Given the exponential growth of the assisted living and nursing care industry, it should come as no surprise that there's hard money loan resources for assisted living facilities. Demographics are the driving factor.
According to the U.S. Census Bureau, seniors will represent 20 percent of the U.S. population by 2030. More than 500,000 people are expected to turn age 65 and older every year from now on. Over the next two decades an estimated 77 million Americans plan to retire. The question is where will they decide to spend their golden years.
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Continuing care retirement communities provide on-site nursing and medical care facilities, which appeal to the elderly who have the resources to afford them. To meet this demand, traditional and alternative lenders are extending business funding in this space.
But assisted living facilities have found a more restrained lending environment these days because traditional financing sources are tighter and underwriting standards are tougher. Fortunately, compared to multi-family properties, these facilities are still appealing to many commercial financiers because once the residents move in, they remain there.
The associated borrowing costs for an assisted living facility can be quite high, but this can be offset by the revenue generated by the residents over time. That's why these assets may be an attractive investment for a hard money loan lender.
Besides the standard tax write-offs that apply for real estate investment properties, assisted living facilities get revenue generated from multiple residents, along with insurance and municipal subsidies that are not available to standard multi-family residences. Some investors in this space may be asset rich yet poor in liquidity, so if an opportunity comes up, they'll want to act fast. Hard money facilitiates this scenario.
Assisted living facilities are also quite expensive to operate, epecially for new construction or substantial renovation. These projects can have a significant dollar amount attached to them. Sometimes, a borrower may arrange for a round of financing to keep afloat while waiting for a larger round of financing down the line. This loan is known as “bridge financing.”
Hard money is a great bridge financing strategy, especially for a borrower who may have substantial equity or assets but is lacking liquidity. A borrower can get quick access to the funding necessary to take advantage of a sudden opportunity or to address an emergency that arises.
Hard money is not subject to the strict underwriting standards of traditional lending...
For instance, a developer may want to build a new assisted living facility, but has mostly liquid assets tied up in other projects. Adding to this example, the developer must close on the purchase of the land earmarked for the facility within three weeks. Now, a traditional lender might not look at this deal favorably because there's not enough time, collateral or liquidity.
But a hard money lender might look at it and find it attractive. Hard money is not subject to the strict underwriting standards of traditional lending, so the deal might be approved quickly and funded handily. In certain scenarios, a hard money loan can indeed act as bridge financing.
Hard money loans are not for every borrower. Given its complexity and its relatively high cost of capital, hard money loans are definitely not a first option for novice developers or those without adequate liquidity. But what hard money does do is give experienced developers a quick source of capital should they need it.
When it comes to developing assisted living facilities, getting a hard money loan could make it happen. If this option appeals to you, be prepared to furnish the following information: