Assisted Living Facility Investing 101: Deals, Operations, Returns and Risks

Anthony Gallo (00:00)
Manage the managers, not micromanage it, because if you do, you’re not going to get past two facilities. Right. And that’s fine. You could live a very good life off of two facilities. You could live a good life off of one facility, depending on how you do it. You know, I know people that work on Wall Street and do all these other things, they have great returns, but this is safe, it’s long term, it’s never going anywhere. It is recession-proof.

Dylan Silver (01:56)
Hey folks, today we’re joined by Anthony Gallo, the founder of Gallo Realty Group, a Brevard County real estate investor and entrepreneur with more than 40 years of experience across brokerage, private lending, title, residential investing, and construction. Anthony, thanks for taking the time here today.

Anthony Gallo (02:14)
I appreciate you having me on the show.

Dylan Silver (02:16)
Now, these days, what types of deals are coming across your desk as an investor?

Anthony Gallo (02:24)
Mainly at the moment, I help people with fix and flips, buy holds, and I really am specializing on assisted living facilities. I switched my entire portfolio to that direction.

Dylan Silver (02:36)
When we talk about assisted living facilities, of course, there’s a huge need for this. You’ve got an aging population, but also there is a niche of folks who can successfully operate these facilities. What do these deals look like, you know, from the cradle to the grave?

Anthony Gallo (02:54)
That’s a great question. They’re very complex, and that’s why most people stay away from it. A lot of investors are really scared about the liability issues and things like that, and obviously the stigma. A lot of assisted living facilities have a bad stigma for the right reasons. They’re mismanaged, they don’t take care of the people, and they’re all about the money. If you look at it from a human standpoint and just my background being first generation, you know.

My family’s from Italy and I’m a first-generation U.S. citizen. Our history is to keep your parents in your home, take care of them. In the U.S., it’s more of when they get to that level of care, people usually, if they have the means, put them in a facility of varying degrees, to low end to high end. I specialize in the luxury end because one, you’re putting out a good product, two, the returns are better, safer. It’s a smaller pool, but if you do it right.

You make better money, and it’s just in this climate, I feel the best form of investing in it. And I’ve researched it for over 10 years before I executed my first one.

Dylan Silver (04:01)
Now, when we talk about what this looks like as an acquisition, when you’re coming in and you’re reviewing deals, are you looking for properties that have assisted living in place, or are you looking at transforming a property from one asset class into assisted living?

Anthony Gallo (05:07)
That’s a great question. If there’s a serious need in an area and they don’t exist, there’s two ways to go about it. Ground up is always best because everything’s brand new. You have new building code, no issues with converting an old structure. I did it the hardest way for my first one of my own on purpose. I wanted to learn every challenge. I picked the hardest town in my county to get it done. One doesn’t exist in my town. There is one in Satellite Beach, but it’s zoned Brevard County.

So they don’t have to deal with all the town rules. They deal with the county rules, which are much more lenient. So it was much more expensive, time consuming, and difficult to get it through the town. ‘Cause at first the town was pretty opposed to the idea, but when I explained what I was actually presenting, they loved it. It had the stigma. They thought it was going to be a place where old people weren’t taken care of. I explained my goals, who I am, what I do.

And they’ve known me from my flips and other things I’ve done in town and in the area that I usually take the ugly duckling and make it the prettiest house on the block. So I’m usually an asset. And they understood that. And that’s the only reason I truly feel I got it done. Plus, I use the best professionals. I have a great team. I’m not a one-man show. No one can do this by themselves. I don’t care how smart you are. You need a great team around you. You really do. You need licensing. And your manager needs to be an extension of your vision.

Is the best way I could say that. If they don’t eat, breathe, sleep, and love ALF, you got the wrong person. If they’re only talking to you about math, don’t hire them. Their job is care.

Dylan Silver (06:46)
Let’s talk about that, Anthony. When you’re running one of these assisted living facilities, the operations component is probably the most important thing, that you have a management component of this. And it’s oftentimes where distress creeps in because even if you take out a different asset class, multifamily, poorly run, you know, commercial apartment complex can become a distressed asset. When you have folks who are needing like elder care, right? This is something that is particularly challenging. You mentioned having the right people in place.

What all goes into operating an assisted living facility?

Anthony Gallo (07:24)
That’s what keeps everyone out of it. It’s so complex from your caregivers to getting the right food, getting the right dietitian, the right nurse, doctors. You need someone like myself who’s been in their industry a lifer, 30, 40 years, second generation. I’ve found those people. It took me nine years in Florida, and I’m a good sourcer to find the right fit.

