How Residential Assisted Living Creates a Massive Real Estate Opportunity | Melanie Claborn

Melanie Claborn (00:00)

Definitely education. I don’t regret taking the classes. it was expensive, but you get what you pay for. you’ve heard that, right? And you’re getting information if it’s not in your prior experiences. I used to be a school teacher and we would teach to people’s private children’s prior knowledge. We would first decide where they were, how much prior knowledge they had of this particular subject, and then we would teach to that level.

Dylan Silver (00:58)

Hey folks, welcome back to the show. Today we’re joined by Melanie Claborn single family investor and assisted living builder in Saint Louis, Missouri. Melanie, thanks for joining us here today.

Melanie Claborn (01:10)

Thank you for having me.

Dylan Silver (01:11)

You’re in the middle of a very interesting build, a residential assisted living set of homes. Walk us through that.

Melanie Claborn (01:20)

it started a couple of years ago. Where do you want me to start?

Dylan Silver (01:23)

We could start certainly from acquisitions.

Melanie Claborn (01:25)

Okay. So I send out postcards for my marketing, right? I’m a residential rehabber. I do residential homes, single family homes. And I moved into luxury homes a couple years after I became a real estate investor and had a wonderful mentor in Jan Duke. She’s was the luxury home specialist here in St. Louis for a long time. and then whenever my father passed away.

I was still remembering all the trials and difficulties we had at the rehab center. He was there for only six weeks, and then I took him home after that. But it still was an experience. And I heard Jean Garino speak at a real estate event here and he talked about there’s a better way to serve our seniors. And my ears perked up, but I was extremely interested. And so

I sold a property in order to go to Phoenix and get into the academy that they have there. And I learned all about it and came back. And this gentleman who got one of my postcards called me with some land. And while he was talking about the land, I’m like, I don’t buy the land. I wonder who would want this land. And as I was talking, he goes, And it’s already zoned for senior living.

And I went, what? And my ears perked up, and I really started listening to him then. And so we came to a deal. And I bought the land in 2022 for two dollars a square foot. And I was checking out a new development near me on David Hochle Parkway, and it’s less than a mile from my property. And they’re selling, I’m not sure how large the plot is, but they’re selling a plot.

for a senior family home in this new development that they’re bringing in into Wentzville, Missouri. And I asked him, Well, I’m just curious, how much are you selling that property for? And he goes, Well per square foot, it’ll be twenty two dollars a square foot. I’m like, my gosh. So four years ago I bought it for two dollars. I bought mine for two dollars and theirs is going for twenty two. And people are putting contracts on them. it’s pretty amazing.

Dylan Silver (03:27)

And so you’re doing build and operate, you’ll be operating these RALs as well.

Melanie Claborn (03:33)

I will not be the operator. I’m not in the medical field, but I do have a fantastic operator. her name is Amy Hill. She has over 25 years experience. And I also have my director of nursing. I have contracts with both of those. I also, because I’m not in the medical field, I hired two consultants who are just waiting for us to give them the go sign. And one is a marketing.

consultant and one is an executive director consultant. So those two will be working with the two, the licensed administrator and the director of nursing, and myself. I’ll be there to do whatever I can do. And we’re all going to be working together to put the

building on the market and get everything ready for residents. I also have another advisor. Kevin Cast is on my advisory board and Tom Conte. And both of them are in the industry. They’ve owned homes or they’ve owned a placement. Tom owned a placement business. So I have all these really good people around me who know the ins and outs of the business and I feel really comfortable and really confident that we’re going to put out a wonderful product.

I don’t want to spill all the beans, but we’re also gonna have this fantastic wellness, one of our investors, the main investor right now, he’s also in charge of the capital stack, but he owns a fusion wellness company. So fusion wellness is his company that he operates. He’s a natural doctor. He’s in the process of finishing his PhD for natural medicine. So

He is offering, and this will not be an extra charge to the patients, but offering a hundred and forty biomarker blood panel before they come in. And what we’ll do with that is we’ll know exactly where they are inside, the part where it counts and makes you feel good or feel bad. my gosh, there’s so much we’re gonna be doing. But we’re already building.

relationships with the farmers in the area. So we’re gonna source our food directly from farmers and we’re gonna have basically clean food, grass fed beef, whole chicken that’s been, cage free. It’s out there on the range and it’s getting all the good stuff that it needs. So that it can give us all the good stuff that we need. No fake chicken, no fake food, no preservatives. we’re gonna be really, careful.

about what we feed our residents. And a lot of people who have suffered under inflammation all their life, that’ll start dissipating and their health comes back. And it’s gonna be beautiful. I’m so excited. It’s the care behind the care. So we’re gonna be caring for them like a good care home would, but we also have this extra layer of care that is going to be fantastic. And we’re so excited.

Dylan Silver (06:11)

That sounds wonderful. I want to have that type of culinary experience myself, right? And I think everyone can appreciate that.

Melanie Claborn (06:19)

You’re welcome to come for dinner anytime.

Dylan Silver (06:22)

when we look at the operations and what the day-to-day looks like in a residential assisted living and in yours specifically, help us envision this. How many tenants will be in each home and what will it look like?

Melanie Claborn (07:15)

So there’ll be 16 residents in each home. And it’ll look like every day is Saturday morning, where you can get up at any time you want. You can walk into the kitchen, go up to the island and pour your coffee. It’s hot, it’s ready. And there’s someone there to cook your breakfast. And they’ll take really good care of you. Whatever you want. We’ll have a short order of cook available for every meal and in between meals.

So that’s going to be one of the staff members and they will be trained. I have a great relationship. It’s not a close family member. It’s a kind of a second cousin once removed, or I don’t know how all that works, but he is in our family and he is a fantastic chef. And we are talking to him about doing the training. And he’s been the chef for several universities.

And here in St. Louis and he’s just very accomplished and he does a great job and he agrees with us on the food choices, on how we source our food. I think he’s gonna become a really great asset. And while he won’t be able to be in all four buildings at once, he will be training the staff members who will be doing the cooking.

Dylan Silver (08:17)

Sixteen residents. what’s the square footage of one of these homes?

Melanie Claborn (08:21)

Eight thousand seven hundred and fifty square feet. It’s a mansion. It’s a very large home.

Dylan Silver (08:27)

Okay. how many rooms not just rooms, but including kitchen, living room, how many different areas will there be in this home?

Melanie Claborn (08:35)

So there’ll be a large activity room. so right in the middle, we’re gonna have this big living room, kind of like homes are made now, where I’m sitting at a bar, but you can see the living room behind me because it’s just all open. That’s how it is. It’s all open, but it’s a much bigger space than what I’m sitting in here. and right across from all that there will be an activity room that will have a double doors on it. and the doors can be closed or open depending on what we’re doing.

so it has an outdoor patio and we will have a van for outings. We will be doing outings with our residents. Even though we will have some memory care mixed in with the assisted living. The levels of memory care and the abilities of people under memory care are varied. And many of them can go fishing. Many of them

enjoy going to the zoo and riding around in a cart, looking at animals and stuff like that. So there’s a lot we can do with our residents still. And we are also going to have movement breaks and hydration breaks. And we’re going to make sure we take those four times a day for the hydration and probably once or twice a day for the movement stretching activity. Little bit of light exercise.

So that’ll be worked into the day activities as well.

Dylan Silver (09:47)

And you’re building several of these residential assisted living facilities, a mini subdivision if you will. I think it’s four that you’re building right now.

Melanie Claborn (09:56)

Yes, there’ll be four. It’s like a mini neighborhood. So two will be facing on this side of the street, the other two that are facing this side of the street. we do have a real street name. It’s called Thousand Springs Court. And Winzville has basically made it a city street because they’re making us put street lights in. So we’re not real happy about that. they’re very expensive, tens of thousands of dollars apiece and so

You have to add that into your budget, and it’s not something that we planned, but Winsville planned it and so Winsville gets it.

Dylan Silver (10:28)

I wanna ask you about the investor side of this, right? When you’re looking at building and holding, it’s challenging, right? there’s a lot that comes with that. in order to have a RAL work from a pro forma underwriting perspective, what are the most important things? Is it purely the demand and the cost per tenant? or is it also just as important?

Several other factors, appreciation over a five and ten year period, what the net migration looks like in an area, and what other use cases could be at time of sale. What does that underwriting look like?

Melanie Claborn (11:05)

It’s pretty complicated and I do leave that to Robert Mordini. He is the gentleman who’s doing the capital stack But it is complicated and we do have to keep in mind the EBITDA That is a factor for selling, when you sell a property, that’s something that the buyers will look at. So we can’t let salaries get too high. we gotta make sure we’re balancing things out. there are relationships that

have to be watched and taken care of. And we do have the people to do that. So Robert Mordini will be doing that. And he brought over his accountant named Sabina Latz. And she’s actually starting on some of that right now. She not on the pro forma. We have the pro forma. We’ve had it for a while. But she’s starting on some of the accounting and some getting everything set up the way she wants it.

Dylan Silver (11:53)

Follow up question there. again, investor lens here, five and ten year picture. I’m imagining that’s maybe a typical hold on, but maybe people are holding longer as well. You’ve obviously decided to build a much larger, sixteen tenants, eight thousand square foot. For folks who are building smaller RALs, is it common for those to be sold, the smaller ones, to single family investors who

keep them as RALs or is it common at the end of, the quote unquote investment journey or lifespan of that investment that it’s sold and converted back into single family residential?

Melanie Claborn (12:30)

in this area in Missouri, I don’t believe any of the residential assisted living homes have reached that cycle yet. It’s very new here in Missouri. Now, you would talk to Isabella Garino, and she’s in Phoenix, where it’s been going and ongoing for quite some time. In fact, you can drive down a neighborhood street in Phoenix and you’ll see a little sign on a fence. And that house is actually a care.

We can’t really do that here. it’s not very profitable here to do that. But they have those large sprawling ranches and they’re easier to turn into. and they don’t have basements there either. So it’s easier to turn those into assisted living because they’re large and they’re kind of sprawling all over the place. so coming back around a little bit.

to your previous point about creating a smaller home. I did look into that before I found the property. And when I looked into one of these large homes in Creve Coeur that’s large enough to fit 12, 15 people, at the time I wasn’t really going for 16. I didn’t know enough, I was in the academy and I was asking questions and learning. I

went through the numbers to retrofit a regular standard home. it was a lot. It was almost as much as building one. Cause you have to almost take everything out to put in an entire sprinkler system. when you’re building, you can add that in as you go. And you’re not tearing stuff out and putting it back and then you have to add a lot of bathrooms. And so that’s a lot of plumbing. Yeah.

It came out to be very, very expensive.

Dylan Silver (14:01)

You mentioned this is a new concept where you are in Saint Louis, maybe in Missouri at large. currently what are folks doing for elder care?

Melanie Claborn (14:46)

Well, it’s the big box facilities like Brookfield or Brookdale is one that’s kind of everywhere in the United States. there’s a few of those big box facilities here. Cedarhurst is a big box facility. they’re here. There’s a bunch of nursing homes, they’re smaller and big,

That’s not what we’re doing. We’re not doing the nursing home. We’re not doing skilled nursing. we’re doing something between independent living and skilled nursing. So in that space between where you can’t really live by yourself anymore, but you’re not bed bound.

Dylan Silver (15:16)

Right, there’s obviously a tremendous need there and I didn’t realize that it was maybe as big as it is, when folks are considering doing something similar and maybe they’re in the on ramp or in the discovery phase of becoming assisted living owner and investor, do you think the starting point is education or is the starting point finding a potential property?

Melanie Claborn (15:39)

Definitely education. I don’t regret taking the classes. it was expensive, but you get what you pay for. you’ve heard that, right? And you’re getting information if it’s not in your prior experiences. I used to be a school teacher and we would teach to people’s private children’s prior knowledge. We would first decide where they were, how much prior knowledge they had of this particular subject, and then we would teach to that level.

So if you’re coming in blank, kind of like I was, if I would not have taken the academy classes, then I would have made a lot more errors. And I might have tried to do one of those creep corehouses that are huge and I might have really messed up. But I had a coach who was coaching me through how do you analyze this? How do you underwrite this? It was different than just a single family home that I had been, renovating for years. So I definitely

believe in education. I believe that a coach will help you, will save you money and it’s better to pay for their experience and the cost of them than to pay for your own ignorance.

Dylan Silver (16:43)

No question about that. And there is a hurdle to jump over when we talk about going from single family investing fix and flipping, being a traditional landlord into assisted living. There does seem to be a lot of folks who are looking at this as an opportunity for investing. And that of course comes with the need to learn. You have to pair yourself with an operator in the medical field as well. That brings me to my next question.

you’re educating yourself and you’re finding a property, then you’ve gotta find that medical professional. How can folks find that person if they don’t have someone like that in their sphere?

Melanie Claborn (17:19)

So the first thing you should do is start going to the senior resource team meetings in your area. So in your area, there are different meetings. They have different speakers all the time. It’s kind of like a REIA but it’s for senior living and it’s for senior owners. And somebody that maybe drives a bus and will do all the moving and the van offering the vans and stuff like that for moving for seniors.

they’re becoming very specialized here because our number is going up. And now you can look up senior moving van and get a senior moving van, one especially sized and set for what a senior might be taking to a new home or a new assisted living home, which would be, a much smaller than a whole house. So it’s very interesting how things morph and change as people start feeling the pressure of this.

