The Assisted Living Investment Model That Creates $30M Exit Strategies

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In this episode of the Real Estate Pros podcast, host Michelle Kesil interviews Brett Chotkevys, who specializes in building senior assisted living homes. Brett discusses his innovative approach to creating luxurious memory care mansions, the challenges of operating in this niche, and the unique exit strategies available in the senior living market. He emphasizes the importance of community relationships and effective operations management, while also providing insights for potential investors looking to enter this field.

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Brett Chotkevys (00:00)
Yeah, absolutely. So I’ll unpack the kind of a typical deal a little bit further. So we’ll go and we’ll build, you know, typically one of these and say total development cost is usually between say three and four million dollars. It’s a couple of million dollars for the building. Then you have the land and the site work. And then typically, you know, at least five hundred, sometimes a million dollars of soft cost safety net ⁓ construction overage, you know, working capital furniture, all of that kind of stuff. So a lot of times we’ll do SBA. So it keeps us

the five million dollar loan amount and so therefore you only need really 10 to 15 percent down

you subtract everything,

It typically leaves about 40 to 70 thousand dollars of monthly cash flow,

Michelle Kesil (02:14)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil. Today I’m joined by someone I’m looking forward to chatting with, Brett Chotkevys who is focusing on building senior assisted living homes around the country. So excited to have you here today, Brett.

Brett Chotkevys (02:33)
Yeah, awesome. Excited to be here with you as well.

Michelle Kesil (02:36)
Definitely, I think our listeners are really going to take something away from how you’re approaching both real estate and yeah, helping seniors in their last moments of life. So thank you. Let’s dive into that.

Brett Chotkevys (02:49)
Yeah, awesome.

Michelle Kesil (02:53)
So first off, for those not familiar with your work yet, can you share what your main focus is?

Brett Chotkevys (02:59)
Absolutely. So

as you mentioned, we were in assisted living. We don’t do what many people think of assisted living when they think of, you know, residential assisted living and the home conversion, the six or eight beds.

What our model is is somewhere in between those small six beds and big, you know, the four story buildings that big corporate has. We go and we build out neighborhoods of, I call them, you know, memory care mansions. And we’ll build buildings that are 10,000 square feet. There are 16 private rooms. Everyone has their own bathroom and they’re big, luxurious homes, right? That’s what we call mansions. we’ll, instead of just building one, we’ll buy it and develop a big piece of land.

and put in all the infrastructure and site work and then go and build in phases, know, one to four of these building our own neighborhood of these mansions. And they’re really designed for end of life assisted living and memory care and really competing with the big smelly facilities in your market. Who’s charging top dollar? You know, is it 10, $12,000 a month at the big smelly facility down the street? We can do every single thing. The service, the private room, the chef, we have

a

salon, have libraries, we have everything in all of our buildings, but it’s done more intimate and it’s done it at a way where we can actually, you know, make a difference and help people.

Michelle Kesil (04:19)
Awesome. And where are you creating these?

Brett Chotkevys (04:24)
So I’m

in the Austin, Texas area. So I have a few of these myself, and then we team up with people around the country. We’re in 20 different states that we go and we build a very similar model to our flagship model here. And we pretty much copy and paste those buildings and use the same banks and the same everything and just go and copy and paste around the country.

Michelle Kesil (04:43)
Awesome. And so how did you get started in creating these senior living mansions?

Brett Chotkevys (04:50)
Yeah, well, I started in flipping houses and we did that for eight or 10 years, flipped a good amount of houses and was always chasing the next deal, right? Always sending out more direct mail, always trying to find the next property. And I wanted something that had stable, consistent income with a massive backside on the net worth side, right?

And so it was really just like I built my first mansion and it was actually a home conversion. We gutted a house and we did a huge addition and we built a 15 bedroom mansion. And then I thought to myself, man, how do I scale this? Right? Like we’re doing great, but I want to buy the house next door and convert that and the house on this side and convert that. But like, that’s not going to work.

And then it had like this light bulb moment, like, why can’t I buy like a big old piece of land and just develop my own neighborhood of these assisted livings that are, you know, luxurious bill for end of life care.

