What Buyers Look for When Acquiring Assisted Living Communities

Current Occupancy vs. Market Average: Buyers immediately compare your facility's occupancy (ideally 85-95%) against local market averages. Communities below 80% face steep valuation discounts unless there's a clear turnaround story.

3-Year Occupancy Trend: A declining occupancy trend (e.g., 92% → 88% → 82%) signals operational issues, competitive pressure, or market saturation. Buyers will demand price concessions or operational improvements as closing conditions.

Move-In/Move-Out Velocity: High turnover (avg. length of stay <18 months) raises red flags about care quality, pricing, or reputation. Buyers analyze move-out reasons (hospital transfers, family dissatisfaction, cost) to assess risk.

Waitlist & Tour Conversion Rates: A healthy waitlist (15-30 prospective residents) and tour-to-move-in conversion rate (20-30%) indicate strong demand and operational competence.

Revenue Per Occupied Room (RevPOR): The single most important metric for assisted living valuation. Buyers compare your RevPOR ($3,500-$7,000/month depending on market and care level) to competitors to assess pricing power.

Private-Pay vs. Medicaid Mix: Private-pay residents generate 30-50% higher revenue than Medicaid. Buyers prefer facilities with 70%+ private-pay census due to higher margins and fewer regulatory constraints.

Care Level Revenue Uplift: Facilities that successfully charge incremental fees for higher-acuity care (Level 1: $500/month → Level 3: $2,500/month) demonstrate strong operational sophistication and margin expansion potential.

Historical Rate Increases: Buyers review 3-5 year rate increase history (typically 3-5% annually). Communities that haven't raised rates in 2+ years leave money on the table and signal weak management.

EBITDA Margin: Assisted living facilities typically generate 25-35% EBITDA margins. Margins below 20% suggest operational inefficiencies, overstaffing, or pricing problems. Buyers will scrutinize labor costs, food/supplies, and overhead.

Stabilized Net Operating Income (NOI): Buyers underwrite properties based on stabilized NOI (assuming 90% occupancy and normalized expenses). If your current NOI is artificially inflated (deferred maintenance, understaffing), expect valuation haircuts.

Labor Cost Percentage: Labor should be 45-55% of revenue. Facilities exceeding 60% face margin compression and buyer skepticism about sustainability, especially post-wage inflation.

Rent Coverage Ratio: For leased properties, buyers analyze whether operating income covers rent obligations (1.2x-1.5x coverage preferred). Poor rent coverage jeopardizes lease renewability and financing.

Deferred Maintenance Assessment: Buyers conduct Property Condition Assessments (PCA) to identify deferred maintenance (roof, HVAC, plumbing, fire safety systems). Expect $1-3M in deferred CapEx to be deducted from purchase price or escrowed at closing.

Life Safety Code Compliance: Non-compliant fire alarms, sprinkler systems, egress paths, or emergency lighting trigger immediate concern. Buyers may require pre-closing remediation or holdbacks until issues are resolved.

Unit Mix & Marketability: Studio-heavy unit mix (60%+ studios) limits marketability to couples and higher-income seniors. Buyers prefer balanced mix: 40% studios, 40% 1BR, 20% 2BR for maximum appeal.

Common Area Quality: Dated lobbies, dining rooms, or activity spaces reduce competitive positioning. Buyers factor $500-1,000/unit for cosmetic upgrades to maintain market competitiveness.

State Survey History (Last 3 Years): Buyers request all state survey reports, complaint investigations, and corrective action plans. Recent deficiencies (L-tags, G-tags) for medication errors, abuse/neglect, or staffing violations create significant liability exposure.

License Transferability: State-specific approval timelines vary (30-120 days). Some states require full application, background checks, financial disclosures, and administrator licensure before transfer approval. Delays jeopardize closing.

Medicare/Medicaid Certification: For SNF or dual-certified facilities, buyers verify CMS certification status, survey cycle, and Quality Measures. Facilities on SFF (Special Focus Facility) list face valuation discounts or deal termination.

Pending Litigation & Complaints: Unresolved lawsuits (wrongful death, falls, elopement) or active complaint investigations must be disclosed. Buyers underwrite litigation reserves or demand indemnification provisions.

Turnover Rates: High caregiver turnover (>60% annually) signals cultural issues, poor management, or below-market wages. Buyers assess turnover trends and wage competitiveness vs. local market.

Staffing Ratios by Shift: Understaffed facilities (e.g., 1:15 caregiver:resident ratio on overnight shift) create care quality risks and regulatory exposure. Buyers verify staffing against state minimums and census acuity.

