Senior Housing Cap Rates by Property Type
By Haven Senior Living Partners · · 2 min read
What cap rates tell you about senior housing values, how they differ by property type, and why they move.
Key takeaways
- A cap rate is NOI divided by property value; lower cap rates mean higher prices for the same income.
- Senior housing cap rates have generally been higher than apartments' because the properties are also operating businesses.
- Independent living usually trades at lower cap rates than assisted living and memory care, which carry more operating risk.
- Property age, quality, market, occupancy and operator all move the number.
How a cap rate works
Cap rate = NOI / Property value
A community earning $1,000,000 of NOI and selling for $16,000,000 trades at a 6.25% cap rate. If buyers accept a 7% cap rate instead, the same income is worth about $14,300,000. Small changes in cap rates have large effects on value.
How cap rates differ by property type
| Property type | Relative cap rate | Why |
|---|---|---|
| Independent living | Lowest of the three | Apartment-like, lower staffing and regulatory risk |
| Assisted living | Higher | Licensed care, more labor exposure |
| Memory care | Often highest | Most staffing and regulatory demands |
| Skilled nursing | Typically higher still | Heavy reliance on government reimbursement |
| Multifamily (for comparison) | Typically lower than senior housing | Simpler to operate, deep buyer pool |
Exact figures change with interest rates and market conditions. Industry surveys from firms such as CBRE, NIC MAP and the major brokerages publish current ranges each year.
What makes cap rates move
Higher borrowing costs usually push cap rates up.
Buyers pay more for growing income.
Newer, well-designed communities command lower cap rates.
Strong demographics and limited new supply support values.
A proven operator reduces perceived risk.
How investors should use cap rates
Look at two numbers in any offering: the cap rate at purchase and the cap rate assumed at sale (the "exit cap"). A conservative plan usually assumes the exit cap will be the same as or higher than the purchase cap. Run scenarios in our Cap Rate Calculator.
Questions about valuation in a Haven offering? Schedule a call.
This article is for education only and is not an offer to sell or a solicitation to buy any security. Target returns are not guaranteed. Consult your own tax, legal and financial advisors.