And it wasn’t a simple solution, right? It took me a few years to go through and find the right land, figure all of the stuff out, and then build our neighborhood. And so, ⁓ as I said, we do this in phases because of the funding and things like that. We like to go in and build either one or two upfront, and then we’ll operate for a few years. A lot of times we’ll use SBA financing, we’ll get past the prepayment penalty, and then we’ll have literally several million dollars worth of equity in the real estate side to be able to roll that and

not need any extra funds, investor funds, and build phase two. And then just step by step build out these neighborhoods that the cash flow is massive and then the exit strategy is something I haven’t seen in any other niche.

Michelle Kesil (07:12)
Yeah, amazing. And can you expand on the exit strategy? What makes it so special?

Brett Chotkevys (07:17)
Yeah.

Yeah, absolutely. So I’ll unpack the kind of a typical deal a little bit further. So we’ll go and we’ll build, you know, typically one of these and say total development cost is usually between say three and four million dollars. It’s a couple of million dollars for the building. Then you have the land and the site work. And then typically, you know, at least five hundred, sometimes a million dollars of soft cost safety net ⁓ construction overage, you know, working capital furniture, all of that kind of stuff. So a lot of times we’ll do SBA. So it keeps us

the five million dollar loan amount and so therefore you only need really 10 to 15 percent down

and so you can come in you know you can a lot of times raise the investor money for this you need five hundred six seven hundred thousand for a deal and then you can come in and build out you know the first mansion in your neighborhood

And so, as I said, our niche is kind of matching the highest comp in our market as far as usually the big smelly facilities, right? Looking at their little memory care wing. And most times that’s, you know, eight to ten thousand, some more expensive areas. It’s twelve, fourteen thousand dollars a month.

you subtract everything,

because this is not a passive investment, we don’t go and do this and rent it to big corporate. We operate them. So when you start looking at, OK, well, we’re going to bring in

know,

$130,000 to $160,000 a month of top-line income from one building, subtracting by, you know, our mortgage and expenses and staffing.

It typically leaves about 40 to 70 thousand dollars of monthly cash flow,

right? Obviously, it’s going to be drastically different if you’re eighty five hundred a month versus fourteen thousand a month. But you’re in a very strong spot to, you know, for me, it just totally replaced my active flipping income from having one of these buildings. And so you’ll come in, you know, build at call it four million dollars. You have a three and a half million dollar loan.

we have appraisals back at $7 million for the real estate part. That’s excluding the value of the operations company. So now you’re coming in, you have two, $3 million worth of equity there, and now you don’t need any extra capital from investors or yourself. And you can roll that equity, refinance, move into say a 504 or a commercial loan, put a new SBA 7-8 loan behind that, and now build mansion number two. And then you just continue to kind of rinse and repeat, stabilize.

with two buildings, $700 to like $1.1 million a year, depending on your market on the cashflow and now having $8 million in equity on the real estate side. And then just rinse and repeat again and you get to a place where you can have a build out complete neighborhood over 10 years and you have a $30 million profit on the exit strategy.

Michelle Kesil (10:38)
Yeah, amazing. That’s incredible. What would you say are some of the main challenges of this specific niche?

Brett Chotkevys (10:47)
It’s

There’s definitely a lot of challenges in this because it’s an active business, right? It’s really an operations company is where all the cash flow is coming from. So myself, like, you know, I was flipping and rentals and all that kind of stuff is my background. It’s not like that at all. We’re I mean, we’re talking about running, you know, being a CEO, running your own operations company with staff that’s 24 seven. So Christmas, New Year’s Eve, all of those kind of things, you have to make sure these caregivers show up. So we we essentially have, you know, two managers per building.

We have one chef per building and we have caregivers, two caregivers that are there 24-7. And so that’s kind of what the staff looks like per building, but making sure that you can…

have great people that show up every day and you’re really there to make a difference. Like our success comes because we build a great wait list. We are able to charge top dollar because we have the best care in our city. And it really goes back to running your operations company and making a difference in your community because this whole industry is very tight niche. You’ll have all of the home health, hospice, doctors, everyone knows who the best is and who the worst is.

And so it makes it very very easy to win if you run a great company and it makes it very easy to fail if you don’t give a dang and You’re turning staff over constantly and your managers are returning every six months. This is what it’s like a big smelly facilities, right? They’re just this culture of death and so they provide terrible care and they have 65 % occupancy and they’re probably breaking even right so like it all comes back to You know managing your staff creating a winning team really caring and serving these people

and then you’re able to make crazy money on it.

Michelle Kesil (12:27)
Yeah, absolutely. That’s, yeah, not easy to run those types of operations, I’m sure. And what would you say to an investor that’s wanting to try out this style of investing into these senior homes? Like, how can someone get started?

