Friday, January 31, 2025
Introduction
When considering assisted living investments, many assume that operating two 8-bed facilities is equivalent to managing one 16-bed facility. However, this is far from reality. In fact, it takes five 8-bed homes to match the profitability of a single 16-bed assisted living mansion. In this post, we’ll break down the financial differences, operational challenges, and why starting with a 16-bed model is the smarter investment.
Breaking Down the Numbers: 16-Bed vs. Two 8-Beds
Many investors believe that starting with smaller facilities and scaling up over time is the safest route. However, let’s analyze the income, expenses, and overall profitability of a 16-bed assisted living mansion versus two 8-bed facilities.
1. Income Comparison
A high-end, luxury memory care facility can charge around $8,000 per resident per month. Whether you operate a 16-bed or two 8-bed facilities, the total income remains the same:
16-bed facility: $8,000 x 16 = $128,000/month
Two 8-bed facilities: ($8,000 x 8) + ($8,000 x 8) = $128,000/month
At first glance, the income appears identical. However, the real differences emerge when we examine expenses.
2. Mortgage & Construction Costs
16-Bed Facility: A new 8,000 sq. ft. luxury assisted living home costs about $2 million, with a monthly mortgage payment of $15,000 (7% interest).
Two 8-Bed Facilities: Each 5,000 sq. ft. facility costs around $1.2 million, totaling $2.4 million for both. The combined mortgage payment amounts to $16,000/month—higher than the single 16-bed model.
3. Payroll Expenses
Payroll is the biggest differentiator between these two models:
16-Bed Facility: Requires two caregivers 24/7, one chef, and one manager.
Total Payroll: $39,500/month
Two 8-Bed Facilities: Requires four caregivers 24/7, two chefs, and one manager.
Total Payroll: $74,000/month
By running two 8-bed facilities, payroll nearly doubles without a proportional increase in income.
4. Operating Expenses
16-Bed Facility: $11,000/month (utilities, food, insurance, PPE, etc.).
Two 8-Bed Facilities: $7,000 per building = $14,000/month—again, higher than a single 16-bed facility.
5. Net Profit Breakdown
Model
Income
Expenses
Net Profit
16-Bed Facility
$128,000
$65,500
$62,500
Two 8-Beds
$128,000
$104,000
$24,000
With nearly three times the profit margin, a 16-bed facility significantly outperforms the two 8-bed model.
Why a 16-Bed Facility is Easier to ManageBeyond profitability, a 16-bed mansion is operationally smoother. Here’s why:
Fewer Caregivers to Manage: A 16-bed facility needs just two caregivers per shift, whereas two 8-bed facilities require four caregivers per shift, increasing the risk of no-call no-shows and turnover.
Simplified Oversight: A single location with one manager ensures streamlined operations, reducing miscommunication and inefficiencies.
Better Staffing Coverage: In a 16-bed facility, if one caregiver calls in sick, another is still present. With an 8-bed model, you risk being understaffed and personally filling in for shifts.
The Trap of “Starting Small”
Many new investors think starting with an 8-bed facility is a low-risk entry point. However, the reality is that smaller facilities generate lower profits, making it difficult to scale. Operators often find themselves trapped—overworked, underpaid, and unable to expand. Instead of progressing to a 16-bed model, they end up selling and exiting the industry.
Final Thoughts: Go Big from the StartIf you’re serious about financial freedom through assisted living, don’t start small—start smart. The 16-bed luxury memory care mansion model is not only more profitable but also significantly easier to manage. With higher earnings, streamlined operations, and a stronger exit strategy, it’s the clear winner.