skilled Nursing in valuation multiples due to regulatory burden and capital intensity.
Market Demographics
Markets with growing 75+ population, high median income, and low supply ratios command premium valuations.
Physical Condition & CapEx Needs
Deferred maintenance and upcoming capital expenditures reduce value. Buyers adjust for required improvements.
Reputation & Online Reviews
Strong reputation with 4.5+ star ratings increases value 10-15% by reducing marketing costs and improving census.
Staffing & Labor Relations
Stable workforce with low turnover valued higher. Unionized facilities may trade at discount depending on contract terms.
Common Valuation Mistakes to Avoid
- ❌Using outdated multiples:
EBITDA multiples change with market conditions. 2019 multiples don't apply in 2026. Always use recent comparable sales.
- ❌Ignoring deferred maintenance:
Buyers will reduce offers by 1.5-2x the cost of deferred capital improvements. A $500K roof replacement reduces value by $750K-$1M.
- ❌Overvaluing based on "potential":
Buyers pay for current performance, not future potential. A 65% occupied facility trades at distressed multiples regardless of "upside."
- ❌Failing to normalize EBITDA:
Owner taking $250K salary when market rate is $120K? Buyers will normalize. Adjust for market-rate compensation before applying multiples.
- ❌Using cap rates for operating businesses:
Cap rates are for real estate. Assisted living is an operating business—use EBITDA multiples as primary method, cap rate for validation only.
2026 Valuation Landscape
🔼 What's Driving Values Higher
- • Aging demographics: 10,000 Americans turning 65 daily through 2030
- • Institutional capital returning to senior housing after 2022-2023 reset
- • Limited new supply in many markets due to construction financing constraints
- • Stabilized occupancy rates recovering post-pandemic (back to 85-90%+ in strong markets)
🔽 What's Compressing Multiples
- • Labor cost inflation: wages up 15-25% since 2020, compressing margins
- • Insurance cost pressure: general liability and professional liability premiums rising
- • Higher interest rates increasing buyer cost of capital and hurdle rates
- • Regulatory scrutiny: staffing mandates and compliance requirements increasing
Bottom Line: High-quality, well-operated facilities in strong markets with 85%+ occupancy continue to command premium valuations (5.5x-7.0x EBITDA) as demand fundamentals remain strong. However, distressed assets, high-labor-cost markets, and facilities with deferred maintenance are seeing discounted valuations (3.5x-4.5x EBITDA) as buyers factor in operational and capital improvement challenges.
Ready to Value Your Community?
Whether you're preparing to sell, evaluating an acquisition, or seeking financing, accurate valuation is the foundation of every successful transaction. SeniorCRE's marketplace connects you with healthcare M&A advisors who specialize in senior living & care community valuation and transactions.
Related Resources
Disclaimer: This article is for educational purposes only and does not constitute professional appraisal, investment, or financial advice. Facility valuations vary widely based on market conditions, individual property characteristics, and operational performance. Always consult with a qualified business appraiser, CPA, and healthcare M&A advisor before making valuation determinations or transaction decisions.
Data and benchmarks referenced are based on industry research as of January 2026 and may not reflect current market conditions at the time of reading.