How To Raise $2 Million To Build Your First Assisted Living Mansion!

Welcome to Assisted Living Investing! I'm your host, Brett Chotkevys, and today we’re diving deep into the world of assisted living investments. Are you eager to close your first deal? Wondering how to effectively raise capital, hire a manager, or run your operations smoothly?

This is the journey that transformed my life, paving the way to financial freedom. This investment not only supports my family but also grants me the invaluable gift of time with my wife and kids—attending every school event and game. It’s truly been a life-changing venture!

Today, we’ll explore how to raise $2 million to build your first assisted living mansion, typically around 10,000 square feet. You might think it sounds daunting, but I assure you, it’s more achievable than it seems. Many aspiring investors reach out, expressing their passion for caring for seniors but feeling overwhelmed by the financing aspect. They might feel comfortable starting small with a six-bed facility, but they know it lacks profitability and they’ll be tied down like employees instead of thriving entrepreneurs.

So, how can you tackle a larger project like a 16-bed facility? Let’s break it down step by step, making it accessible for everyone—even if you think you’re not ready. You might be closer to your goal than you realize!

Understanding the Financials:
Let’s get into the numbers. Building one of our beautiful 10,000 square foot memory care mansions typically costs about $170 per square foot, totaling $1.7 million just for the structure. Add in the land cost, which I estimate at $200,000 for about one acre, plus $100,000 for site development, and we’re looking at $2 million in hard costs.

Total Investment Needs:
For a complete project, including soft costs, you’ll need approximately $2.5 million. This figure covers all expenses, including working capital, permits, and furnishings.

Financing Your Dream:
Now, let’s discuss funding. If you pursue an SBA loan, you could secure financing with just 10% down, which would be $250,000 for a $2.5 million project. Many people have retirement savings or investments sitting idle, so finding investors for this amount isn’t as scary as it sounds.

Structuring Your Investment:
To raise the $250,000, consider partnering with investors. The bank will cover 90% of the total project costs, approximately $2.25 million, allowing you to focus on securing that 10% from investors.

If you’re ready to make your dream of owning an assisted living facility a reality, stick around! I’ll share practical strategies for raising the necessary capital and navigating the challenges of your first project. By the end of this episode, you’ll be equipped with the knowledge to take the next steps toward your financial freedom through assisted living investing!

Understanding Equity vs. Debt in Real Estate Investment:
When structuring a deal involving investor partners, it’s crucial to differentiate between equity and debt. If the investor is providing capital for the investment, this is classified as equity—not debt. This distinction is vital because it means you cannot treat this investment as a second-position loan behind a bank. Instead, you must consider a 10% down payment, which refers to actual cash, not borrowed funds. In previous discussions about fundraising, I’ve covered various topics including debt versus equity, profit sharing, and how to structure deals. However, today we will focus on an example involving SBA financing where you need to secure that 10% as an equity position. In this scenario, you are essentially bringing on a partner who will hold ownership in the real estate venture.

Crafting the Investment Proposal:
If you plan to approach potential investors, consider presenting them with a compelling opportunity. This is a chance to earn substantial cash flow, which we recently discussed, where I detailed how to generate $50,000 per month. If you haven’t seen that video, I highly recommend checking it out for insights into structuring your finances effectively.

In addition to cash flow, another significant benefit is the equity appreciation. As you develop your property and establish a business, the value is likely to increase substantially. This dual benefit—cash flow and equity growth—presents a strong investment case.

Example of Equity Structuring:
Let’s break down a hypothetical scenario. If you offer an investor 10% equity in your business for providing 10% of the capital, the financial benefits become clear. For example, if your monthly cash flow reaches $50,000, that translates to $600,000 annually. Thus, the investor’s share would amount to $60,000 each year.
Assuming a 10-year investment horizon, where you aim to build and stabilize your business, the timeline looks like this:

Years 1 & 2: Initial building phase, likely zero profit.
Years 3-10: Cash flow stabilizes at $60,000 annually.
In year 10, you can expect a total payout of $310,000, which includes the final year’s earnings and the appreciation of the property. This equates to an average annual return of around 29%, which remains attractive even accounting for the initial years of no profit.

Maximizing Investor Returns:
To enhance your investment appeal, consider offering a higher equity percentage, such as 19%. This adjustment can significantly increase the investor's returns without requiring them to personally guarantee the investment.
For example, at 19% equity, the annual return would be $114,000 based on the $600,000 cash flow. By maintaining the same property appreciation, the investor would ultimately receive $475,000 upon exit after 10 years.
In this scenario, the investor enjoys a total annualized return of 46%, showcasing a lucrative opportunity for both parties involved.

