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Show Summary
In this conversation, Zach Rynders discusses the process of converting single-family homes into assisted living facilities, focusing on the requirements, challenges, and opportunities in the market. He explains the demographics of clients entering this space, the architectural considerations necessary for compliance, and the financial dynamics for investors. The discussion also touches on the future growth potential in the assisted living sector.
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Investor Fuel Show Transcript:
Zach Rynders (00:00)
we find that typically those investors receive 150 to 200 % of the normal rents of a single family house. And then they can get a longer term locked in. So a lot of operators want a three to a five year lease. And it’s much more of a commercial lease versus a personal lease. So you get a lot more safety and protection into that home.Dylan Silver (00:06)
Hmm.Hey folks, welcome back to the show. Today’s guest, Zach Rynders runs R2 Studios Architecture, where he helps investors and business owners turn standard homes into profitable license assisted living facilities. With over 200 successful conversions under his belt, his team handles the entire technical journey from proactive site assessments to final state plan approvals. His mission is to remove the heavy lifting of compliance so owners can focus entirely on providing care.
you can find him at r2studiosarchitecture.com. Zach, thanks for taking the time today.
Zach Rynders (02:23)
Thanks for having me. I’m excited.Dylan Silver (02:25)
Now, when we talk specifically about the assisted living space, I was mentioning before hopping on here, it seems like there’s lots of people who are getting into the space. So I can imagine, you know, they’re having to find these properties somewhere. Right now, our most, and of course, it’s going to vary by location, but generally, our most assisted livings being built from the ground up, or are they being converted from one asset class to another?Zach Rynders (02:52)
In our case, we’re finding people that have, they’re converting existing single family homes, so they’re not building.Dylan Silver (02:59)
Now, for folks who are doing that type of conversion, do they typically come from a real estate heavy background or are they focused more so on the care providing portion ofZach Rynders (03:14)
We have a mix. I would say primarily our clients are nurses or medical professionals who are looking for transition out of the hospital or an assisted living facility and looking to be their own boss, essentially. And they might have their own single family that they lived in, or they might have had a rental that they’re looking to potentially convert into these assisted living facilities.Dylan Silver (03:36)
Now, know, the need for this is of course ⁓ there and people see it wherever you are. It seems like there’s not enough ⁓ assisted living facilities. Now, I would like to break this term down because I’ve seen a lot of different terminology, you know, retirement homes, assisted living, elder care, ⁓ memory care. What is assisted living? When people say that term, what is it and what does it encompass?Zach Rynders (04:03)
Yeah, so we’re in Minnesota and so in order for our clients to receive reimbursements from the state or waivers, it has to be 55 plus. And so these people can be perfectly healthy, but they’re private pay clients that could be coming through these waivers, but they are typically 55 plus. And then there is another element where you could have dementia care. So it kind of depends, you can branch off. There’s different requirements for each type of facility though.Dylan Silver (05:15)
And so, you the folks who are doing these assisted living facilities, I was surprised to hear, and I guess it makes a lot of sense, they’re doing, you know, single family home conversions into assisted living. Would this be like one individual home, or would this be like a group of homes that may be close by to each other that are being converted in like a subdivision?Zach Rynders (05:35)
It’s usually a single house. So in Minnesota, you can have a campus, but those campuses have to be two houses on adjoining properties. So we don’t see that rare very often. So it is a single family house and we typically have five or less occupants inside of it. So if you talk about a care ratio, it’s much better than a nursing home, right? Where you may have 40 or 50 beds. You’re looking at someone that’s got one provider with maybe five people max.Dylan Silver (06:00)
Okay, so in this assisted living scenario, it’s a single family home, but it’s rented out on some level by the room. Would that be accurate to say? Okay, okay. Now I would like to talk and pivot a little bit here and talk about the the avatar of the person who is running these assisted facilities. You mentioned ⁓ nurses potentially, you people who may let’s just say you’re maybe a little burned out from working at the hospital and so forth.Zach Rynders (06:09)
Yep.Dylan Silver (06:27)
Is that something where they would have to have that type of medical background in order to ⁓ own and assist the living in Minnesota specifically?Zach Rynders (06:37)
