Senior Housing Investing Glossary: 30 Terms Every Investor Should Know
By Haven Senior Living Partners · · 2 min read
Plain-English definitions for the terms you will see in every senior housing offering.
Key takeaways
- Senior housing has its own vocabulary because it is both real estate and an operating business.
- The most important numbers to understand are occupancy, NOI, RevPOR and the operating margin.
- How a deal is structured (triple-net lease vs. RIDEA) changes who carries operating risk.
Care levels
Age-restricted apartments or cottages with meals, activities and transportation, but little or no hands-on care. Behaves most like multifamily.
Housing plus help with daily activities such as bathing, dressing and medication. State-licensed and staff-intensive.
Secure, specialized care for residents living with Alzheimer's disease or other dementias. The highest rents and the highest staffing needs.
A campus that offers several care levels, often with an entrance fee. Also called a Life Plan Community.
Operating terms
The share of available units that are filled. Investors watch both physical occupancy (units filled) and economic occupancy (rent actually collected).
Revenue per occupied room. Total monthly revenue divided by occupied units; it captures rent plus care fees.
Extra monthly charges added to base rent as a resident needs more help.
The point when a community reaches its target occupancy and steady operations, often defined as roughly 90% occupancy held for several months.
The period after opening or repositioning when a community fills units toward stabilization.
Financial terms
Revenue minus operating expenses, before debt payments and income taxes. The core measure of a property's earning power.
NOI divided by revenue. Labor is usually the largest expense and drives most margin changes.
NOI divided by property value. A lower cap rate means buyers are paying more for each dollar of income.
NOI divided by annual loan payments. Lenders use it to judge whether a property can safely carry its debt.
A target annual return paid to limited partners before the sponsor shares in profits. A target, not a guarantee.
The order in which cash is split between investors and the sponsor.
Structure terms
The owner leases the building to an operator, who pays rent plus taxes, insurance and maintenance. Steadier income, less upside.
A structure in which the owner keeps the operating profits and pays the operator a management fee. More upside, more exposure to operating results. See What Is a RIDEA Structure?
A group investment in which a sponsor (general partner) raises equity from passive investors (limited partners) to buy or build a property.
The tax form a partnership sends each investor to report their share of income, deductions and depreciation.
A federally insured loan program for senior housing and care properties. See Understanding HUD 232 Loans.
Questions about a term in an offering you are reviewing? Schedule a call with our team.
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.
