Investing in Healthcare Real Estate: How to be Successful

Posted on: March 14, 2018

As more and more of the United States’ population ages, many financial experts encourage investment in healthcare real estate. The investment opportunities in medical real estate are constantly increasing as the market grows, with an estimated 10,000 Americans turning 65 every day. Additionally, healthcare is an essential service that everyone must have access to, so it is very likely that the healthcare real estate sector will remain strong for years to come.

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A report from CNL Securities revealed that senior housing and healthcare real estate continue to provide income opportunities to investors. Data shows that the spread between projected annual return on senior housing investment to a conventional mortgage continues to remain positive. Because of this, more developers and landlords are jumping into the fray amid low borrowing costs before investment risks and interest rates start to rise once again.

Whether you have plans to invest or are currently investing in healthcare real estate, it’s important to remain vigilant and search for more investment opportunities. Indeed, senior housing is an excellent sector of medical real estate to invest in, but if you want to achieve massive success, you should diversify your portfolio. As experienced investors put it, “You shouldn’t put all of your eggs in one basket.” Here are four investment methods that can help you become a successful healthcare real estate investor:

Crowd-Funding

According to Jess Stonefield of Seeking Alpha, crowdfunding provides excellent investment opportunities for those who prefer the feel of a direct investment without having to amass high investment capital and do extensive networking. Online crowdfunding platforms, in particular, are the easiest to manage. They usually have a low investment minimum and allow you to choose from a wide range of specific investment opportunities, such as a medical office building in City A, a memory care unit in City B, a hospital in City C, or a combination of all three.

As with any income opportunity, it is important to be knowledgeable and mindful about the projects and online platforms you choose to invest in. Being a perceptive investor can minimize significant investment mistakes that result in huge losses. Before investing in a project, Stonefield advises that you ensure that the company you’ll choose will limit investment to qualified investors.

Private Equity Funds

Similar to crowdfunding, private equity funds use capital from many people to invest in various projects. However, the main difference is that they require much higher investment minimums, and they can be done using an offline investment platform.

Many investment companies that delve into private equity funds focus solely on investing in senior housing, medical office buildings, or a combination of different healthcare real estate. In most cases, fund managers diversify the portfolio to obtain greater returns on their investments. Since these companies are usually smaller and managed offline, you may expect more attention from the fund manager. It is also very likely that you’ll get frequent updates about specific project development while investing with them.

Real Estate Investment Trusts or REITs

Real Estate Investment Trusts are basically a mix of conventional and alternative investment methods, wherein investors earn money through their real estate investments while working within the threshold of the trading market. In this method of healthcare real estate investing, 90% of investors’ capital will be invested in real estate and then 90% of the net income will be distributed to shareholders through dividends.

Just a word of caution: it can be difficult for investors to monitor the progress of a specific project because of the sheer number of investments REITs make in each fund. Before jumping into REITs, be sure to do your research and talk to someone who is very knowledgeable in this aspect of investing in healthcare real estate.

Exchange Traded Funds or ETFs

Similar to the Long-Term Care ETF, ETFs are a combination of private equity funds and REITs. They allow you to create a portfolio of various healthcare REIT investments, which potentially include multinational companies managing senior care facilities and hospitals. ETFs are recommended for more experienced investors, particularly those who are keen on highly diversifying their healthcare investments.

Regardless of the investment methods you’ll choose, it’s important to know the basics of investing in real estate to avoid potential profit losses and to maximize your investment returns. To ensure your success, here are three basic rules you must follow:

1. Be patient

As with any investment opportunity in any industry, having patience is a must. You must study a property or investment, conducting a thorough analysis of both its advantages and disadvantages, before taking the plunge. Keep in mind that success in healthcare real estate investing isn’t something that happens overnight. As such, don’t let impatience get the better of you or you may end up making a decision that you might regret later on.

2. Choose the right people to help you

Healthcare real estate investing is similar to team sports such as football or basketball. Just like playing on a team, investing requires you to have the right people to propel you forward. Experts suggest going into strategic partnerships and teaming up with the right professionals to achieve maximum capital growth and improve your profit potential.

3. Improve your tax efficiency

Find ways to improve your tax efficiency so you won’t end up spending more money on taxes than you should. For example, ensuring that the income from your investment portfolio is divided between you and your spouse is one way to make yourself more tax-efficient.

Investing in healthcare real estate is a great way to ensure a brighter future. Just like most methods of earning money, investing requires patience, knowledge, and experience. Having access to the latest investment information and listening to the advice of a trusted source or investment partner will set you on the path to success.