What It Takes to Run an Assisted Living Home: Inside the Business Beyond the Care

To most families, an assisted living home is a peaceful place where loved ones get daily support, meals, and a safe environment. But behind the welcome desk and cozy dining rooms is a tightly regulated, labor-intensive business that combines real estate, staffing, licensing, and 24/7 operational discipline.

If you’re thinking of owning or lending to an assisted living facility, here’s what it really takes to run one day to day.

1. Facility Setup and Licensing: More Than Just a House

Before you accept your first resident, you’re managing:

• Zoning and facility compliance – Properties must meet strict building codes, fire safety, ADA access, and health department requirements.

• State licensing – Most states require facility licenses, administrator certifications, and an approved operations manual before opening.

• Room setup – Each resident room needs furniture, call systems, safety bars, fire-rated doors, and temperature controls.

• Common areas – Dining room, living spaces, bathrooms, and staff stations must be functional, safe, and meet square footage requirements.

Startup costs for a small licensed home (6–16 beds): $350K–$750K+ including renovations, licensing, and working capital. Larger campuses range from $2M to $5M+.

2. Daily Operations: Running a 24/7 Residential Care Business

This is not a 9-to-5. Assisted living homes run every hour of every day.

• Morning routine – Wake-ups, dressing, medication administration, breakfast.

• Midday – Personal care, housekeeping, lunch, wellness checks, activities.

• Evening – Dinner, night medications, hygiene routines, sleep assistance.

• Overnight staff – Handle fall risks, bathroom support, medication emergencies.

You also manage:

• Meal planning and dietary logs

• State compliance records

• Visitor policies and family communication

• Maintenance, trash, and facility cleaning

Homes with 6–10 residents still require 2–3 staff per shift, rotating across 3 shifts/day.

3. Staffing: Your Largest Cost—and Biggest Risk

Assisted living is a people-first business—which means staffing is your lifeline.

• Typical team includes:

  • Caregivers / CNAs (assist with ADLs)

  • Medication techs

  • Shift supervisor / Administrator

  • Cook/housekeeper (often same person in small homes)

• Staffing ratios: Typically 1 caregiver for every 4–8 residents, depending on state law and acuity.

• Hiring & turnover: High burnout means turnover can exceed 50% annually. Recruiting and retaining staff is a full-time job in itself.

Labor costs typically run 45–60% of monthly revenue in small to mid-sized ALFs.

4. Revenue Model: Monthly Rates, Tiered Care, and Occupancy Targets

Assisted living is private pay in most cases—cash, long-term care insurance, or family payment.

• Monthly revenue per resident: $3,500–$6,500+

• Care level fees: Many homes charge base rent + tiered personal care based on needs (bathing, medication, mobility).

• Other revenue:

  • Transportation fees

  • Private nursing services (outsourced)

  • Adult day care drop-ins (in some markets)

Occupancy goal: 85–95% to achieve stable margins. Empty beds = lost revenue with full staffing costs.

5. Compliance and Liability: Constant Oversight Required

Every aspect of an ALF is regulated—often at the state and local level.

• Required systems:

  • Resident records and medication logs

  • Incident reports and state notification processes

  • Infection control protocols

  • Emergency/disaster response plans

• Regular inspections – Most states conduct unannounced visits at least annually.

• Insurance – Must carry liability, workers comp, property, and often professional liability or abuse coverage.

Failing an inspection can mean fines, suspension, or license revocation.

6. Financial Metrics and Lending Insight

• Startup cost:

  • Small residential model: $350K–$750K

  • Larger campus-style facility: $2M–$5M+

• Average gross revenue:

  • Small facility: $300K–$800K/year

  • Mid-size (20–50 beds): $1.5M–$4M/year

• Net margin: 15%–25% with efficient staffing and high occupancy

• Break-even timeline: 18–36 months for smaller homes, longer for new builds

• DSCR target for lenders: ≥1.25, with emphasis on operator experience and licensing

7. What Makes a Great Operator?

• Strong compliance history and systems

• Proven staffing management and low turnover

• Compassionate, consistent care delivery

• Clear occupancy growth strategy

• Transparent billing and family communication

Operators often start small—1 home, 6 beds—and scale to 3–5 homes in a local cluster once the model is stabilized.

Final Word: A Business Built on Care, Cash Flow, and Compliance

An assisted living home is a uniquely challenging and deeply meaningful business.

You’re managing real estate, healthcare-adjacent services, high-touch staffing, and one of the most regulated small business models in the U.S. But for the right owner—with heart and hustle—it’s a model that builds impact and long-term equity.

If you’re evaluating or supporting a borrower in this space, focus on:

• Their operating experience

• Staffing and compliance readiness

• Break-even occupancy math

• Licensing and local regulations

This isn’t just housing—it’s care, and it runs 24/7.