Brett Chotkevys (12:34)
Yeah.

Well, mean, you know, depending on what you’re looking for, there’s for sure the active side, right, that I just talked about. And I see a lot of success with husband, wife teams. You may have like, you know, this may be a little cliche, but you have the husband who’s dabbled in real estate investing. He’s got some rentals. He’s doing a little flips on the side. And then you have the wife who’s a nurse or in the medical field. We team up with a bunch of husband, wife teams that crush it. And you have the two different sides that you need. And I always consider there’s kind of

three different components to be successful. You need kind of the real estate business person to put the deal together. You need the operations person who may be kind of the nurse avatar. And then you need the capital, right? You need the investor and that could be a silent person. And so we see a lot of teams that are husband and wife coming in or two business partners. And then they’re just raising money from, you know, this third avatar. They’re raising that three, five, $600,000 and then coming in and being able to be successful when you have the right plans and,

set up for this kind of stuff.

Michelle Kesil (13:47)
Yeah, absolutely. I like how you’re highlighting everyone’s different skill sets that they can bring in. So what are you most focusing on solving or scaling to next?

Brett Chotkevys (13:55)
Yeah, absolutely.

So now…

We, because we live in Texas, we have our own buildings here in Texas. That’s kind of where we started, right? As we started building out this model, it started here in Texas a few years ago, and we were teaming up with people expanding into different markets. And now we’re expanding outside of Texas. We’re getting, honestly, from coast to coast, building, going to a groundbreaking in Idaho in a couple of weeks, and then in Houston next week. And we have teams up in the Northeast and really learning all of these different markets.

and being able to gather data from, here’s our construction costs over here, here’s what lenders will do over here, putting all of this together to be able to have this mastermind of all this different data. Because we literally copy and paste. Here’s the same building, but how does it compare if you’re building out of cinder block in Florida versus if you’re building somewhere in a snow-like area, right? So gathering all of this kind of stuff and really just kind of systematizing it state by state by state as we continue to expand across the country.

Michelle Kesil (15:40)
Awesome. And what are those like systems that need to be in place look like?

Brett Chotkevys (15:44)
Well, there’s a lot of components to that because we walk through this from A to Z with teams. I mean, really going through and looking on the front side at the land and knowing, right, like some states have totally crazy, you know, zoning laws. Some states have flood areas or wetlands, right? What does that look like on the front side? Then, you know, going through the construction, as I mentioned, like snowy areas are totally different in the north than in the south as we’re looking into the MVP.

and all of those kind of things. The challenges are roughly the same everywhere. It’s usually staffing. I think the…

What a lot of people think might be the hardest part is filling your beds is actually not filling your beds when you have a beautiful product and you have a great reputation is actually very easy. So we’re able to, you know, teach that and copy and paste the sales, the touring, all the marketing stuff across the board. I think that’s one of the things that we’ve really dialed in, but continuing to go and look at all the little details of because you’re going to be licensed with the state. What does that look like? State by state by state is all these different rules and regs and codes and stuff.

that you have to the process through.

Michelle Kesil (16:52)
Yeah, absolutely. That makes sense. Especially across the different states.

Brett Chotkevys (16:58)
Yeah, you have some

states that are easy and are business friendly and then some states that like, man, it’s like, maybe we should do this here. This is very difficult. They’re trying really hard to make it difficult.

Michelle Kesil (17:10)
Yeah, definitely. And so when you’re like working on these senior homes, is there like any issues with getting the people in or is that like not an aspect that you’re taking care of? Do you like hire out for that?

Brett Chotkevys (17:28)
Yeah, so filling the beds, right, getting the people in.

Our niche is end of life, that’s later assisted living and that’s memory care. So I think of it from this perspective, it’s almost like this funnel. At the top of the funnel you have independent living and then a little down the funnel you have assisted living. And assisted living is kind of broken into, I think, front side and back side. Meaning the front side is you have grandma and she can walk around and she’s fine, but she just needs somebody there to make sure she’s okay.

The backside of assisted living is like, you’re in continent, you’re in a wheelchair, it’s a two person transfer in and out of bed, you need oxygen, lots of things that, you’re not memory care, but it’s a lot of work that you need. You need a lot of care.