They are calling it a tsunami. I think the Gorino family calls it a tsunami. And it is true, it’s coming and it’s getting here. the NIC report recently said the occupancy rates are now at ninety point four percent, whereas in the previous two quarters they’ve been in the eighties, eighty-eight and I think eighty six or something like that. So it’s slowly growing.

it’s building on itself and we are gonna get to that point where it could be possible that there may be seniors who don’t have a place to go. And that’s concerning.

Dylan Silver (18:39)

Is that ninety percent for RALs in particular?

Melanie Claborn (18:43)

No, it’s not.

It’s for the region and I can’t remember which regions they tested. I think it was national but the bigger cities across the nation.

Dylan Silver (18:52)

Okay, When we look at this silver tsunami, right, and we look at RALs we look at other forms of elder care, do you see that there is momentum more so in any one of these asset classes? Are you seeing more retirement communities, RALs, is it something else? Where’s the momentum?

Melanie Claborn (19:11)

It’s gonna be different everywhere. So if you’re in Texas, what I’m saying may not apply to the Texas. it’ll be the most of the momentum right now is I would say in the new builds. St. Charles County is building. Now a lot of counties, it’s their statistics say they’re only having a growth of one percent of senior care homes.

if you look on the C O N list, the coming approvals for CON certificate of needs for 75 beds. mine will be 48 beds and I already have 16 approved. So a total of 64 for mine. and then there’s a business that has two of them already built, but they have room on the property for a third. And so they’ve applied for 12 more beds. So that’ll put 36. They’re only 12 beds.

homes. So that’ll put a 36 count on that campus. But it’s again, we’re wanting the small home care model, but at the same time that doesn’t make really a big dent in the whole need. So we need more people to make more homes. And I think we will be able to once we get to the fourth home, we’re looking and talking about franchising this model.

the campus of four homes type model and the residential, the small home care, even taking the food sourcing and everything we learn about how to find the right farmers and work with the farmers, how to know if what they’re spraying is acceptable or not. a lot of people in Missouri they do use some kind of pest repellent,

It’s not the one that’s gonna kill you. it’s more organic and it’s more natural. And so there are safer things to use. And we will be able to list all of those. We’ll have everything recorded. We’ll be able to present this to the families as well. So as we work on this, and we’re working on a lot of lanes at the same time right now with the health and then the CON and then the construction. So

It’s all a lot. It’s a lot. Some days my head just spins.

Dylan Silver (21:10)

I can imagine there’s a lot going on there. you mentioned franchising. To your knowledge, is there a current franchise model anywhere in the country for RALs?

Melanie Claborn (21:20)

I don’t think so. I haven’t seen one. But I might be wrong.

Dylan Silver (21:23)

What’s really interesting about that is when most people think of franchising for better or for worse, people often think of quick serve restaurants, right? But, these in many cases are family owned or owned by someone who’s not a massive corporate entity, although they certainly can be, right? And when you’re looking at RALs, this tends to elicit an emotional response from people because there is a

component of this where it’s invested emotionally, right? This is not just a purely, number driven investment opportunity. Ultimately there’s a lot of folks, pretty much most people I would think at this point who are impacted by aging parents and family members and often cases folks realize, I would like to be able to do something to change that. Well

if this franchise model ends up coming to fruition, that would give folks the opportunity to change for the better. Yeah.

Melanie Claborn (22:18)

And it would package all the education with it. So now someone with no prior knowledge could come in, they would have the education, they would have all of the help at their fingertips, and they could move forward with a coach. That’s what franchises are. They’re like coaches. And they take you through the different steps because they have a system and they’ve done that system over and over again and they know it works.

that’s what we would look into doing. We’re excited about that too. That’s another thing that my latest investor Bob Mordini will be doing and taking care of. he’s brilliant. He’s really a brilliant person. and he has a ton of experience and he has a ton of investors in his circle that can

provide these types of things for us.

Dylan Silver (23:01)

when are you looking or when is the target date for the first RAL to be opened?

Melanie Claborn (23:06)

We’re looking at first or so into first quarters beginning of second quarter.

Dylan Silver (23:11)

Okay, very exciting. That’s right around the corner, it feels like.

Melanie Claborn (23:14)

It is. It’s kinda scary. It’s so close. We still have quite a bit to do, but we’re getting there.

