How to Make Your Real Estate Empire Using Residential Assisted Living with Dr. Alex Schloe

Having some degree of passive income is incredibly important for physicians. Just so it can be defensive.

It can be defensive to have that cash flow coming in to let you have some degree of freedom, whether that's seeing a few less patients taking an extra day off of work. Just really important to set yourself up to do that.

Welcome to Truly Passive Income. I'm Neil Henderson.

And I'm Clint Harris. And Today's guest is Dr. Alex Schloe. He's a physician entrepreneur and and co founder of the RAL Room.

While still serving in the Air Force, Alex built a real estate portfolio focused on residential assisted living homes, helping busy doctors reclaim their time without trading patient care for profit. Now a podcast host and a sought after speaker, Alec has created a high impact AI tool that empowers physicians to vet syndication deals in minutes.

From physician burnout into financial freedom. We would like to welcome Dr. Alex Schlo. Alex, appreciate you being here today. How are you, sir?

Awesome. I'm doing great. Yeah. Looking forward to being here. I misnomer there. I did not create an AI tool.

I think an AI tool said that I did, but it's all good there. And AI tool said it's taken over, but, but everything else is true. I am a family medicine physician in the Air Force.

Three more days active duty, A Christian, a husband, a father, most importantly. And do invest a lot in residential assisted living.

I love that the robots are coming for all of us.

No kidding. So we'll get into, we'll get into the RAL Room and find out what it's really all about at some point.

But we were talking right before we got on that you're three days away from separating from the Air Force. You're going from Air Force physician to residential assisted living investor. Can you walk us through that pivot and how each step built on the last?

Yeah, absolutely. Well, I got started investing in real estate in residency.

So when I was in, in med school, actually I got a stipend from the Air Force signing bonus for 25,000 bucks. And at the time I was looking for apartments in, in Richmond, Virginia, which is where I was going to start med school.

And my dad said, hey, why don't you think about taking that bonus, buying a duplex, fixing it up, renting it out to someone else. It was, it was house hacking before house hacking existed. And unfortunately I did what most kids do and I did not listen to my dad.

But the seed was planted. And so I knew, hey, I'm going to, I'm going to go after this. Once I Start residency a couple years later.

And so as soon as I got into residency at Eglin Air for based in Florida, I bought a house with a physician loan. I was no money down, $58 out of pocket. I was terrified. But that was the start of the investing journey and that's been a fantastic long term rental.

Then I pivoted into short term rentals for a bit. We had a few, we sold a couple and then pivoted into assisted living which is where we invest primarily.

I do have shiny object syndrome, so I've been a GP and been involved in a bunch of other deals as well. Boutique hotels, independent living, some new development, those sorts of things.

I need to get in the senior, sorry, the self stor game with you guys as well.

Boy, have you come to the right place. So let me ask you about this, that trajectory. Everybody typically has similar version of the story.

Start off with a single family home or maybe a duplex, maybe a house hack and then maybe a short term rental or a small multi family or whatever. You made the jump to commercial with the assisted living homes fairly early and a lot of times that's a pretty high barrier to entry, right.

So I mean I know you're a white coat professional, higher earning income individual or I hope you were at the time, but the reality was like that's a jump, right?

So when at that point you're probably looking at strategic partnerships to come up with the capital to come up the, the bank approval by having someone that knows how to operate. How did you get the, the know how and the fortitude to make that jump?

Yeah, absolutely. As with everything in business, it's all about relationships, right?

It's that that relationship capital is more important than any other sort of capital. And so I started podcast called Physicians and Properties because I kept having doctors come to me and say hey, how are you doing this?

What are you doing?

And, and, and that turned into one of the best decisions I ever made because it formed so many great relationships, access to capital and opportunities. And then through that I'd be remiss if I didn't mention I have two partners that, that I met in a mastermind.

And I think masterminds are so incredibly important. And that was the war room mastermind for military folks. And gosh, we've been in that for about six years now.

And Charlie and Luke, my partners, we met there and we started buying properties together.

And so I think success in real estate in any capacity is going to be, you know, totally dependent on your partnerships going to be Totally dependent on relationships. And then through that, we were able to scale, you know, a little bit more quickly than typical.

I could not agree more. Neil and I are partners. We have two other general partners in our group, four general partners, total 17 employees, and a handful of interns.

It's amazing when you have the right strategic partners, what you can take on that you may have otherwise been intimidated for. One of our partners, Eric always says that risk is a muscle. And, like, you gotta work that muscle right.

And the stronger you work it, you get to the point you're willing to take on things you wouldn't otherwise do.

And when it comes to strategic partnerships, oftentimes the whole really can be greater than the sum of its parts, especially if you're coming from a place of really understanding yourself first, I think, and strengths and weaknesses, and then how that plays in with other people. One other thing before we skip on is the podcast thing. We have a podcast where, I don't know, 125 episodes or so in.

I used to say that the most important thing you could do is listen to podcasts. When people ask me how I was doing, what I was doing at the time, and it was like, well, so I believe in the law of 100 hours.

The law of 100 hours says that if you spend a hundred hours studying any one thing, you're going to know more about that subject matter than 95% of the people on the world. And 100 hours in a year is only 18 minutes a day, which is less than the average person's car ride and commute.

So I've always said did for years, I was like, use that windshield time. That's your time, that's your hundred hours to get, really get ahead.

And then when Neil and my wife talked us into to co hosting a podcast starting a couple years ago, this has been such a significant jump forward because we get to ask the questions, we get to connect with the people that we want to learn about. We get to. Anything that I'm curious about, I can connect with you.

And you're going to give me 30 minutes of your condensed life experience if I let you get a word in edgewise. But I say all that just to say this. Listening to podcasts and anybody listening to this is really, really important.

But the next step above that, which in my opinion is, is head and shoulders more beneficial is starting a podcast. It's amazing how that turns you into a lightning rod for those kind of communications.

So I also feel like you got a buzzword going on right the the physician thing with alternative investments is a really strong play right now because physician burnout is very real and I would argue probably at an all time high.

With so much administration in healthcare, physicians forced to practice defensive medicine, you're fighting with insurance companies, you've got significant reduction in workforce since COVID Um, there's a ton of, of headwinds that you guys are facing. So as that's happening, more and more physicians are looking for, like, man, I really don't want to spend the rest of my life trading time for money.

How do I do something differently? Talk to us about that side of things as a physician.

Connecting with other people, a community, the mentality, some of the biggest obstacles you may face with physicians, getting them to think bigger. What does that look like?

Yeah, absolutely. That was the whole reason why I started the podcast.

It's how, you know, how we can show physicians how investing in real EST and entrepreneurship can give you the freedom to practice medicine and live life how you want to. And a lot of that does stem from burnout. And I think, you know, a few things that are important.

Like, sure, physicians are high income earners, but they gave up a decade of their earning potential to go to med school, to go to residency.

I mean, I was making like the equivalent of probably like $4 an hour when you look at the number of hours I was working in residency compared to what we were making. And so there's, there's just a lot of that.

You're giving up a lot of time to become a physician, and then you get there and have that arrival fallacy of like, hey, maybe this wasn't everything that I thought it could be. Being a physician is so honorable and taking care of patients is the best privilege. And I love it so much.

And even though now I have, quote, unquote, financial freedom, I'm still practicing medicine because I still love taking care of patients. But the only reason I was able to do that was because of real estate, was because of entrepreneurship.

And so I think that having some degree of passive income is incredibly important for physicians. Just so it can be defensive. You know, you mentioned defensive medicine.

It can be defensive to have that cash flow coming in to let you have some degree of freedom, whether that's seeing a few less patients, whether that's taking an extra day off of work. Just really important to set yourself up to do that.

A challenge, I would say that a lot of physicians have is we're intelligent and analytical and we want to have all the answers and we want to know all the potential outcomes before we take action. So that's something that I'm always talking to folks about is like, hey, what is a amount of money that you're okay with potentially losing?

Because every investment has risked. But I'm telling you, you're not. You're never going to find the perfect deal.