I’ve gone through dozens, interviewed them, checked out their properties. I just don’t like it. I’m picky. I want elite people around me, and that’s all I’ll do business with. And I finally found it. And we’re doing a ton of business together, clean business. Our tenants love us, their children love us. We have to make more facilities because of our waitlists. So, and we’ve accomplished this in a short amount of time because once I had the infrastructure in place, which took me years.

The execution is easy. Now it’s just duplicating the same product in different areas of need, another pin on the map, basically.

Dylan Silver (08:28)
Can we, without giving away all the gold here, Anthony, can we talk about the capital stack? What does it look like financing a project at this scale?

Anthony Gallo (08:36)
To give you an idea, for most people, I advise them to enter on the mainland for multiple reasons. Doing it on a barrier island like I did is the most expensive way to go, the hardest way to go, and it takes a lot of cap.

So I wouldn’t advise that for starters. Right now, I’d say most people can get into this buying almost turnkey. An existing failed ALF is the way to go. And there’s plenty of them with a really bad name and a really bad stigma. So you get them depending, 70, 80 cents on the dollar, 70, 80% value. And then we clean them up, we give them a new name, and it’s like a rebranding. And we do everything right. AHCA, who governs Florida, contacts my administrator to fix facilities and pays her to do that.

Dylan Silver (09:25)
Now, when you’re coming across these deals, you mentioned sometimes the deals are coming to you. What are some of the first things that you’re looking at to see if there’s an opportunity there?

Anthony Gallo (09:35)
The math is always the first thing in any investment. The math has to make sense. You can always change the property, but how much has to go into the property?

How truly bad is it? Is it just mismanaged? Is it a structural issue? Does the property need $100,000 of renovation? And that all goes into your price. And it is a situation where 95% of this stuff you’re not seeing on the MLS. This is word of mouth. You know someone who knows someone who knows someone who has a failed facility. I have that infrastructure in Brevard County and most of Florida now.

And I’m branching out to other states, but I really like Florida. I like to stay in my wheelhouse. I don’t like to fly to those places. I like to fly on vacation. So, it can be done, but the right way to do it, in my opinion, Florida’s a great market for seniors. There’s other markets that are great too. Don’t get me wrong, but it’s very investor-friendly, no state tax. What they’re doing with property tax is amazing.

Anthony Gallo (11:08)
But the numbers are great. To give you an idea, you buy a four hundred thousand-ish property, twenty-five percent down. It should be returning somewhere gross in the high twenties to low thirties, and your overhead is about a third of that total overhead.

Dylan Silver (11:27)
Now, when you’re looking at hold times on deals, and for a lot of folks who may be investing as part of a syndication or a fund, they’re they may be looking at three-, five-, seven-year hold time. Is it similar in the assisted living facility space? Is it different? Are these longer hold times?

Anthony Gallo (11:45)
Well, it’s one of those things where the ROI is so high. Most people long term them, but you can definitely flip them for a huge profit. It’s just you have to leave the infrastructure in place. Most people want to be hands-off investors, as do I. I like to set it up, get it on autopilot, and then just manage it.

And manage the managers, not micromanage it, because if you do, you’re not going to get past two facilities.

Dylan Silver (12:11)
Right.

Anthony Gallo (12:12)
And that’s fine. You could live a very good life off of two facilities. You could live a good life off of one facility, depending on how you do it. I know people that work on Wall Street and do all these other things, they have great returns, but this is safe, it’s long term, it’s never going anywhere. It is recession-proof.

Dylan Silver (12:31)
We were talking in the green room about Florida as a whole and I like to say that, Florida, if I had to say what is the best of the United States, I would say, well, put some money in someone’s pocket and send them pretty much anywhere in Florida and they’ll have a wonderful time.

Anthony Gallo (12:45)
Absolutely. Stay on the coast.

Dylan Silver (12:47)
One of the aspects of Florida which is quite interesting is there does seem to be this competition between the different markets and regional regionalities of Florida. You’re in Brevard County. You know, if you had to say what makes Brevard County great compared to Tampa, compared to South Florida, compared to the Panhandle, what would you say is the pros and the pluses about Brevard County?

Anthony Gallo (13:10)
Absolutely. What made me move here ten years ago was everything going on in this county. It exploded for a lot of reasons.

South Florida is quickly becoming very unaffordable unless you’re wealthy. They’re getting paid over value on properties just to move out so they could buy four or five of them and build something 10 stories. So that’s happening all over South Florida. Those people are coming to our area with money and they’ll pay full market. They don’t care because they made so much on their houses. They just want what they want. So you’re getting that. It’s engineer heaven. We’re a move-to area for engineers all across the country.

Space Force, Lockheed Martin, Harris, SpaceX, Blue Origin, they’re all within 20, 30 minutes of each other. So engineers can bounce around and jack up their income. Most of my friends are engineers. The guys I play ice hockey with, engineers, rocket scientists, NASA guys. It’s heaven for these guys. There’s other pockets of it in the country, but a lot of them are closing down and coming here and Texas. Texas is similar. It is.

