How Much Does It Cost To Open a Nursing Home?

Are you looking to open your own nursing home or assisted living facility? As part of your business plan, make sure to consider all the startup and operating costs to open and run a nursing home.

How much does it cost to open a nursing home? And how much does it cost to run the business on average? Is this a profitable business?

We’ve identified that it costs anywhere from $675,000 – $3,600,000 to open a 40-unit nursing home, plus $278,000 – $293,000 in operating costs per month to run the business.

Want to know more? In this article we’ll go through all the different costs you will need to budget for before you can open your own nursing home. Let’s dive in!

For more information on nursing home businesses, make sure to check our guide below:
How To Open a Nursing Home In 8 Steps: Complete Guide
How to Write a Business Plan for a Nursing Home: Complete Guide
How to Build a Financial Model for a Nursing Home

Nursing Home Startup Costs 

The startup costs for starting a nursing home will vary greatly depending on factors such as the size of your nursing home, equipment, the number of staff, etc. Also, it will depend on whether you plan to build the facilities from scratch or to renovate an existing building you rent.

In this article, we will give you cost estimates to start a nursing home with 40 units at an average-sized location based on 2 scenarios:

  • Option 1: you rent and renovate an existing building ($675,000 – $1,290,000)
  • Option 2: you buy land and build from scratch the facility ($2,020,000 – $3,600,000)

There are 2 types of costs: startup costs and operating costs. Note that these costs are for illustrative purposes and depend on several factors which might not fully apply to you. Let’s first start below with startup costs:

Startup costOption 1: RentOption 2: Build
Lease deposit $75,000 – $90,000$0
Construction$0$1,900,000 – $3,400,000
Renovation$480,000 – $1,000,000$0
Furniture and medical equipment$120,000 – $200,000$120,000 – $200,000
Total$675,000 – $1,290,000$2,020,000 – $3,600,000

Download the Nursing Home budget template

  • 5-year projections Excel template
  • Lender & investor-friendly
  • CPA-developed financials
  • 30+ charts and metrics

Nursing home lease deposit cost

If you’re renting or leasing a space to operate a nursing home, you must pay a security deposit, which is refundable. The cost will vary depending on factors like the size of your assisted living facility, the quality of the building/land and the rental prices of the area.

Thus, assuming you plan to operate a 40-unit assisted living facility with rooms of 200 square feet each, the space must be at least 16,000 square feet (50% space for the rooms and 50% for the rest).

Therefore, assuming you pay $20 / sq. ft. per year, the rent alone will cost you around $25,000 – $30,000 per month.

With that calculation, if you are required to provide a security deposit worth 3 months of rent, you must set aside $75,000 – $90,000.

What if you want to build?

If you want to build your nursing home from scratch, you need to buy the land and build the facilities.

On average building a nursing home facility cost $160 per square foot. Based on the location, cost vary between $120 to $215 per square foot. So a 16,000 sq. ft. facility will cost you $2,500,000 to build.

Whilst building gives you maximum flexibility when it comes to design and the layout, renting an existing nursing home space will help you save costs related to interior design, renovations, equipment, and machines.

A 40-unit facility will cost about $2,500,000 to build

Nursing home renovation costs

If you decide to lease an existing space, you will likely need to spend money to design and remodel the space to accommodate for the units (the rooms), the public area (cafeteria, restrooms, etc.) and the staff area (kitchen, changing rooms, offices, etc.).

The renovation costs will vary significantly from one project to another as it will depend on the existing building quality and layout.

On average, expect to spend 25-30% of building costs in renovation and remodeling. In other words, you would spend $30 to $65 per sq. ft.

So a 16,000 sq. ft. facility will cost you around $480,000 to $1,000,000 to renovate.

