Founder and CEO of ERG Enterprises. Nationally recognized thought leader on entrepreneurship, investing and leadership.
Making money is a great feeling, so is making a difference. But you can’t beat doing both at the same time.
Socially responsible investing isn’t a new concept, but it’s taken on new meaning at a time when we face what I see as one of the greatest crises of our time. Much of the Baby Boomer generation has reached retirement age, but many have no guarantee of finding affordable housing and healthcare. Jennifer Molinsky, project director of the Housing an Aging Society Program, wrote in a Harvard Joint Center for Housing Studies blog that more than 10 million households headed by someone age 65 or older spend a third of their income on housing. A survey by Clever, which provides real estate services, found that the average retiree has less than $175,000 in savings. This is far less than the estimated $318,000 some retired couples can expect to spend on their healthcare alone.
The problem isn’t felt by just older generations. We all feel it. More than 50% of small businesses are owned by people aged 55 or older. Some of us fit into this demographic, while most of us have family and friends who do as well.
If you’re a socially responsible investor or someone aspiring to become one, senior living might be a category that’s captured your attention. Here are three reasons why.
Why Investors Might Consider Senior Living
1. Senior living affects everyone. I believe a lack of housing or healthcare for our wealthiest generation could spell doom for our economy. It could also have a negative psychological impact on those of us who are connected to someone in this demographic.
2. Investments now can aid future generations. We all grow old. Despite our disillusions, the time will come when we need care and assistance. The “Silver Tsunami,” a term used to describe the aging of the Baby Boomer generation, is unique because of its size and velocity. Every day, 10,000 Americans turn 65 and join a rapidly expanding cohort. But this phenomenon actually isn’t one. Baby Boomers are no longer the most populous generation after Millennials supplanted them. In other words, the demand-supply problem of senior living will survive for generations to come. Investments in senior living can help advance an industry designed to serve all of us eventually.
3. Senior living has the potential to be an alpha investment. As an investor, we all want an alpha investment. “Alpha” is an investment that beats the market, which most often beats us. Compared to investments in real estate, senior living has been found to outperform much of the market, according to the Commercial Real Estate Development Association. From my perspective, the imbalance between demand and supply could mean strong and favorable tailwinds for investors. And this doesn’t appear due for a correction anytime soon. Some estimates predict the population of seniors 85 and older will triple by 2060.
What To Know Before Investing In Senior Living
You could say that I was a socially responsible investor before it became a widely known concept. Nearly three decades ago, I began investing with the belief that making money doesn’t need to subtract from positive change. In fact, I find it’s just the opposite, and that belief has been reinforced again and again. Meaningful investments in healthcare, technology and, most recently, senior living have taught me that purpose and profit can go hand-in-hand.
If you’re planning to invest in senior living, read my previous article on the three main investment channels in the space. In short, it breaks down the pros and cons of investment in a real estate investment trust via the public markets, senior living developer and operator directly, and a private fund.
Before investing in senior living, it’s important to assess your goals. What role do you want to play as an investor? Do you simply want to make an investment that generates a positive return while creating good for others, or do you want some involvement in strategic decision making? Setting your ideal outcome and what you want to accomplish can help you choose the right investment path for you.
It’s also important to keep several considerations in mind. Like any investment portfolio, diversification is important, and the same applies to senior living. Don’t limit your investment opportunities to one niche, such as assisted living communities. Be open to all that senior living offers, such as service providers and technology vendors, for example. Those investment vehicles can also offer high upside and social impact as well.
Additionally, make sure you do your due diligence. No investment is the same, and each one calls for careful scrutiny. A great senior living operator can run a successful senior living community, just as a bad one can do the opposite. Importantly, your analysis should not only focus on the opportunity but also on your partners, too.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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