Dylan Silver (23:19)

aside from all of the steps that it takes in any new construction, from laying the foundation and permitting right to all of the trade work that needs to come in, plumbing, electrical, and so forth, there’s of course fulfillment. And then there’s of course finding the tenants and leasing it up. Is there a typical advised strategy for finding those tenants? Are there specific brokers that

have relationships in place, what does that look like?

Melanie Claborn (23:46)

So that’s a whole nother thing too. That’s one of those many pieces that we’re working on. So that’s where Cindy Wilson, the lady that I am hiring to be my consultant for marketing, she’s coming in and she’s gonna be filling in those gaps. She’s been in the business herself for around 20 to 25 years. And she has been in this area for all those whole twenty-five years.

So she knows everybody that is anybody. And I think the key for anyone building one of these is finding the people who know what you don’t know and who have the skills you don’t have and who’ve been where you have not been. And when I found Cindy, I’m like, you’re one of my missing pieces. And so she’s totally excited to start. She’s ready right now.

She would start now if we could, but we’re working on getting her in. It’s not to the point yet for marketing yet, at least the level of marketing we want from her. We do have a website up and we are doing some small marketing. We do have a waiting list actually already. And so it’s not a long one. I think we have five people on it, but they’re looking ahead and they know that they’re gonna need care. Or the son or daughter is looking ahead for them.

And so we have about five right now waiting. if we got three more, we would be halfway there for the first time.

Dylan Silver (25:06)

Now to your knowledge, is there any type of government assistance financially that folks who may be looking at RALs as tenants have access to or is this all self pay?

Melanie Claborn (25:18)

This at the moment is all self-pay. I don’t know if that might change later ’cause the assisted living is kind of new here in Missouri. it doesn’t have as much attention from the state because it’s not skilled nursing. It’s not a nursing home. So the state regulates the nursing homes a lot.

But they don’t do much with us as far as assisted living goes. and memory care comes into that too. memory care is under assisted living. So it is relatively new here and we don’t have a lot of statutes for it here. But I think used to people would just stay home until they needed the nursing home. And it just doesn’t happen anymore. Everybody’s working.

And then you also have this care gap is what we call it. So when I grew up, both of my parents were from families of twelve children. So counting mom and dad, that’s 14 people in the house. And they didn’t live in mansions. So they learned to work together and there was a lot of people, right? but when their mom and dad got sick and needed care, those 12 children and their spouses, they all chipped in.

And they all helped. So it wasn’t on one person or two people. It was the whole family helped. And the same with my mom and dad. There’s seven of us. my mom didn’t have twelve, but she had seven. And so there was plenty of people to take care of my mom. My mom passed away in ’05 And so we were all there. We were all young and healthy. and we were able to help my dad take care of my mom. and then

When my dad was starting to get feeble, we had lost my oldest brother, but there were still six of us in our spouses. And we took care of my dad. We made a Google spreadsheet and put it on Google and we all just took the times as many times in the days and nights as we could take. We couldn’t cover round the clock, but we got really close. Pretty, pretty darn close.

Dylan Silver (27:10)

Yeah, that’s right. for folks who are now smaller families and it looks like that’s trending in that direction, right? What’s going to happen for the future? The silver tsunamis right now, but what will the next generation after look like? and I think we’re trying in real time to come up with solutions for the current silver tsunami, right?

And so the future does feel uncertain, but there’s folks great folks like yourself who are coming up with solutions and in your case the first in your area.

Melanie Claborn (27:40)

We’re actually the second in Saint Charles County. Glenfield

Dylan Silver (27:44)

Okay. Okay.

Melanie Claborn (27:46)

Manor Memory Care was first, I think. and there may be one other, but I think Glenfield is the only other RAL here in Saint Charles County. But in other parts of Missouri there most of them are relatively new. they’re not more than, three years old.

Dylan Silver (28:01)

Yeah.

Melanie Claborn (28:02)

exciting.

Dylan Silver (28:02)

You’re on the frontier over there. we are coming up on time here, Melanie. Anything you’d like to mention to our audience before we wrap?

Melanie Claborn (28:10)

we do have a website. It’s www.thousandspringsseniorliving.com. And you can reach me there or I do have an email address, which is melanie@stlouissolutionsfirm.com And if you’re interested in becoming an investor or if you have questions, you’re starting your own, I’d be happy to, as time allows, to chat with you about it

see what I could help you with.

Dylan Silver (28:38)

Melanie Claborn thank you so much for joining us today. Thanks for your time.

Melanie Claborn (28:41)

Thank you so much.