Nursing home furniture and medical equipment costs

If you’re renting or leasing a nursing home facility, you need to add some basic furniture to accommodate your residents. A few examples include:

  • Safety supplies (walkers, crutches, wheelchairs, braces, bed alarms, shower sheets)
  • Bedding
  • Assessment tools (stethoscope, thermometer, scale, pulse oximeter, otoscope, blood pressure cup, etc.)
  • Security cameras
  • Nurses buttons and alarm system

As a rule of thumb, furniture alone will cost you between $3,000 and $5,000 for each unit. Thus, if your nursing home facility comprises 40 units, you need to keep aside $120,000 – $200,000 for furniture alone.

Furniture costs in average $3,000 to $5,000 per room

Nursing Home Operating Costs

In addition to the one-off startup costs you pay before you open your nursing home, you should also take into account all the recurring (operating) costs you’ll pay every month to run your business. 

The operating costs depend on the size of your nursing home and the services you offer. Here’s a brief overview of the operating costs you can expect for a standard 16,000 sq. ft. nursing home with 40 units:

Operating costsAmount (per month)
Rent & utility bills*$30,000 – $35,000
Staff costs$150,000
Food supplies$48,000
Housekeeping services$15,000 – $20,000
Security & maintenance$20,000
Marketing$15,000 – $20,000
Total$278,000 – $293,000
* rent only valid if you decide to go for Option 1 above

Download the Nursing Home budget template

  • 5-year projections Excel template
  • Lender & investor-friendly
  • CPA-developed financials
  • 30+ charts and metrics

Rent & Utility Bills

You must pay monthly rent if you’ve leased your nursing home property. The amount you’ll pay as monthly rent will vary depending on factors like location and size of the property, purchase or lease, etc. 

Using the same example above, you’d have to incur $25,000 – $30,000 per month in rent. Adding up another 25% for utility costs (gas, water, electricity), you would pay around $30,000 – $35,000 total per month.

Nursing home staff costs (45%)

Lack of nursing staff will affect your nursing home residents negatively. To provide the highest quality of care and life to your residents, you need to hire an adequate number of efficient staff who care for your residents regularly without failing or negligence. 

Here is a quick list of the annual salaries that you must consider if you’re opening a nursing home:

You should keep in mind the abide by the staff to residents ratio in your nursing home. The ratio will fall between 1:4 to 1:8 depending on your state regulations and the services offered by your nursing home. 

Thus, assuming your nursing home has to attend to 40 residents daily, you’ll need 5 – 10 staff at all times.

So, assuming you need 8 employees at all times (4 in night time), you may spend up around $150,000 to pay the employees’ monthly salaries. This assumes 3 shifts per day, 7 days a week, a $55,000 average gross salary and 20% in taxes and benefits.

You will need to keep a 1:4 to 1:8 ratio for employees : residents

Nursing home food supplies costs (15%)

Food supplies are one of the largest monthly expenses for a nursing home. You should expect to spend around 15% of your sales on food supplies. 

Let’s say you’re opening a nursing home facility with 40 units at $8,000 per month each (national average), you generate a revenue of $320,000 per month.

Then, you should expect to spend around $48,000 on food supplies.

Housekeeping and laundry services (5%)

Your nursing home needs to be hygienic all the time so that your residents are less prone to commonly transmitted diseases. Thus, you need to hire some staff for the housekeeping and laundry services of your nursing home. 

You should expect to spend around 5% of your sales on laundry & housekeeping services. Taking the above example, you’ll have to spend around $16,000 on housekeeping and laundry.

Nursing homes spend on average 5% of their revenue in laundry and housekeeping costs

Security & Maintenance (7%)

Security guards are highly essential to ensure that your nursing home residents and staff are safe and safe within the premises of your nursing home. You should expect to spend around 7% of your sales on security & maintenance. 

Nursing home marketing costs (5%)

Appropriate and well-targeted marketing is essential, especially in the first few months/years to acquire new residents. In average, you should spend about 5% of your revenue in marketing.

Your marketing costs should include the cost of your website, signage, press, online and offline marketing & advertising costs.