Financing for Residential Care Homes

by John King on May 17, 2015

Residential Care Home Financing Possible With 10% (Cash) Down*

Residential Care Homes - aka “Board and Care homes” are becoming more popular across the U.S.  In Florida they are known as Adult Family Care Homes (AFCH’s) and in California they are commonly referred to as Residential Care Facilities for the Elderly (RCFE’s).  They are also popular in Arizona and Texas as well as other states.

Essentially, residential care homes are an assisted living facility in a residential setting where the owners of the facility provide board and care and possibly a few other services for the residents.  They are popular because the residents enjoy the smaller in-home setting vs. that of a larger institutional facility.

Residential vs. Commercial

The issue with financing these property types is that they are technically both residential and commercial in nature (they are single family homes in neighborhoods, but they typically require licensing for the facility and the operators) and thus are not eligible for conventional residential financing.  This unusual hybrid of a commercial business in a single family home (and in a single family neighborhood) typically creates confusion on the part of local bankers as to what type of financing they can offer.

*10% (Cash) Down Is Possible

The good news is that there is financing available from a few select lenders under the SBA programs and typically for up to 25 years without a balloon and in some cases with as little as 10% down. The key to being able to do this with only 10% down is that you must have equity in another property that you can put up as additional collateral in lieu of a larger down payment.   How much additional collateral depends on the transaction - it can be as little as 5%, but typically not be more than 15% of the purchase price.

So as an example, if you are buying a residential care home for $1,000,000 and you want to put down 10% cash you would need to have another property (residential or commercial) with between $50,000 and $150,000 in available equity that you could pledge in lieu of additional down payment.  So, while not truly 10% down, this is a workable solution for a lot of borrowers.


There are many factors that come into play with financing, but at a minimum you need to have good credit and good credit scores,* experience in the industry or VERY relevant experience and the property you are looking to acquire needs to have good occupancy and cash flow.  (Loans are available for construction of new facilities in some instances for some borrowers).

Unusual situations can also be funded but the situation needs to make sense.  As an example, one of our lenders recently funded a project with multiple homes and a common dining hall on one property.

Please contact me at jking (at) green commercial capital (dot) com or 1-800-414-5285 to discuss your situation.

* Credit is very important, but some derogatory accounts are acceptable as long as they are isolated.  As an example, we were recently able to get a commitment for a client who was refinancing a facility in spite of the fact that they had a repossession a few years back.  The loan worked because the repo was an explainable, isolated incident and it helped that the client had a lot of equity in the home as well as 100% occupancy and great cash flow.

For more information about financing other types of Assisted Living and Senior Care facilities including HUD Loans you can visit our website here.

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