Senior Housing and Opportunity Zones – A Winning Formula

The only thing better than one investment opportunity … is two investment opportunities!

We’ve talked about senior housing and opportunity zones before … but what happens when you combine the two?

The combined demographics and tax incentives of these investment niches create exciting possibilities!

We sat down with a successful real estate entrepreneur who is putting senior housing and opportunity zones together into a creative … and profitable … investment play.

Discover how to ride the wave of demand and capital to create a WINNING investment strategy.

In this episode of The Real Estate Guys™ show, hear from:

Your riding-high host, Robert Helms
His here-for-the-ride co-host, Russell Gray
CEO of Sage Oak Assisted Living, Loe Hornbuckle
Loe’s partner and construction developer, Austin Good

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Opportunity zones sweeten the deal

We’ve been talking a lot lately about opportunity zones … but today we’re going to focus on taking the idea into the real world.

You may have heard Loe Hornbuckle on our show before. He specializes in senior housing.

Loe recently began a new project … and discovered that the land was inside an opportunity zone.

His team began to pay attention to how they could structure the deal around opportunity zone incentives … and he’s here to share what he has learned from the process so far.

A word of caution before we dive in … be careful about picking an investment purely for the tax breaks and overlooking the real fundamentals of the deal.

Loe sought out a location that was a good place to do business, fit in his niche, and gave him a unique selling proposition. The opportunity zone just sweetened the deal.

Prepare for the silver tsunami

Let’s start with the silver tsunami. In a few years, baby boomers will be looking for assisted living … and the industry needs to be prepared.

But that’s still a ways off. Loe says his average client is 87 years old. The oldest baby boomers are still about 75.

That means there is time to get in the game and get prepared.

A lot of times when people talk about senior housing, they’re really talking about active adult communities, independent living, assisted living, dementia care, and skilled nursing facilities all under one umbrella.

But it’s important to look at each of these areas as its own asset class.

The type of person that wants to live with other people 55 and up and play golf with their buddies is totally different than a person who may not be able to walk independently anymore.

And when the baby boomers come looking for senior housing, they’re going to demand things that their predecessors didn’t.

Baby boomers want smaller, more intimate environments where they are around people that are like-minded in some way.

Maybe they like the same music … or have the same cultural heritage … or even have the same medical condition.

In Loe’s case, he began Sage Oak Assisted Living and Memory Care in 2015. It’s basically a boutique assisted living and memory care company.

“What we do is focus on small facilities that are designed to make people feel more comfortable in a homelike environment,” Loe says.

When most people think of assisted living, they picture a nursing home. But Sage Oak’s facilities are light, airy homes designed for anywhere from 8 to 16 people.

Loe currently operates five of these locations in Dallas.

But with the silver tsunami on the horizon, Loe is looking to expand his idea … more beds but preserving the intimate setting.

For Loe and his team, the answer is raw land development into planned care communities.

Think of it like a residential neighborhood … but instead of 3000 square foot homes that house single families, these are 9,000 square foot homes designed for 16 seniors.

These independently owned houses operate as independently licensed facilities … some as assisted living and luxury assisted living and others as dementia care.

And these houses can be tailored and changed over time to provide the personalized environment residents are looking for … allowing you to operate in any niche you feel the market is lacking.

Obviously you would never exclude anyone, but you could help them find a house that they are most interested in.

“One house might be for people with diabetes. Another might be kosher, with a kosher chef and visits from the local rabbi. The house next-door to that one could have a Korean chef and Korean newspapers delivered daily,” Loe says.

Sage Oak has two such projects underway right now … one in Texas and one in Louisiana.

A natural partnership

Loe’s partner, Austin Good, hails from the construction development side of real estate.

Austin is a single family, build-to-rent developer … and that’s essentially what Loe and his team are creating.

Starting from the ground up in building these campuses offers the advantage of control … controlling the process of creating the campus and controlling the end experience offered to residents.

And now, the Texas development has the added advantage of being in an opportunity zone.

“We selected a piece of land in Denton, Texas, to build a campus and discovered it was in an opportunity zone,” Austin says. “So, we had to rework our model a bit.

For example, Austin says they weren’t necessarily looking at a 10 year hold period at the start … but now they are making changes to gain the biggest tax advantages.

An opportunity zone location also gives Loe and Austin the ability to offer investors a chance at making some money tax free … quite the incentive to come on board!

Senior housing is a natural companion to the opportunity zone structure for a lot of reasons.

Since opportunity zones are typically in lower income or rural areas, you probably aren’t going to build a luxury hotel there.

But if you create a reputation as the “go-to” place for senior housing, most people won’t mind driving a bit further … because the outcomes are so much better at your location!

“Our Denton project is about 10 minutes away from the luxury assisted living facilities in the area, so it’s not a difficult pitch for us to say, ‘Drive a few more minutes and be in a more intimate environment with a better caregiver ratio,’” Austin says.

Another major opportunity zone benefit … access to an untapped workforce of caregivers.

The number one problem CEOs in the senior housing space are facing is access to good caregivers.

Opportunity zones located in lower income or more rural areas tap into a workforce that may live too far away to work at other facilities.

Find your winning opportunity

For people who are concerned about taxes and wanting to maximize their return, investing in a niche opportunity zone project can be … well … a great opportunity.

You still get all the advantages of real estate … like bonus depreciation … and now you can get your capital back.

It essentially allows you to make a better return on a post tax basis.

As always, check with your tax professional to find out what will work best for your portfolio.

And listen in to the full episode for more on how senior housing and opportunity zones can be a winning formula!