And analysis paralysis is going to kill your growth and kill your future potential. It only takes that one deal just to get started and see like, hey, that really wasn't that scary.

And then that cash flow starts to stack and go from there and that snowball starts to take effect.

Well, and what you're talking about going back to the risk muscle that Clint was mentioning is that, you know, oftentimes the way you get past that is, is to partner with somebody. And you've helped so many physicians break into real estate without sacrificing their careers for someone brand new.

How would you explain what residential assisted living is and why is it such a powerful niche?

Absolutely.

Well, if we look at residential assisted living, a lot of times folks hear assisted living, they immediately just think about that big box facility, you know that, that huge institutional facility that smells like ur caregivers are running around like they're on fire because they're taking care of 20, 30 patients. That is not what residential assisted living is.

So when you think residential assisted living, I want you to think a large, boutique, well renovated single family home that's typically single story, numerous bedrooms and bathrooms. The more bedrooms and bathrooms you can have, the better because the more private residents you can have.

And you're taking care of seniors in that homelike personalized environment. And so you're going from a caregiver ratio at a big box facility of maybe 1 to 20 or 1 to 30 to 1 to 5 or 1 to 8.

And so just much more personalized care. Seniors live longer in residential assisted living and it's just a better community environment.

So that's, that's what residential assisted living is in its core. It's just the ability to take that care and make it more personal and make it more effective.

Okay, gotcha. So we're not talking about nursing homes and certificates of need.

We're talking about individual properties that you are buying it as one thing and you are converting it into a different asset class, mainly a assisted living facility.

I'm assuming you're going to have fixed overhead costs of having someone either living there or on site all the time, or a nurse or occupational therapist or medical assistant visiting there. Like, what does that look like?

Because when I hear that one of the reasons I got out of Airbnb and into self storage is because I got burned out on tenants. And I really like the idea of renting someone a box of air with no kitchens and no bathrooms. This sounds like the opposite of that, right?

This sounds like not only do you have, you've got a lot of tenants, hopefully one per bedroom, you have tenants with a very specific need set and you have fixed overhead costs that come along with that.

Now along with that is going to come increased cash flow and the net operating income on the property now probably give you a commercial valuation versus buying as the residential bricks and sticks. So I see the value add component, especially from a recapitalization standpoint.

But just explain the whole strategy, including the exit and how laborious is it?

Yeah, absolutely. So there's four different ways to invest in assisted living. So the first would be you own the real estate, you own the operations.

That's going to be much more operationally intense because you're either overseeing all the operations, which is the day to day care of the residents that live in that home. And typically, depending on the size of the home, you're going to have multiple caregivers who are there 24, 7.

They're, you know, helping the residents with activities of daily living, bathing, cleaning, toileting, food preparation and so forth. And so it's not really a strictly medical environment, it's not a nursing home environment. It's more of those help with activities of daily living.

But to, to answer kind of your question as a whole, the four different ways, so you own and operate. That's what we just talked about. So you own the real estate, you own the operations.

And we typically teach folks how can you remove yourself from the operation. So how can you hire a manager who runs that day to day care more effectively so you can work on the business and not in it.

But option number one, own and operate. Number two would be lease to an operator. So we call that the L2O model. That's how we got started.

That's where you would buy the home and either renovate it to assisted living or buy a previously operating assisted living home. And then you would lease that out to an operator.

On a commercial lease, that's going to be way more passive because the operator's handling all the day to day. It's a commercial lease. Just like any commercial lease, you're kind of beholden to that operator.

And so you want to make sure that you're vetting that operator appropriately. But the cash flow there and the leased operator Model can be just as good as an Airbnb without all the operational headaches.

The operator's handling all your day to day. The third way would be the flip side of that.

So you're an operator who comes in and you lease a home from, from a real estate investor, most likely, and you do all the day to day care. And then the fourth way would be passively investing, say in a syndication or investing with us on one of our deals.

Got it. What is a, what is the amount of renovation that typically goes into a property if you're converting it?