Not at all. So the requirements in Minnesota, you have to have one nurse on staff. You don’t have to be the nurse and you have to have one director. And so typically our owners are usually one or both of those. And so usually if it’s a nurse, they’re going to be the director as well, just so they’re not paying someone else to do that role. If they’re not a medical professional and they are just a real estate investor or they just want a second business, then they’re usually just that director and they’ll hire a nurse.Dylan Silver (07:04)
Now nurse on staff, does that mean that someone’s there ⁓ full time during the day or someone on call? What’s ⁓ the scope of care when people are talking about assisted living?Zach Rynders (07:16)
Yeah, so the nurse is mainly on call. So you would have a home health aide or something like that that’s there 24 seven. So there is someone that’s always there. It’s just a lower level of care. And then you would have the nurse that’s coming in making sure that prescriptions are taken, that everyone’s healthy if there’s an injury that they’re addressing that. And so they’re kind of coming in as needed to help people if they have any issues.Dylan Silver (07:40)
Now the state comes into play here because they’re providing ⁓ some of the monthly payment support. So as far as rents, they’re providing a certain percentage of that. Is that how the state’s coming into play there?Zach Rynders (07:53)
Yep, all the licensing is obviously through the state. So comes through the Minnesota Department of Health in our case. And then if you want to receive the waivers that comes through the Department of Health and Services. So one evaluates the home to make sure it’s safe for residents to be there. And then yes, the state is there for payments as well.Dylan Silver (08:11)
Now for the folks who are moving in themselves, you mentioned 55 plus. Now are these folks who are in many cases looking for a permanent solution? Is this going to be where they’re ultimately going to be residing or is this potentially a temporary solution for folks or is it a mix of both?Zach Rynders (08:31)
It’s both. I would say if you’re a private paying, right? So if you’re just paying out of pocket, you’re going to be there long-term. You’re trying to find the right place of where you want to stay. So you’re making sure that it’s a good fit. You’re going through multiple properties, trying to find the place you’re going to live or the family of that person is. And then if you are going through state waivers, then you’re likely just trying to find a good fit, but it’s not guaranteed to be a long-term thing.Dylan Silver (08:56)
Let’s pivot a bit here and talk about the conversions of a single family home into an assisted living. I’m not sure what all goes into that. Break it down for us. What goes into this conversion?Zach Rynders (09:08)
Yeah, so that’s where our company really comes in heavily. So they have to be the right zoning. So we’re doing a conversion into R3 residential. So that’s the biggest thing is it’s got to be eligible to be R3 at the back end of it. And then we’ve kind of got two different areas. You have to go to the city, you have to get approval for it. So we submit the plans for that. But then you also have to go through the state as well because you are a licensed care facility.And so our part in that is we’re going through these houses, we’re looking, so windows have to be a certain size, right, to be able to escape out of, if that’s the case. The kitchen, we have to have a double sink because you have to be able to wash dishes and hands. And so there’s all these things that no one really realizes goes into it. And that’s where we come in to try to help these people to make sure they have everything in advance of their inspection from the state or the city.
Dylan Silver (10:32)
Now, you doing also properties that may have some degree of distress or are these relatively rental grade homes, so to speak, that are being converted into a system?Zach Rynders (10:43)
We do both. So we do a lot of, we’ll do plans for people that are gonna flip a house and then have it be that on the back end, whether they rent it out to an operator or whether they’re the operator themselves. So yeah, we come in and there’s some houses that the walls are gutted or we come in and it’s a fully polished, cleaned up house ready to go.Dylan Silver (11:00)
Now, when we talk about where architecture comes into play here, I’ve worked with a lot of flippers who are doing flips outside of, of course, the assisted living space. And in many cases, it’s a little bit of almost like shoot first, ask questions later. They’re getting the flip done. Walk me through where the plans and the architecture plans come into place when you’re working in the assisted living space.Zach Rynders (11:27)
Yeah, we do see that too, where sometimes we’re trying to come in on the back end where maybe there weren’t permits that were pulled for something that should have been. But really what we’re doing isSo you have the application for the city, you have the application for the state, and they require plans from a licensed architect. So that’s where we come in. So on the city side, we’re going through all of the building code. We’re making sure that the code is in those plans that proves that this site or this home is safe and able to be converted for this type of use. And then on the state side, they’re looking more the safety side. So they want to see the kitchen. They want to make sure that all the appliances are up to date and good on that aspect. They want to make sure the windows are good. They want to know how many
are going to live in that house. And so that’s how their plans are used while they’re going through the application process to get license.
