How to Run a Market Study Before Buying an Assisted Living Facility

In this guide

• What a market study is actually for
• Demand: who your residents are and where they come from
• Supply: competing beds and whether they are full
• Private-pay capacity
• Labor: the constraint everyone underestimates
• Regulation and new supply risk
• Turning it into a go or no-go

Key takeaways

• The market caps your census; operating skill only gets you to that cap.
• Use drive time, not straight-line miles — families choose by visiting distance.
• Competitor occupancy matters more than competitor count. Full competitors are a good sign.
• Private-pay capacity is set by local incomes and home equity, not by your rate card.
• If caregivers are not available at your modeled wage, the pro forma is fiction.

What is a market study actually for?

To find out whether the census in the pro forma is achievable, before you pay for the seller's version of it.

Buyers spend weeks on the P&L and hours on the market. That is backwards. A facility's income is a function of beds filled times rate collected, and both of those are capped by the market it sits in. Excellent operating gets you to the ceiling faster; it does not raise it.

This sits alongside financial diligence, not instead of it — see the assisted living due diligence checklist for the rest.

Demand: who are the residents, and where do they come from?

Start with the 75-plus population inside a realistic drive time, and its growth rate.

For a residential care home, the draw radius is tight — commonly 5 to 10 miles, or a 15 to 20 minute drive. The decision-maker is usually an adult child choosing a place they can visit after work, so measure in drive time, not map distance. Larger communities pull wider, but not as wide as their marketing suggests.

You want three numbers: the current 75-plus population in that radius, its projected growth over five to ten years, and the share living alone. U.S. Census and American Community Survey data give you all three for free at the tract and county level. A market where the 75-plus cohort is flat or shrinking is a market where you are fighting for share rather than riding growth.

Then ask the operator where residents actually came from over the last two years. Referral sources, hospitals, discharge planners, and word of mouth cluster geographically, and that real pattern beats any radius you draw on a map.

Supply: how many competing beds, and are they full?

Count the beds, then chase the occupancy — the second number is the one that matters.

Every state maintains a public list of licensed facilities, usually through the health or aging department, with bed counts and license type. Pull it for your county and map it against your radius. Include the categories that actually compete for your resident: personal care homes, adult family homes, memory care, and small assisted living, depending on your state's terminology.

Then call or shop them. Are they taking new residents this month? Is there a wait list? What do they charge, and what does that include? Full competitors with wait lists mean unmet demand. Empty competitors mean the constraint is demand or price, and that is the single biggest red flag a market study can produce.

Also check what is coming: pending applications, new construction, and any facility recently approved to add beds. Supply that has not opened yet still competes with your year-three pro forma.

Can the market actually pay your rates?

Private-pay capacity comes from household income, retirement assets, and home equity — mostly the last one.

Many residents fund care by selling a home, so median home values in the radius are a strong proxy for how long a resident can pay before running out. Compare local median home value and median 65-plus household income against the annual cost of your modeled rate. If your rate requires two-thirds of local home equity to be consumed in three years, expect shorter stays and more Medicaid conversion pressure.

Payer mix flows directly into value at exit, too — a private-pay-weighted census supports a tighter cap rate. See how occupancy rate affects value and assisted living cap rates.

Labor: can you staff it at the wage in your model?

This is the constraint that most often breaks an otherwise good deal.

Pull the Bureau of Labor Statistics wage data for home health and personal care aides in that metro area, then compare it to what the seller currently pays. If the seller is under market, you have a raise coming that is not in their P&L. Check the competing employers too — a new distribution center or hospital paying two dollars more an hour will empty your night shift.

Ask the operator for turnover over the last twelve months and how many shifts ran on agency staff. Agency usage is expensive and it is a symptom, not a cause.

What is the regulatory posture?

Two questions. Does your state limit new beds — through certificate of need or a restrictive licensing process — which protects incumbents like the facility you are buying? And what is the actual survey and inspection record in that market? Pull the subject facility's inspection history and its competitors' from the state portal. A market with a light regulatory record and open licensing means new supply can arrive; a restrictive one is a moat.

And confirm the license path for you specifically before you commit — the CHOW: transferring a care home license when you buy.

Turning it into a decision

Score five things and be strict about it:

• 75-plus population growing in the radius
• Competitors full, with wait lists
• Local income and home values supporting your rate
• Caregivers available at your modeled wage
• No wave of new beds approved or under construction

Four or five green: the market supports the deal, and your remaining work is the facility itself. Three: proceed with a lower rate assumption and a longer lease-up. Two or fewer: pass, or restructure the price to reflect it. A weak market is not fixed by operating better — it is fixed by paying less, or by not buying.

Then go back to the numbers with questions to ask when buying an assisted living facility and how much it costs to buy. If the market is strong but nothing is listed, read how to find off-market assisted living facilities for sale.

Get someone local on it

Agents who work care homes in a market already know which facilities are full and which are quietly struggling — data you cannot pull from a spreadsheet. Get matched with a Buy Sell Assisted Living expert in the market you are considering.

Informational only — not financial, investment, legal, or tax advice. Population, wage, and licensing data change; verify current figures with primary sources and qualified professionals.