I'm assuming you have to have wide door frames, rails, you probably have to be wheelchair accessible, all those types of things. And then what is the average family or consumer paying for this? Is it, is insurance paying? It is a private pay. What does that look like?

Yeah, great question. So first I'll kind of talk about the ideal home and that'll answer the renovations piece.

Typically when you're looking for an ideal home to convert into assisted living, you wanted to have as many bedrooms and bathrooms as possible. The more private rooms you can offer, the more you can charge.

And typically we're going after private pay residents and I'll talk a little bit about why that is in a second. But you're going to want to have as many bedrooms and bathrooms as possible.

Large, single story, you don't want to have multiple stories because mobility is an issue in this population. So large single story.

And then renovation wise, you typically need a fire suppression system, so sprinklers, a fire alarm, monitoring panel, wheelchair ramp, widen hallways, widen door frames, and at least a shower that you have one roll in, shower in. And of course the grab bars as well. Those are the big typical renovations.

It's going to be different in each state and even in each locality is going to have a little bit different flavor on things that they require for licensing. But those are kind of the big things to look at in terms of reimbursement.

We typically, we typically go after private pay residents for a couple different reasons. That's because they have the capital. Right.

You're not dependent on the government, such as Medicaid to help supplement their, the pay that's happening. And you know, you and I all know how the government works. That's sometimes not as effective.

And so private pay, the median right now is about 4,500 to $5,000 per month. Okay. Per resident. So if you have a 10 resident house like you could have in Arizona, that could be 50,000.

There's a lot of different specialized niches within assisted living. But so that could be like memory care where you could charge more like 8, $500 per month. That's for patients with dementia.

You could have ventilator homes. There's other things as well.

But just standard assisted living is about $5,000 per month, which is still about $1,200 per month cheaper than going to one of these big box facilities where you're most likely going to have poor care. So that's typically what we're looking at. Some folks will still have Medicaid beds.

There is long term care insurance that some homes will take as well that can help supplement there's VA benefits. So there's some other ways too that you can get paid, but typically private pay residents are what you're shooting for.

Well, I'm a little older than the two of you and I have a long term care plan. So I was going to ask that selfish question of are there facilities that often take long term care insurance?

Because my wife's already told me that like as soon as I go downhill she's kicking me out of the house.

Oh, she and I are, we already talk about it. Yeah.

Hopefully not anytime soon there for you.

I hope so too, but you never know.

So let me ask you this, you've, you scaled five of these things while you were practicing medicine.

So what did your, what is your journey, what did this look like while you were practicing medicine and like where, where did it lead to and what does the future look like for you?

Yeah, so we did five least to operator while practicing medicine and then we partnered with an operator on three more. So a total of eight while I was still practicing.

I'm still practicing now, but that, that looked like, you know, early mornings, late nights and a, and a, a good routine. I like I mentioned, I got two boys and a wife who I love way more than real estate and way more than medicine.

And so my priority when I'm, when I'm with them is I'm with them. I'm not working on business.

So I'm pretty strict morning routine person and then once the kids go to bed, then I'm staying up late working after I've connected with my wife. That's changed a little bit now that I'm in terminal leave and I have a lot, a lot more time because I'm not currently seeing patients.

But that's the key I think is to have those strict, that strict routine, have those KPIs that you're looking for prioritize. I hired a VA early on which was really helpful having two partners, you know, also really helpful.

Charlie, one of our partners, you know, he's a full time entrepreneur, so he had a little bit more flexible time during the day to put out some fires. And so that's, that's how I did it. And then just that consistent effort over time kept compounding and I can't believe where we are right now.

That's amazing. So talk to us about, is there some kind.

I know you, you mentioned that you did not develop an AI tool, but you have some way of teaching people that when you're talking to the other physicians that are your colleagues and people you work with, how are you giving direction on how to get started, how to identify your own goals, how to choose operators, the structure to put together, like what, what's the curriculum or the methodology that you're teaching?

Yeah. So we have on our website, thereailroom.com a free guide, a free 10 step guide that anyone can download if they want to take a look at that.

