Starting an Assisted Living Facility


Conduct a feasibility study before seeking to finance such a project. Securing long-term financing is often a component of successful strategic planning. An investment loan is one option for acquiring and developing real estate, especially if it includes the construction or reconstruction of buildings. Operating costs and capital expenditures should be given careful consideration. Allow for future capital expenditures. Be sure to include low maintenance and energy efficient features in the design or redesign of living units. Bear in mind that you are marketing a lifestyle (not just four walls) to an aging population.


Define the market. Take into account the geographic area, local competition and the age and income level of prospective residents. Think about the disadvantages of locating a senior housing community in a commercial area. Residential areas are preferable, although overall location is crucial. Potential residents are interested in proximity to nearby community services, shopping, churches, hospitals, recreational activities and physicians’ offices. Developing and maintaining referral relationships with other care providers in the area can be a definite benefit as well.


Consider the pricing structure and package of services to be offered. The key is to keep pricing competitive. Housing units should not be priced too high above that of the neighboring competition. Take into account the average income of prospective residents who might be attracted to the community. Promote any features that would be particularly beneficial as residents’ needs change.


Complete a license application and pay the required fees. Because assisted living facilities are not federally regulated, each individual state is responsible for establishing licensing requirements and monitoring whether ALs are complying with least minimum standards. Since states may have different definitions of assisted living, eligibility requirements can vary. Certification may also be dependent on the types of services being offered.


Find out if local licensing is needed in addition to the mandatory state licensure. Typically, a facility must provide services to a minimum number of residents (usually at least 4) in order to be licensed to operate as an assisted living community. Fire safety and local building code compliance inspections will be required before a license is issued. The local municipality may expect you to apply for a zoning permit. Criminal background checks also must be conducted on any individuals responsible for resident health and safety.


Contact your state's Department of Aging, Department of Health or Department of Public Welfare for more information about specific state regulatory issues. Keep in mind that until recent years, the assisted living industry has been generally unregulated, although today most states are in the process of increasing the supervision of assisted living programs. Facilities also are required to provide proof of liability insurance, as part of the licensing process. Speak to the department in your state that regulates insurance for answers to more of your questions.


Apply for membership in an industry organization that represents the interests of member facilities by working with state regulatory commissions and funding agencies. Many of these professional organizations develop and sponsor staff training and educational programs for assisted living providers throughout the state. There are many state and national organizations both, which provide information to providers, state affiliates, and policy makers in an effort to improve the quality of care available to the nation's elders.

Tips and Warnings

  • Sound planning is the best way to avoid cash flow problems, which can limit a facility’s opportunity for success. Be conservative with available resources for at least the first two years. Develop a budget and then stick to it.
  • All policies and procedures should be in place before beginning operations so that there are no delays in services to the residents.
  • With a significant increase in litigation against senior care facilities in recent years, the cost of liability insurance for providers has risen dramatically. Today the ability of insurers to assess and limit liability risk has become essential in a highly competitive market. Mandated risk management programs are now often a condition of coverage.
  • With the senior housing market undergoing significant changes these days, more attention is being directed to how assisted living (AL) facilities operate. Despite a growing population of American seniors, more AL facilities are finding themselves challenged by difficulty meeting regulatory compliance, which ultimately impacts profitability. Senior housing today is far from being an easy business venture as there are many variables, which must be considered before operating an assisted living facility.