How Much Does It Cost To Start an Assisted Living Facility in California?
People think about starting a Residential Care Facility for the Elderly (RCFE) in California for many reasons. Some feel aging demographics make caring for the elderly a good career opportunity. Others may have tended to an incapacitated family member or friend and found it very rewarding.
Occasionally, an individual may inherit a sprawling house that seems ideally suited for a care facility or discover a great building for sale at a reasonable price. Sometimes, assisted living employees may conclude they could run a caring and innovative establishment if they went into business for themselves.
Whatever your motivation for starting an RCFE or assisted living facility, you may wonder what it would cost to get your business off the ground.
This article examines some of the steps involved in opening an assisted living home and breaks down the expenses. Keep in mind these expenses vary based on the size and scope of your proposed facility.
Start-Up Steps and Costs
Something important to note is that California’s assisted living model provides for a large variation in facilities. Some homes offer care for only a few residents, while others offer services to dozens or even hundreds of individuals.
All RCFEs provide a room, three meals and snacks per day, common areas for socializing, enrichment activities, help with managing medications, and assistance with activities of daily living. Although the communities differ in living environments, extra amenities, and dining options, they all require an understanding of the costs of the various start-up expenses which include the following:
Training and RCFE Licensing Fees
Even if you plan to hire an administrator for your business, obtaining an RCFE administrator certificate is a good idea; it is required by California law if you plan to run the facility yourself.
During the 80-hour certification training, you become familiar with California RCFE regulations and reporting requirements, as well as the fine points of assisted living operations.
The current price for the course is $559 with ALE and the fee to take the state-required exam is $100. Once you pass the exam, you need to pay an additional $110 state fee for the certification. Keep in mind that your future staff will also need RCFE classes to meet caregiver requirements.
You will also require an RCFE License for your facility from the California Department of Social Services. This process starts with a three-hour orientation fee of $50 and a license application fee based on the number of resident beds in the facility.
For example, fees start at $495 for one to three beds, increase to $990 for four to six beds, and $1486 for seven to 15 beds. The application fee for a 75- to 100-bed facility is $3469.
Since the RCFE license process is quite long and complex, many new owners hire professional assistance to prepare the application. ALE’s fee for these services can start at approximately $2,000.
Whether you buy an existing facility that has residents and staff in place, convert a property you already own into a compliant facility, or search out an ideal building to purchase and modify, housing your senior care business is your largest potential expense.
Very few assisted living businesses lease buildings; most own the property they utilize. In California, you must show “control of property” which means you must show proof that you own, are in the process of owning, or renting a property for use as an RCFE. Without proof, you won’t be able to submit your license application.
Down payments vary, depending on the type of loan. If you qualify for a 504 SBA loan, you may need to put as little as 10% down. A traditional bank loan may require a down payment as high as 40% in some instances.
Even a facility currently in business may need some updates, and you will need to incorporate the improvements into your mortgage or have the additional money on hand. If you already own a suitable residence, be sure to get several firm bids for needed modifications and upgrades before making a final decision. The remodeling expenses may be more than you expect.
Furnishings and Equipment
If you purchase a successful operation, most of the furniture, kitchen equipment, and perhaps an inventory of supplies may be included. This might also be somewhat true if you are converting your home. Take a thorough inventory of items already in place and indicate which ones need replacement.
If you are furnishing the RCFE from scratch, you may want to figure anywhere from a low of $3,000 up to $5,000 or more for each residential room and higher amounts for recreational, dining, and kitchen areas.
Another initial cost is setting aside cash for the first few months of operating expenditures. Experts suggest a minimum of one to two months’ expenses, but in California, the state sets this for you. Before the State of California issues your RCFE license, you must prove that you have three months of operating funds set aside in a bank account.
Once again, monthly operating costs vary with the size of the facility, the number of residents and staff, and the amenities offered. To come up with a general estimate, be sure to include:
- Wages for caretaking staff, kitchen personnel, housekeeping, and laundry workers
- Employee RCFE classes, benefits, and Social Security taxes
- Food for residents and possibly staff (it is a nice benefit)
- Laundry and cleaning supplies
- Mortgage Payments
- Utilities and Property Taxes
- Advertising and Office Supplies
- Recreation and Entertainment
Marketing and Advertising Expenses
You won’t be able to accommodate residents until you’re fully licensed, but it’s never too early to start marketing your RCFE. Create a marketing plan for your facility to attract residents.
Before spending money on digital marketing or PR, establish a marketing plan that outlines the expected outcomes of your marketing activities. Include KPIs (key performance indicators) that can be used to determine if your marketing tracks with your goals. All marketing is an ongoing strategy, so expect this to be a monthly expense.
Many owners outsource their marketing needs to an agency or consultant. As a rough estimate, small to mid-sized businesses usually spend about 10-20% of revenue on marketing.
Start Small and Expand Slowly
California has a great assisted living model that allows both the owner and RCFE administrator to begin with a small property and learn along the way.
If you have some capital, to begin with, then realize that over a short period of time with great management and marketing, your return on investment will make the initial sacrifice worth the effort.
Operating or owning an assisted living facility is one of the best careers you can embrace, but it can become overwhelming if you take on too much before you are ready. It’s generally best to only take on what you can confidently handle at one time and grow your business organically over time.
If you have questions or need advice about opening an RCFE, contact us at Assisted Living Education. We are here to help you provide quality care and educational assistance.
People Also Ask:
Who licenses assisted living facilities in California?
Licensing, monitoring and regulation are provided by the U.S. Department of Health and Human Services along with the California Department of Social Services. Every 5 years, the California Department of Public Health performs inspections.