But we tend to start there, kind of that 30,000 foot view of like, okay, let's figure out one. Do you even want to do assisted living? Do you have a heart for assisted living at all? And then in what capacity do you want to invest?

You know those four investor types that we already talked about?

Once you get there and figure that out, then it's like, okay, well, do you need to find an operator or do you need to find a partner who's going to act as the operator? So that's going to be really helpful from a relationships perspective, which is most important, and then figuring out, okay, where's the location?

Are we practicing, you know, memory care? Are we just doing assisted living?

And then working through the checklist of, okay, what's licensing look like, what's zoning requirements, renovations, all those sorts of things. It sounds pretty daunting, but that's why the mastermind exists. That's why relationships are really important.

And we also have a podcast called the Railroom Assisted Living Podcast where you can get a ton of information for free and a couple Facebook groups as well. And so there's a lot of different ways to get into the, into the space.

But the big thing really is just building those relationships, figuring out what asset class you want to invest in and then taking action and going from there.

Well, let me dig in here a little bit. You mentioned the zoning aspect of it. You are talking about buying, you're buying homes that are in residential neighborhoods.

Obviously you probably get some pushback occasionally from residents about Rezoning that and turned residential assisted living. How do you navigate that?

Yeah, well, the beautiful thing is sometimes you don't even have to rezone. It can just be a residential home. The other thing that is important to know is the federal fair housing laws cover assisted living homes.

So even an HOA, for example, can't technically say you can't do assisted living in your home. So that's helpful. Do tend to avoid hoas because that's just another headache to deal with. But a lot of times these are, these are residential homes.

You may have a residential assisted living home in your neighborhood and not even know it. And you know from a zoning perspective, oftentimes you don't have to rezone unless you're trying to have more residents than what's allowed.

So for, you know, an example would be in, in Virginia, we're getting ready to start a development project in Winchester, Virginia. In Virginia, if you're going to do residential assisted living and you're not worried about zoning, you want to do that in a residential zone area.

You can have up to eight residents. We're, we're, we bought some commercial land. We're going to do ideally 416 bed homes just because economies of scale and so forth.

So that's kind of where it fits there in terms of being in a residential neighborhood. I'm going to be honest, seniors make really good neighbors because it's quiet by 7:30, they're clean, you know, those sorts of things.

So it, it doesn't tend to be an issue.

And as I mentioned, a lot of times these are just right in the neighborhood which is helpful for the senior because they may go from having to sell their house to then staying in their same neighborhood and going into one of these residential assisted living homes which does wonders for community for them. So it's a, it's a great way to do it.

Are you guys bound by states that operate under a certificate of need?

Some states do have a certificate of need and then you have licensing requirements as well. Again, every state's going to be different depending on how you're investing in assisted living is how that will affect you.

If you're leasing out your home to the operator, they're typically the one that's going, getting the license and the license is going to be under their business name. So that kind of removes you from having to do that.

One thing that is important to look at though is some states will have distance requirements and again that's more locality specific.

Got it. All right, thanks. So it's kind of funny to bring it up in this conversation, but we talk a decent amount about the silver tsunami.

Usually what we're talking about are businesses coming up for sale because we've got this baby boomer population that's in the aging population. There's billions if not trillions of dollars worth of wealth that's going to be transferred over the next one to two decades.

And we hear about people aging out of the workforce. And so there's a lot of economic impacts that potentially come along with that.

But it's in this situation, it's not just the residents that we're talking about, it's also the operators that own some of these facilities looking to exit.

And usually that's what we're talking about is like roofers, plumbers, electricians that have all these service businesses that they're going to unload. I think there's a pitfall because a lot of that business was built on relationships.

You can't just hand the keys to the next guy and expect it to operate. But you're in a line of work where you have an aging population, are your consumers.

But at the same time, you know, assisted living is kind of a veteran move, right?

Very few people jump in as early as you have things like mobile home parks, assisted living, you know, laundromats or self storage is typically people that are a little bit farther along with their journey and they understand the value of net operating income, maximizing cash flow and recapitalization. So how does that silver tsunami come into play when you guys are looking for deals? Are you looking for off market deals?