Dylan Silver (12:14)
It’s a very ⁓ document heavy process and that’s why ⁓ services like this can be so valuable because if folks are going through it on their own, they’re not going to have familiarity with that process. I’m imagining a lot of what you do is facilitation as well with the state.Zach Rynders (12:30)
Absolutely. And the reason the laws changed in 2023 was people used to be able to hand draw plans. And so there were too many errors. There were too many discrepancies. And so the state would come in and inspect and they’re like, this is just not correct and it’s not safe for people. So yeah. And then on the, on the backend, when we complete those plans, we’re submitting them for most of our clients directly to the city or the state and we’re coordinating that. So if anything comes back, we’d say, Hey, we need to do this. You need to make this change in your house to be licensed.Dylan Silver (12:59)
Now, typically speaking, what’s the turnaround time from the time someone, you know, closes on a home and intends to ⁓ transition it into an assisted living space to the time that it’s now operational?Zach Rynders (13:14)
It really depends on how much work has to be done in the house. But if you say it’s a perfect house, they buy it, they close, they come to us on day one, we will get out to the house within two days. So our big thing is speed. So we want to be reliable and we want to be fast. And so within a week, we have the completed plans back to you. And then from there, you start to go into the licensing. That for the Minnesota Department of Health is a four to six month process.Dylan Silver (13:40)
Okay.Zach Rynders (13:40)
or city itself, it’s two to four months. So you’re at least six months out if there’s nothing wrong with your house. So that’s on the back end. If you have an inspection and there’s nothing, if there is some things, it just depends on how long it takes to get those things fixed or addressed. And so that could add anywhere from one to three more months. So easily it’s a six to 12 month process for our operators.Dylan Silver (14:02)
Now, what are the typical design specs that someone might be looking at with an assisted living? Are they going ultra modern with this? Are there like some higher end? I would also imagine that some of it is going to be limited by what the state is willing to pay. So it has to be within reason. But is there a general theme that you’re seeing with folks when they’re looking at assisted living orIs it different depending on the operator?
Zach Rynders (15:14)
There’s not finishes that are general, right? It’s kind of whatever the house is. However, what we do see is people want five bedrooms because that’s the maximum we can have before going to the next level of code, which requires things like sprinklers, ramps, and handicapped accessibility, which becomes really costly. And so we see people that want to have five occupants. And so a lot of times if they’re going to try to gain some equity in the property, they’re going to look for a house that maybe has three or four bedrooms with an easy addition of a bedroom or two and let’s say a basement.So and then too we have a lot of people that trying to get into the house itself at a lower cost. So we see a lot of split level where it goes up and down just because those tend to be a little bit cheaper than a rambler.
Dylan Silver (15:54)
Now for the investors themselves, you mentioned they don’t have to have a background as a medical professional. Are these typically folks that are coming at it from the perspective of this may be something that they’re passionate about or are they coming at it purely from a numbers perspective and knowing that there’s additional ⁓ capital that they have access to due to the state providing?Zach Rynders (16:19)
Usually they’re on that side of the investor. They’re just going to rent out to an operator. And so it might be a house that they’ve had a hard time renting it to a family. They might’ve had bad tenants. This way we find that typically those investors receive 150 to 200 % of the normal rents of a single family house. And then they can get a longer term locked in. So a lot of operators want a three to a five year lease. And it’s much more of a commercial lease versus a personal lease. So you get a lot more safety and protection into that home.Dylan Silver (16:38)
Hmm.Are the operators themselves, I mean, are they folks that are doing this at scale, meaning they’ll do several dozen homes, or are these folks, like it could be one nurse and her team, let’s say, or his team, and they may be doing one or two homes?
Zach Rynders (17:09)
Both, we see a lot of single ones, but we do, so the cap in Minnesota is five as far as facilities that you can be a licensed assisted living director for. So one of those two roles that you have to have. So you can only have five in your name, but what we see if people truly want to scale, they’ll get family involved. And so they might have an LLC that takes on an X five and they might have either someone else in their family or a friend that can be the come that director. And so that’s kind of how they scale is they find someone else that can be that director with them.Dylan Silver (17:39)
That’s interesting. I wonder why they would cap it at five. That seems like almost a cap and growth for people, right?Zach Rynders (17:46)
Yeah, I think it’s just a matter of you’re supposed to be present, you’re supposed to be taking care of people. And so if you think about it, if you’re supposed to be somewhere either daily or at least multiple times a week, it’s hard to go through at least five different properties. So I think they’re just trying to maintain some of that care for those clients that are staying there.Dylan Silver (18:04)
I see. That checks out. We are coming up on time here though, Zach. Any new projects that you’re working on and then as well, what’s the best way for folks to get in contact with you?Zach Rynders (18:06)
Bye.Yeah, I mean, we’re also expanding. what we’re trying to do is we do our initial assessment. And so we walk through the house before we do all of our measurements just to make sure it is a good fit. And so in doing that, we see a lot of times that people have bought a house that they think might be great. And then I walk through and they find.
ceiling height in the basement is too low. So they can’t use any of those bedrooms. So now they’re capped at three bedrooms and the revenue on three versus five is drastically different. So I’m currently working on getting my real estate license so that we can actually help people to buy these properties and make sure they’re a good fit prior to even closing. So that’s our biggest avenue of growth that we’re going to try to do this summer. And then yeah, you can find us at r2studiosarchitecture.com. Otherwise, we’re on Facebook, Instagram, and LinkedIn as well.
Dylan Silver (19:00)
Zach, thank you so much for coming on the show. Thanks for taking the time today.Zach Rynders (19:03)
Thanks for having me.
