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Is a Nursing Home Profitable?

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Investing in your future is always an excellent idea. But when it comes to the senior living industry, you’re not just investing in your own portfolio; you’re investing in improving the lives of everyone who walks through your door. Whether you’re building your own community, investing in someone else’s, or considering designing your own community, it’s essential to understand what to expect. So the big question is: are nursing homes profitable?

Nursing homes are indeed profitable businesses. The nursing home industry was estimated to be worth more than 180 billion USD in 2023 alone, and the number is expected to rise by 2032. However, it’s essential to make a proper plan before investing in this industry; it can always help to speak to a team of experts before making a financial decision.

Are Nursing Homes Profitable?

The healthcare industry is one of the most profitable in the United States. In 2022 alone, it’s estimated to have earned roughly $2829.6 billion.

The senior living industry contributed a large part to this number. Every year, older adults move to assisted living, memory care, hospice, and nursing homes. Depending on their situation, each of these communities can be an excellent choice. This is why the “skilled nursing facility market” alone is estimated to be worth $181.74 billion in 2023.

But what about the people running these communities?

For nursing homes specifically, the goal of the business is twofold. On the one hand, these communities exist to provide:

  • A living environment where older adults can stay
  • Provide comprehensive medical assistance that can be difficult to find outside of a hospital setting
  • Dignity to older adults experiencing chronic pain or medical conditions

On the other hand, nursing homes are still a business. To survive, a business must be profitable. Nursing homes make their profit by:

  • Charging for room and board
  • Charging for the specialized healthcare services offered
  • Applying for government funding
  • Participating in programs such as Medicare and Medicaid, which can considerably subsidize costs for residents and open potential new areas of revenue for the home
  • Incorporating other forms of senior living into their community to meet a broad clientele

A financially stable nursing home can reinvest the money to offer improved services, update and maintain its fee structure, and create a cycle where it can continue making a profit while offering compassionate care.

This doesn’t just strengthen the business model or the owner’s portfolio; it broadens trust between the community and the residents.

What’s the Average Cost of Running a Nursing Home?

It’s essential to understand what’s involved in running a nursing home. It isn’t as simple as some businesses; you’ll have to handle everything from salaries and facility maintenance to medical technology and real estate.

The average cost of running a 40-room nursing home can vary wildly, anywhere between $675,000-$3,600,000. This greatly depends on:

  • Real estate, and whether you’re renting a building, purchasing a building, or purchasing land to build your own community
  • Staffing costs and salaries
  • The cost of medical supplies and technology
  • The specific services you will be providing
  • The furnishings in the rooms themselves
  • Utilities, maintenance, and other facility costs

While thinking about paying more than $3,000,000 may be daunting, it’s important to note that it is often cheaper to rent rather than build your own community from scratch. Renting a building to open a nursing home is often significantly lower. This number also depends on the real estate value in your area.

Strategic Tips for Your Nursing Home Investment

Investing is about making smart, informed decisions to maximize your profit; this idealism shouldn’t end once you’ve made your decision. If you plan on investing in a nursing home, it’s essential to consider tips and strategies to optimize your investment.

It can help to:

  • Foster a connected community
  • Be innovative with technology
  • Work in partnership with a team of experienced professionals

Foster a Community of Excellence

A well-trained, connected, and happy team is the heartbeat of any profitable senior living community. When selecting your staff, hire people who aren’t just looking for a job—try to find people who genuinely love what they do and go above and beyond.

Make sure the community itself is inviting and supportive for every resident. Invest in your staff and your residents, and you’ll have a community that feels like home to everybody.

Innovate with Technology

The medical field is constantly evolving. Remember, one of the main focuses of nursing homes is to provide comprehensive medical care in a home-like environment. It can help to:

  • Streamline business operations where possible, including management, scheduling, and patient requests
  • Use electronic record keeping to minimize potential risks
  • Stay up-to-date on the medical field to see what the newest technology is, and consider how it can benefit your residents
a woman and her senior parent reading a photo book

Picking the Right Investment Partner

It can be particularly beneficial to work closely with a team of experienced professionals like our team at Distinctive Development. We have a wealth of knowledge when it comes to senior living communities, and we’d love to help you with this decision. Having a proper investment partner is one of the easiest ways to improve the chances of building a profitable nursing home, so reach out to our team. Let’s connect!

Written by Distinctive Development

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Our goal is to ensure that both clients and residents are happy, and we do this by helping you think differently about your organizational goals from concept to keys.

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Why Invest in Senior Living?

Over recent years, there has been astonishing growth in the U.S. senior population, driving demand for senior housing. The percentage of older adults is continuously growing, with over 54.1 million Americans being 65 years or older. Now, baby boomers are pushing the envelope like no other generation before, creating a powerful investment opportunity. 

In the last decade, senior living has been the number one performing commercial real estate sector, and has continued to be profitable through several market collapses. As an investor, you can earn a significant return on investment while also providing a much-needed resource to the market. With senior living, you can expect an annualized rate of return of 13%-21%. 

Don’t sit out this amazing opportunity. Our senior living development experts are here to help you achieve success.

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Our company offers the solutions you need to build a successful senior living community. We’re here to assist you every step of the way.

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