How are you identifying properties?

Are you specifically looking for properties that you can convert or are you targeting facilities that are already set up as an, existed as an existing assistant living facility?

Great question. Yeah, all the, all the above would be the right answer there. You do have two silver tsunamis, right?

You have the aging population that's aging into these assisted living homes. There's 77 million boomers. Seven out of ten of them are going to require long term care. That's 59 million boomers.

And we're already have a, have a shortage of about 600,000 to a million beds right now. So this is going to be a huge crisis.

From that perspective alone in terms of the silver tsunami, as in the boomers that are aging out of their businesses and wanting to retire, it is a great opportunity for assisted living because a lot of these are mom and pop operators. In fact, the last two deals that we've done were mom and pop operators who wanted to retire.

We were able to purchase those homes under seller financing and it was just a great win win for us. And so, you know, continuing to network with folks in that environment is a great way to do it.

You know, just, just calling and, and talking with the seller if you can, or the potential seller if you can and figuring out, hey, what do they need? It all goes back to relationships and figuring out, hey, what is the seller or the potential seller looking for and how can you accommodate that.

That you mentioned early on that you have, you suffer from a little bit of shiny object syndrome. You've invested in multiple asset classes from memory care to independent living and even boutique hotels, soon to be self storage.

What's your personal decision tree for saying yes to a Neil de new deal look like?

Yeah, a Neil deal sounds good too.

A Neil deal. What does it take for you to say yes to a Neil deal today?

Yeah, we'll talk, we'll talk offline Neil. Yeah, well, right now I'm trying not to have the shiny object syndrome anymore.

I think a lot of people talk about shiny object syndrome as it's this really bad thing. I think it becomes a bad thing when you've already have something that you're successful in.

I think when you're first getting started and I tell physicians this all the time, it's like going to an ice cream shop and there's a bunch of different flavors and you take that sample that samples self storage, for example, you might figure out, hey, I don't like self storage. Let me go try the chocolate chip cookie dough, which is the assisted living. That's the best flavor.

And they, you take that bite, you realize this is what I want to go after. And then you fall in love with it and it's working for you.

I feel at that point that's when people sometimes get bored and they're like, hey, this is really successful. This is going great, but I'm kind of bored. Let me look into something else.

When, if they stick with that asset class, they're going to have a meteoric rise. So I'm trying really hard to, to just focus on senior living as a whole.

So independent living, assisted living, memory care, trying really hard to just focus in that regard. So really that, that's what we're looking for going forward. I think that's where the wins are.

But I'm still invested in some other deals, you know, here and there that are, are outside of that, some hospitality deals that are really cool opportunities just to help kind of offset the portfolio and have a little, little of diversification. So I'm trying to combat it. Maybe Neil can hold me accountable.

Yeah, well, when you're actively earning income on something, I think it's good to keep the main thing. The main thing.

If you're, if you're a high earning physician, you know, and you all of a sudden some, some guy named Clint comes to you and say, hey, you should buy a short term rental and manage it yourself. That's maybe not such a great idea.

Or if, you know, some guy named Neil comes to you and say, oh, you know, you should buy a self storage facility and operate it on your own. But you know, there is the power of like often what we are talking about with people is, look, diversify your active income into something else.

You know, if you're a physician that's earning a good income, diversify it into residential assisted living without being the active operator. That's kind of what we say. You know, the danger of shiny object syndrome. That's more of where it comes into.

I often describe it as, I use the same similar energy you, I describe it as sort of eating at the buffet table of real estate strategy and sampling it and getting a sense for what you like. But that's really only for me. That's only if you're going to actively do it.

Yeah, absolutely.

Yeah.

When you're more passively investing. Sure. I mean, it's not going to take much more time or effort to be an LP in a self storage deal, as a hospitality deal, as an assisted living deal.

And so diversifying your portfolio can be really helpful.

Yeah, I love the fact that you figured that out pretty early because the reality is a lot of physicians that start being a little bit more active early on, you guys have to keep in mind how much your time is worth. You know, if you, if anytime you can hire somebody else to do something less than a couple hundred dollars an hour, which is what your time is worth.