Maximizing Your Equity: When to Offer More Than 20% in Business Partnerships
Exploring options for equity distribution in business partnerships can be crucial for your success. As a business owner, there are strategic moments when you might consider offering more than 20% equity to potential partners. Let's delve into the circumstances that may necessitate this decision.

When to Consider Offering More Than 20% Equity
Strength of Your Financials: If your personal balance statement, W-2 income, or overall financial assets aren't robust enough for collateralization, it may be beneficial to offer a higher equity stake. For example, if your appraisal comes in lower than expected, additional collateral may be needed, such as personal residences or rental properties.
Stabilizing Your Partnership: In scenarios where your income is inconsistent or your credit score is lacking, bringing in a partner with a solid financial background can stabilize your venture. This partner can provide the bank with the assurance needed, potentially requiring more than 20% equity for their guarantee.

Structuring Your Equity Offer
If you're considering offering between 20% and 49% equity, it’s important to retain majority control of your company. Here's how to approach this. Define Separate Entities: Understand that you typically operate two distinct entities: a real estate company and an operations company. The real estate company, usually an LLC, holds the collateral for loans. The equity offered should reflect the risk assumed by your investors.

Compensate for Risk:
If you're asking investors to personally guarantee loans or use their properties as collateral, ensure that the equity stake is commensurate with the risks they are taking. A well-structured offer between 20% and 49% can attract investors, particularly if it aligns with the potential profit and growth of your venture.

Creating a Win-Win Scenario:
To foster a successful partnership, balance the equity distribution between your real estate and operations companies:
Equity Differences: Your investor may have 0% equity in the operations company while holding a stake in the real estate side. Alternatively, the equity percentages can match, or differ based on the agreement. Rewarding Your Efforts: If you decide to offer more than 20% to incentivize personal guarantees, ensure that you also compensate yourself appropriately for your time and effort. The cash flow from the operations company will primarily support your income, so structure your equity to reflect your contributions.

Practical Application:
Consider a scenario where you’re acquiring a $2 million building and require $500,000 for working capital. With a $250,000 down payment, you can leverage strategic equity offers to create a solid foundation for your business.
In summary, understanding when and how to offer more than 20% equity in your business can significantly impact your success. By clearly defining your financial needs, structuring equitable partnerships, and ensuring a fair reward for all parties involved, you can build a thriving enterprise.

How to Raise $250,000 for Your Memory Care Mansion Investment:
Are you ready to explore investment opportunities in memory care facilities? In this guide, we’ll show you how to raise $250,000 from investors and provide them with an impressive return on their investment. By leveraging the financial strength of your investors, you can navigate the complexities of financing without having every aspect of your finances perfectly aligned.

Building a Winning Partnership:
Collaborating with an investor can create a powerful partnership. While you may possess the operational expertise needed for the business, your investor can offer financial stability through their strong balance sheet, robust W-2 income, and solid tax returns. Together, you can approach lenders confidently, presenting a united front that enhances your chances of securing financing for a $2 million memory care mansion.

Unlocking Opportunities Without Massive Capital:
You don't need hundreds of thousands of dollars in your bank account to embark on this investment journey. With as little as $50,000 in savings, you can pursue a deal like this. While some upfront capital is necessary for initial expenses, including education and business planning, having savings will put you in a strong position to raise additional funds.

Gaining Experience and Overcoming Obstacles:
Many aspiring investors believe they need prior experience in assisted living or healthcare. However, that's not the case! While my wife and I had no experience in this field, we successfully executed our investment strategy by leveraging our applicable business and real estate skills. If you lack medical expertise, consider hiring an experienced manager to fill the gap.

Emphasizing Bigger Deals for Better Returns:
I started with smaller investments, like six-bed and three-bed facilities, but found that these ventures often led to minimal profits. Instead, I encourage you to focus on larger investments, such as a $2 million memory care mansion. The financial dynamics of larger properties can lead to greater profits, allowing for a more sustainable business model.

Building Confidence and Skills:
Raising money can be daunting, especially if you're new to the process. I remember my first attempts at fundraising; I stumbled and felt nervous. But with practice, my presentations became more polished and effective. Don’t be afraid to fail—view early attempts as valuable practice runs that will build your confidence.

Start Your Journey Today
​If you're interested in learning how to effectively raise money for your memory care investment, start with our free foundations training. This step-by-step course provides essential tools and strategies for successful fundraising. Click the link below to sign up for our free training, and take the first step toward achieving your investment goals.