And then there’s also the memory care side, right? Well, you might be able to walk and talk and do all those things, which you don’t know your name anymore. You don’t recognize your spouse anymore. All of those kind of things. So our niche is more end of life and ultimately like a bigger problem to solve. So with that in mind, it’s very much the bottom of the funnel, right? Like instead of going to the nursing home, you’re coming to one of our mansions. And so we are therefore not looking at markets that are

you know, where is there enough homes that are available or where is there an excess of seniors? That’s not really relevant. We actually take the other approach of we’re going to go and be right next to the big smelly facilities, especially all the independent livings or the 55 plus communities, because those are all our people. They’re going to be in all of our competition. They’re going to be in the four story building on independent. And then they’re going to age and they’re going to decline and they’re going to have, you know, excessive medications. And then when they meet,

with the doctor, the nurse, the hospice, the home health, they’re going to say, hey, you know what, it’s time for mom to move to the next step, right? She shouldn’t be here on her own anymore, right? It may be moving from independent to assisted or from entry level assisted to later assisted or into memory care. And so when we’re going in, we just get plugged into the market. And really this whole marketing niche is relationship based. It’s not about direct mail. It’s not about PPC. It’s knowing all the people in the industry, the home health, the hospice.

the nurses, all those kind of things. Because when you have the most beautiful building and you have the best care, it’s very natural for them to meet with, you know, daughter who’s part of her attorney and say, hey, you know what, mom is declined. And now here’s our new, you know, course of action and we should move her to such and such place. And we want to be that place, right? So we get tons of referrals. We don’t pay for any of things. It’s because we have plugged ourselves into the community and actually be right next to all the competition.

Michelle Kesil (20:14)
Yeah, amazing. That’s such a different aspect of business to then have to, you know, find the right caretakers and medical team too.

Brett Chotkevys (20:23)
So you touched on a kind of a good point and with these the medical team, I always like to tell people because people think that what we do may have a lot of medical, you know, people that you need on your payroll, therefore maybe having a lot of risk. And actually what we do is very limited on risk and liability because an assisted living by definition is actually non-medical. We practice ADLs, which is activities of daily living. Now, I said we do

these different medical things and we have house doctors and we have home health and hospice and people will literally be there to pass away.

But my staff is honestly all non-medical. I don’t have a nurse on staff. I don’t need a nurse on staff. I have people doing activities of daily living and then I have all these outside services that come in. So we coordinate, right? That’s really my manager’s job is coordinating with all the medical people and they’re using our salon or the grandma’s bedroom as their little doctor’s office. And so we have a house doctor, not on my payroll. It runs through the resident’s insurance and they come every week or they send their

their NP every week sees all the grandmas and grandpas. Home health and hospice, again, they’re in the building every single day. They’re taking care of all of them. That is not a liability on me. I’m not charging for those services. I essentially have a month to month residential lease with these grandmas, right, that the power of attorney has signed as well.

And so it makes my job very simple from a medical perspective. I’m just doing non-medical things and coordinating with the professional care and therefore keeping all of that risk and liability off of me and my company. While as I’m comparing to the big smelly facilities down the street, they have a nurse on staff. They’re doing all of those things. They’re paying that higher expense and payroll and risk and all those things. But I don’t have to with what we do.

Michelle Kesil (22:12)
Awesome. Yeah, I think that’s a helpful explanation. So thanks for that.

Brett Chotkevys (22:16)
Absolutely.

Michelle Kesil (22:17)
Well, before we wrap up here, if somebody wants to reach out, connect, learn more about what you’re up to, where can people find you and connect with you?

Brett Chotkevys (22:24)
Yeah, I would start with my podcast, Assisted Living and investing with Brett Chotkevys I would check that out. I go through a lot of this kind of stuff. And then if you want to learn more about it, I have a couple courses on our website that are totally free and it’ll walk you through really the first kind of like three to four months of if I want to get into this, what are the steps look like? And so I’d hit our website, assistedlivingmansion.com. At the top, there’s free resources. Sign up for the courses. They’re totally free. There’s no spam there. And it’s very, very practical, actionable. Here’s exactly.

what to do to know if this is something I should pursue.

Michelle Kesil (23:00)
Perfect, well appreciate your time, your story, your perspective. Thank you for being here. Awesome. And for the listeners tuning in, if you got value, make sure you have subscribed. We’ve got more conversations with operators like Brett who are building real businesses. We’ll see you on our next episode.

Brett Chotkevys (23:05)
Absolutely happy to share it. ⁓

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The Assisted Living Investment Model That Creates $30M Exit Strategies

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