And like you're, you're technically losing money when you do it yourself. Right. Keep the main thing, the main thing, take care of your patients.

Focus on your relationship with your wife, your family, your kids and the people that you love and you care about. And outside of that scale quickly fall, fast, fall forward. Right, right.

Fail in a way that you're, you're pushing to get that time back so that you're not making the mistake of spending your valuable time on something versus putting enough pieces in place that you have the ability to scale. So with that intent to scale, what does that. With you and your partners, what are you guys aiming for? Do you have a fund together?

Do you have a certain number of doors or assets that you're looking for or net operating income? What does that look like?

Yeah, that's, that's a great question. We, right now we're working on two different development deals. One is in Tomball, Texas.

That's going to be two 16 bed like memory care mansions, about 10,000 square feet. And then another is going to be in Winchester, Virginia. We just, we just got under contract on the land there. We're doing due diligence there.

We're hoping to do four different homes on that, on that property. So that'd be a total of 64 beds.

But waiting to see what land feasibility looks like and wetlands delineation and all that good stuff to see how much we could potentially build there. And so that's, those are, those are kind of our three year goals is a couple of development deals. We're still actively sourcing.

We hired an acquisitions manager for the same reason you mentioned. Like we didn't have the time to source all these deals. So we hired an acquisitions manager who came on. His name's Ryan. He's awesome.

So he's sourcing some more of those lease to operator deals.

We're also looking at like 30 to 50 bed assisted living facilities because you can still kind of keep that residential and feel and make that more boutique. But it's small enough that the, the big investors, the hedge funds and private equity are not coming in to buy those just yet.

So there's a good opportunity there as well. And then we're, we're working a lot on just growing the Mastermind.

Our goal with the mastermind is can, can we open 100 homes within the next three years within our community? And so we're, we're getting there. We're probably about 15 or 16 homes that are in the pipeline and that's only been about a year of the Mastermind.

And that's continuing to grow way faster than we could have imagined. And we're really grateful for that.

Two questions. You guys are operating in how many states now?

Yep. So we lease, we have leased operator homes in Arizona and then we're Partnered with an operator in Wisconsin.

The new development is going to be in Texas and then in Virginia, and then I'm raising capital on a general partner on some independent living deals in Florida. So that's kind of where we're at right now.

The beautiful thing about assisted living, when you're looking at that supply, demand, mismatch of almost a million beds right now that are needed is this is needed everywhere. Every state needs it, every city needs it. So a really great opportunity. And the cool thing about that too is it limits a lot of the competition.

Right. Like everyone I talk to could open 10 homes and have 10 residents in each home.

And we're only putting a small dent on the fraction of beds that are needed. And so there's minimal competition as well.

Of course, operationally it's really difficult, but if you have the right support system, it can be beneficial and you can really succeed in the space.

And what does it look like for the LPs investing in an opportunity like this?

Yeah, absolutely.

We can use the Tomball deal that we're working on right now, Tomball, Texas, that's going to look at look like about a 21% IRR and about a 2.4x equity multiple on that. That is new development.

The cool thing about this deal that's, that's exciting is Aaron Amien and Andrea Amien, who are are going to be the owners of this property that we're partnered with, they decided, hey, we're going to return equity back at year six with a refinance, but we're going to keep everyone in the deal. So they're still getting cash flow distributions through year 10 are longer. And so it's a really cool. Both equity play and cash flow play.

Some other deals in the space look so good, honestly, that people don't even believe them when we're talking to them. When you're talking about like a 53% IRR or 40% IRR and some of these independent living deals that I'm working on too.

So it's a lot of great potential to make some great returns.

I love that. Yeah, we have some legacy deals ourselves and obviously like that five to seven years, you're looking at a refinance in that event.

It's always difficult because nobody knows what the interest rates are going to be. It turns into an infinite return eventually.

But what that infinite return looks like is difficult to calculate just because you don't know what the LTV is going to be like. Obviously, the higher the ltv, the higher the interest rate. The lower the cash flow, you can get compression there.

