Is Senior Citizen Housing A Good Real Estate Investment?

Q: Is Senior Citizen Housing A Good Real Estate Investment? Ernie, Pittsburgh, PA

A: Good question, Ernie, but I would caution you not to generalize about broad real estate market niches.  I understand that many investors, institutional and private investors have become interested in senior housing because of the powerful lure of an aging baby boomer population.  I know some investors who have both made and lost money building and investing in over 55 communities.

There are many factors that make a real estate investment sound and demographic trends are certainly one of them, but but you have to look further.  You have to look at supply, demand, building and labor costs if you are building as well as cost of capital.  Even if demographic trends point to the need for senior housing in a particular area, it doesn’t mean that an individual investment focused in that niche will be profitable.

If you are building or buying to sell, you have to make sure potential buyers have the financial means and interest to buy what you build or buy.  If you are building or buying to rent, you have to make sure that potential renters have the financial means and interest in renting what you build or buy.

The truth is that there is no substitute for due diligence and you have to treat and examine every real estate deal you consider separately not as part of a bigger group or trend, because you’re not buying, building or renting a trend, you are buying, building or renting a specific property and each deal has to stand on its own merits.

Thanks for your question, Ernie.  Good luck.

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