Senior Housing Due Diligence Checklist: 25 Questions to Ask a Sponsor

Twenty-five questions to ask before investing in a senior housing offering, grouped by sponsor, operator, property, market, finances and terms.

Key takeaways

• Evaluate the sponsor and the operator separately; both must be strong.
• Ask for property-level operating history, not just projections.
• Stress-test the plan with lower occupancy and higher wages.
• Read the fee schedule and waterfall before you read the target returns.

Sponsor

1. How many senior housing deals has the sponsor completed, and how did they perform against original projections?
2. Has any deal lost investor capital? What happened?
3. How much of its own money is the sponsor investing?
4. How often, and in what detail, will investors receive reports?

Operator

5. How many communities of this care type does the operator run?
6. What are its average occupancy and staff turnover across the portfolio?
7. What do recent state inspection reports show?
8. What are the management fee and contract term, and can the owner replace the operator?

Property

9. What is current occupancy, and how has it trended over the past 24 months?
10. What is the care mix (independent, assisted, memory care)?
11. What capital improvements are needed, and are they in the budget?
12. Is the building's design efficient to staff?

Market

13. How fast is the 80+ population growing within the primary market area?
14. What new communities are planned or under construction nearby?
15. Can local seniors and their families afford the rents?
16. How does pricing compare with competitors?

Financials

17. What occupancy, rate growth and wage growth does the plan assume?
18. What is the downside case, and does the property still cover its debt?
19. What is the loan's rate, term and maturity? Is it fixed or floating?
20. How large are the reserves?

Terms

21. What is the preferred return, and is it cumulative?
22. How are profits split after the preferred return?
23. What fees does the sponsor charge, and when?
24. What is the expected hold period, and what happens if the sale is delayed?
25. Can I transfer or sell my interest early?

How to use this list

Ask every sponsor the same questions so you can compare answers side by side. A good sponsor will welcome them. Learn more in How to Vet an Operator and What Risks Are Unique to Senior Housing Investments?

Want Haven's answers to all 25? 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.