But the idea is you're already recapitalized. If you guys are paying out a nice chunk by way of that refinance, then it's not a capital gain, so it's non taxable.

Obviously the cash flow portion would be taxable. Are you guys taking. Doing cost segregation study and harvesting the accelerated depreciation on the properties you want to hold long term?

Yep, we are. Which is amazing too because you can also accelerate, depreciate the FF and E on these homes too. Right.

So then you're talking about at least, you know, 16 beds and 16 dressers and all the furnishings and medical care and so forth. So it's a really great tax play as well. And then that's going to get passed to the investor pro rata.

So they're going to get those tax benefits just to.

Got it. Are you guys. Is it, you know, year one cash flow or does it take. It depends on if it's a conversion or not.

Are you guys up and running pretty quickly?

Yeah. If you're converting or renovating and you can get those renovations done quickly, then it's just a matter of, of filling the beds.

We've bought some that are already operating and just not operating very well and we've put in a really good operator to help optimize that. That's obviously going to cash flow.

The fastest next would be if you're renovating into assisted living and then, and then operating and then the new development would be. The new development would be the longest to cash flow. Right. Because we have to, we have to build the homes.

Typically you can expect about two new residents per month once you're open. Ideally, we're going to try and lease these up and these spaces up as fast as we can ahead of time.

So then we're walking in with a bunch of residents right away. In fact, this was crazy.

I was just reading an article the other day that was talking about how seniors are already buying, trying to buy spots in assisted living homes because they're so concerned with the supply demand mismatch and so they're putting down large deposits in order to save their spot, which is wild. We haven't even. I didn't even think about that until I read that article. But there's, there's definitely going to be a need there.

But yeah, the fastest way to get up and cash flowing is going to be buying an already previously licensed home and then putting an operator in there to optimize.

That's awesome. I I love it, man. A lot more to unpack here. I want to hear about your next offerings, so I'm going to ask you this question.

We'll start wrapping up here for the sake of time. This is a question we ask everybody and it's, it can have various answers. There's no right or wrong answer on this one.

But when you find yourself talking to other physicians, people interested in what you're doing, friends, family, whoever it may be, is there one book that you find yourself a book or re. Or you know, whatever it may be resource that you see yourself pointing to or leaning towards more often than not that you.

You find out that you're recommending more than others to the people that are interested in your strategy?

Yeah, Assisted living, there's not really a great book and I'm going to call my shot here. I want to write that book, so I'm hoping to write that book in the next couple years. There's not a good one that exists.

I most commonly to physicians, I'm recommending Rich dad, Poor dad largely because they just, you know, physicians never got any financial literacy in med school and I know I didn't and luckily there's like Jim do with the white coat investor. But Rich Dad, Poor Dad's probably what I recommend the most.

Just to flip that mindset to realize like, hey, right now I'm only having that active income. I need that passive income to help, even from a defensive metric to help. And so Rich Dad, Poor Dad's probably what I recommend the most.

The Purple Bible.

Y well, listen, Alex, this has been a great conversation. We've thoroughly enjoyed it.

If any of our listeners want to reach out to you and find out more about you and what you're doing at ra, what would be the best way for them to do that?

Absolutely. The routeroom.com has a bunch of resources there ways to contact me, Charlie and Luke, my partners, as well as links to the podcast.

We have a free guide there, a free 10 step guide that folks can get as well. If you're interested in investing with us, you can click the Invest tab and fill out that form there. Uh, and then the podcast is totally free.

If the Mastermind sounds exciting, we'd love to have you there. That's a great community. You can book a free call, learn more about what the RAM Mastermind has to offer.

That's awesome.

Sounds great.

Well, thank you, Alex. We really appreciate your time today. This is something we haven't dove into a lot, especially from someone with a physician background.

So really appreciate your willingness to share your knowledge. And thanks so much. We look forward to watching your continued success.

Thanks Neon Clint. Really appreciate it.

Thank you so much for listening and watching the Truly Passive Income podcast.

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