But I just prefer Florida. It’s a different vibe. It’s more my style. Texas is great. Don’t get me wrong. If I would live anywhere else in the country other than a Caribbean island, it would probably be there. On the coast, of course, I’m a beach guy.

Dylan Silver (15:24)
Texas is great. Of course, I’m a Texas licensed realtor, but there is something about Florida. It’s almost like you’re in the Caribbean while still being mainly in the United States. And you mentioned the influx of engineers and all the great ingenuity that’s happening out happening out there with some of the companies. What I’ve also seen is that there does seem to be this entrepreneurial spirit that is somewhat, it’s a chicken and the egg thing. Is it like are the entrepreneurs coming because they have built a really successful business and want to be in this nice weather place and want to be in Florida? Or are there so many entrepreneurs in Florida that if you move to Florida you kind of naturally are get better by proximity?

Anthony Gallo (15:48)
I believe it’s a little bit of both. I was shocked at how many investors were everywhere I went when I first moved down here. I started in Melbourne Beach, which is the southern end of the county, and it’s beautiful, very quiet, kind of a sleepy beach. I love that about it. I’d love to live there personally. My wife likes Satellite, that’s why we’re there. But, happy wife, happy life. But sorry, I digress. But what I was getting at was have investors, every coffee shop you go to.

I just talk on the phone, they see Gallo Realty. I’m a realtor too. Half of them are like me. They do real estate purely for the investment side. They do a little residential for friends and family, but their bread and butter is their own portfolios, their clients, their lifers, helping them grow from one door to 50 doors, whatever they’re into, whether it’s BRRRR, apartment, ALF, they all make money. It’s just finding your wheelhouse. I like ALF, I like the ROIs.

I feel other avenues like Airbnb and things like that are oversaturated and they’re a great product for us to take over converting to ALFs because they’re beautiful. They’re just not revenue-ing, revenue-ing like they want to, and they turn into a full-time job for people. Nobody wants that for investing. Hire me on a turnkey service, floor to ceiling. I can ground-up build you these ALFs. And if you let me do that, those are the best returns. They’re slower. You got to give me a year or two to get through engineering, build it, source it. But if you want the quickest.

We buy turnkeys, sometimes within months, you’re making money. Just depends on the product.

Dylan Silver (17:18)
For folks who are looking at a new opportunity and getting into the assisted living space as an investor, and they’re looking at partnering with an operator like yourself. What are some of the things that they should vet that they should look at on a partnership level before getting into a new venture with someone?

Anthony Gallo (17:38)
As crazy as it sounds.

You’re interviewing the person, not just their company. So find out every possible thing you can about their history, their past. It’s worth paying for searches. I mean, you’re giving these people access to medicine, people’s health. If they make a mistake, there’s huge lawsuits. People can die. And you need to realize that. That’s why so many people stay away from this space. So much private money doesn’t touch it.

Just because they feel it’s such high risk. But when it’s done right, it’s the greatest thing that can happen to these people. They get the best care and you get the best people. But you’re never going to get that in the low-income category because the money’s not there on either side. They can’t pay it for the care, and the caregivers aren’t going to provide it for low pay. If you do the luxury end, they’re always going to be luxury. In any market, the wealthy are wealthy.

Dylan Silver (18:35)
Yeah, it’s important not just to vet the property, but to vet the operators, as you mentioned, because there is a lot of liability at play when you’re talking about elder care and all that comes along with it.

We actually are coming up on time here, Anthony. Any new projects or activities that you’re working on these days? Also anything you’d like to mention directly to our audience?

Anthony Gallo (18:54)
Absolutely. I have a few off-market properties. I have turnkeys at the moment that, anytime I feel like buying them, I can.

So if anyone’s interested in a turnkey, just investing money and then over time learning, I’m happy to teach. Contact me. I’m sure you’ll provide all my information to them. I’d be happy to talk to anyone about it who’s serious and ready to go. My time is limited because I’m very busy working for clients. So I will vet you. And if we’re a good fit, I’d love to help some people do this the right way. You got to look yourself in the mirror and say, can I handle something like this? It’s not for everyone.

It’s only for elite investors, and I truly mean that. And if you’re willing to try, even as your first one, you can do it because I do everything for you. You just need to be the money, and it’s how much you want to learn. That’s entirely up to you. I have people 100% hands-off funds that I can’t mention because of my NDAs. And I have the small-time people that just said my 401(k) isn’t what I want it to be, or my IRA, I’m going to self-direct it to you.

Dylan Silver (19:58)
Anthony, thank you so much for joining us today. Thanks for your time.