Licensed Nurse Coverage: Buyers confirm RN/LPN coverage requirements are met (varies by state). Lack of 24/7 nurse coverage or reliance on agency nurses raises operational risk and cost concerns.

Post-Closing Retention Risk: Key employee retention (Executive Director, Director of Nursing, Marketing Director) is critical. Buyers may require retention bonuses or employment agreements as closing conditions.

General Liability Claims History: Buyers request 5-year loss runs showing all claims (falls, medication errors, wandering incidents). Adverse claims history increases insurance premiums and signals operational risk.

Professional Liability Coverage: Adequate coverage ($2-5M per occurrence) is essential. Insufficient coverage or claims approaching policy limits create deal-breaking liability concerns.

Workers' Compensation Experience Mod: High experience modification rates (>1.2) indicate workplace safety issues and translate to higher insurance costs post-acquisition.

Pending Claims & Litigation: All pending lawsuits, arbitration demands, or regulatory enforcement actions must be disclosed. Material undisclosed liabilities can void transaction or trigger indemnification claims.

Market Occupancy Trends: Buyers analyze submarket occupancy (3-5 mile radius) to assess supply/demand balance. Markets with <85% average occupancy or 200+ units under construction face valuation pressure.

Competitive Set Analysis: Buyers identify direct competitors (same care level, price point, amenities) and assess your facility's relative positioning. Commoditized markets with 10+ competitors compress margins and pricing power.

Rate Positioning: Are you priced at market, premium, or discount? Premium-priced communities (top quartile) must justify rates with superior amenities, care, or reputation. Discount-priced properties suggest quality or reputation deficits.

Google Reviews & Reputation: Online reputation (4.0+ star average on Google, Caring.com, A Place for Mom) is increasingly critical. Poor reviews signal care quality or customer service issues that depress occupancy and referrals.

Fee Simple vs. Leasehold: Buyers prefer fee simple ownership for maximum control and financing flexibility. Leased properties must have favorable lease terms (15-25 years remaining, reasonable escalators, renewal options).

Ground Lease Terms: Ground leases create financing and valuation challenges. Buyers analyze rent escalation clauses, purchase options, and landlord financial stability.

Zoning & Certificate of Need: Verify zoning allows assisted living use and assess expansion potential. CON states require regulatory approval for capacity changes, limiting operational flexibility.

Environmental Issues: Phase I ESAs identify potential contamination (underground storage tanks, asbestos, lead paint). Material environmental issues delay closing or require remediation escrows.

Average Age & Health Status: Higher-acuity residents (85+ years, 3+ ADL dependencies) generate more revenue but require higher staffing and face shorter length-of-stay.

Payor Mix by Resident: Buyers analyze payor mix: private-pay, long-term care insurance, Medicaid, VA benefits. Heavy Medicaid census (30%+) depresses revenue and limits operational flexibility.

Resident Agreements & Rate Locks: Fixed-rate contracts or rate caps limit future revenue growth. Buyers prefer month-to-month agreements with annual increase provisions.

Family Satisfaction & NPS Score: Net Promoter Score (NPS) surveys provide insight into family satisfaction and referral likelihood. Low NPS (<30) predicts occupancy challenges and reputation risk.

Marketing Spend ROI: Buyers analyze marketing spend ($2,000-5,000/month typical) vs. move-in volume. High cost-per-acquisition (>$5,000/move-in) suggests inefficient marketing or weak competitive positioning.

Lead Source Mix: Overreliance on single lead source (e.g., A Place for Mom referrals) creates vulnerability. Diversified lead mix (referrals, website, tours, healthcare partnerships) reduces risk.

Tour Conversion Rate: Industry benchmark: 20-30% of tours convert to move-ins within 90 days. Lower conversion suggests sales execution issues, pricing misalignment, or facility condition concerns.

Digital Presence: Modern buyers assess website quality, SEO rankings, Google My Business optimization, and social media engagement as indicators of marketing sophistication.

Expansion Opportunities: Land for addition, zoning for vertical expansion, or adjacent parcels create value-add opportunities. Buyers model IRR impact of adding 20-30 units at stabilized occupancy.

Market Growth Demographics: Buyers underwrite properties in markets with favorable 85+ population growth (2-3% annually). Declining senior populations or out-migration create long-term headwinds.

Management Platform Fit: Institutional buyers assess whether property fits existing portfolio (geography, care level, size) for operational synergies. Stand-alone assets in tertiary markets face buyer universe constraints.

Hold Period Strategy: Buyers model 5-7 year hold with exit via portfolio sale, REIT sale-leaseback, or refinance. Properties with limited exit options (remote location, small size, poor condition) face valuation discounts.