Senior Care Home: Is it a good business?

I AM frequently asked the question:  “Is it a good business opportunity to open a senior care home?”

First, let us define what a Senior Care Home is and how is it different from an Assisted Living Facility or a Residential Care Home Facility for the Elderly (RCFE).

A care home is a regular house that is converted and licensed with the State Department of Social Services to meet the needs of elderly residents.  These conversions entail but are not limited to ramps, wider door width, walk-in shower, and installation of grab bars.  For the State of California, there is no difference between an Assisted Living Facility (ALF) and a Senior Care Home, as both require the Residential Care Facility for the Elderly (RCFE) license to provide non-medical care for residents 60 years old and over.  In this industry, the main difference between the two is the size of the facility.  A care home is usually smaller homes licensed for 1-15 residents while an Assisted Living Facility are more institutionalized with 16 or more residents.

In order to answer the question whether a care home business is good or not, it is pertinent to know if there’s a market.  According to Stanford Center on Longevity and the State’s recent released Interim Population projections, the elderly population of 65 years old and over will double over the next 20 years from 4.3 million in 2010 to 8.4 million in 2030. While the CA Department of Aging states that California’s elderly population is expected to grow more than twice as fast as the total population. So as the youngest generation of baby boomers reach retirement, California’s over-65 population will nearly double in two decades. So, we can expect an increased demand for elderly support and services which include the senior care home industry.

However, even with a growing market, a good business opportunity should be in the right location. Often, the difference between a successful and a struggling care home is attributed to its area.  And yes, the care home business is no exception to this cliché’.  Being in the right location means understanding and knowing your competitors. So before renting, buying or converting your property, learn how many facilities are located in your target community. You wouldn’t want open a care home in an area that is already over saturated with elderly facilities as it often results in high vacancy and low rates. The data can be found in the community care licensing website, www.ccld.ca.gov, where you can search the number of facilities in each county, city, or zip codes in California.  Also, research your competitor’s fees and occupancy rate as it will help you decipher whether it is the right location for you. Of course, a good business doesn’t always equate to a successful business as there are other factors such as having the qualified manpower, ability to deliver quality care, and having a sound financial control and management that dictates the growth of a business.

Currently, there are only 8,100 licensed Residential Care facilities for the Elderly in California based on California Registry’s website, with a median cost of $3750/ resident for a private room and costs ranging from a low of $1,000 a month for a resident on Supplemental Security Income (SSI) to a high of $9,000 a month according to California Advocates of Nursing Reform.  Keep in mind that rates vary from city to city.

In summary, with the growing population of the elderly, it is inevitable to anticipate the increased demand for elderly services which will include the care home business. However, just like any success story, one should perform due diligence and research to find the right opportunity.

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Ami Gan is a Care Home Consultant, owner of Gan Consulting and an Investment Realtor. She was also a vendor with the State of California to teach the Initial Certification Training Program for RCFE Administrators.  She majored in Marketing and Psychology at De La Salle University in the Philippines and took her Executive MBA at University of California, Los Angeles. She has been providing assistance with entrepreneurs who would like to open up a facility in California for the past 10 years. For more information about a senior care home, you may contact her at (707) 853-6691 or (925) 953-7700.