Buying an Assisted Living Community: The Financial Due Diligence Checklist

Senior living acquisitions are priced on trailing earnings and occupancy, and both can be presented in a flattering light. A careful buyer tests every number that drives the price and the financing, and builds a first-year plan before closing.

Census and revenue

• Rent roll vs. billing. Tie the rent roll to actual billed and collected revenue for at least 12 months.
• Census quality. Length of stay, move-out reasons, and how much recent occupancy came from discounted move-ins.
• Rate and care fee structure. Street rates vs. in-place rates, level-of-care capture, and scheduled increases.
• Payer mix. Private pay, long-term care insurance, and any Medicaid waiver residents, with their reimbursement rates.

Expenses and operations

• Labor. Staffing by shift and care level, agency usage, wage rates against the local market, and turnover.
• Normalizing adjustments. Owner compensation, related-party rent or management fees, one-time items.
• Regulatory history. State survey results and any citations or penalties from the licensing agency.
• Insurance and claims history.

Property and capital

A property condition assessment, deferred maintenance list, and a capital budget for the first three to five years. Building systems, roofs, life-safety equipment and resident unit turnover costs often drive the largest surprises.

Quality of earnings and the 100-day plan

A quality of earnings review restates EBITDA on a normalized basis that the lender and investors can rely on. Pair it with a 100-day plan covering the chart of accounts and systems, billing and census controls, staffing changes and the first lender report. Our essay on EV/EBITDA multiples explains how those earnings translate to value.

Common questions

What should I check before buying an assisted living facility?

Revenue vs. rent roll, census quality, labor, survey history, deferred capital and normalized EBITDA.

Do I need a quality of earnings report?

For most acquisitions with outside financing or investors, yes.