ALF Acquisition Due Diligence Checklist: Complete Guide

Thorough due diligence is essential for successful ALF acquisitions. This comprehensive checklist covers all areas that should be investigated before closing on an assisted living facility purchase.

Financial Due Diligence

Historical Financial Statements

[ ] Profit & Loss Statements (3 years)
- Monthly detail
- Year-over-year comparison
- Variance analysis
- Trend identification
[ ] Balance Sheets (3 years)
- Assets and liabilities
- Working capital
- Accounts receivable aging
- Accounts payable aging
[ ] Cash Flow Statements
- Operating cash flow
- Capital expenditures
- Debt service
- Distributions

Revenue Analysis

[ ] Rent Roll Review
- Current occupancy
- Unit/bed mix
- Rate by unit type
- Care level distribution
- Move-in/move-out dates
- Payer source mix
[ ] Rate History
- Historical rate increases
- Competitive positioning
- Rate by care level
- Ancillary charges
[ ] Occupancy History
- Monthly occupancy (3 years)
- Seasonal patterns
- Trend analysis
- Turnover rates
[ ] Payer Mix Analysis
- Private pay percentage
- Medicaid percentage
- Long-term care insurance
- VA benefits
- Other payers

Expense Analysis

[ ] Payroll Review
- Staffing levels
- Wage rates
- Benefits costs
- Overtime analysis
- Turnover costs
[ ] Operating Expenses
- Food costs
- Utilities
- Insurance
- Supplies
- Marketing
- Administrative
[ ] Management Fees
- Current fee structure
- Services included
- Contract terms
- Comparison to market

Need Financing for Your ALF Acquisition?

Our team can help you secure financing while you complete due diligence.

Get Expert Guidance →

Operational Due Diligence

Staffing Review

[ ] Organization Chart
- Current structure
- Reporting relationships
- Open positions
- Key personnel
[ ] Employee Information
- Employee roster
- Tenure analysis
- Compensation review
- Benefits summary
- Employment agreements
[ ] Staffing Ratios
- Day shift
- Evening shift
- Night shift
- Weekend coverage
- Comparison to requirements
[ ] Training Records
- Required certifications
- Ongoing training
- Compliance documentation

Resident Analysis

[ ] Resident Census
- Current residents
- Care levels
- Length of stay
- Acuity trends
[ ] Admission/Discharge Data
- Move-in sources
- Discharge reasons
- Referral relationships
- Marketing effectiveness
[ ] Resident Satisfaction
- Survey results
- Complaint history
- Family feedback
- Online reviews

Operational Systems

[ ] Policies and Procedures
- Operations manual
- Emergency procedures
- Infection control
- Medication management
[ ] Technology Systems
- Electronic health records
- Billing systems
- Communication systems
- Security systems
[ ] Vendor Contracts
- Food service
- Pharmacy
- Therapy services
- Maintenance
- Other vendors

Regulatory Due Diligence

Licensing

[ ] Current License
- License type
- Bed count
- Expiration date
- Any restrictions
[ ] License History
- Previous licenses
- Changes over time
- Any suspensions
- Enforcement actions
[ ] License Transfer
- Transfer requirements
- Timeline
- Application process
- Fees

Survey History

[ ] State Surveys (3 years)
- Survey reports
- Deficiencies cited
- Plans of correction
- Follow-up surveys
[ ] Complaint Investigations
- Complaint history
- Investigation outcomes
- Corrective actions
- Patterns identified
[ ] Fire Marshal Inspections
- Inspection reports
- Violations
- Corrections made
- Current status

Compliance Status

[ ] Current Compliance
- Outstanding deficiencies
- Pending investigations
- Corrective action plans
- Compliance timeline
[ ] Regulatory Relationships
- Agency contacts
- Communication history
- Reputation assessment

Physical Due Diligence

Property Condition Assessment

[ ] Building Systems
- HVAC
- Plumbing
- Electrical
- Roof
- Foundation
- Elevators
[ ] Life Safety Systems
- Fire alarm
- Sprinkler system
- Emergency lighting
- Exit signage
- Fire extinguishers
[ ] Interior Condition
- Common areas
- Resident units
- Kitchens
- Bathrooms
- Flooring
- Walls and ceilings
[ ] Exterior Condition
- Building envelope
- Parking areas
- Landscaping
- Signage
- Lighting

Capital Needs Assessment

[ ] Immediate Needs
- Safety issues
- Code violations
- Critical repairs
[ ] Short-Term Needs (1-3 years)
- Deferred maintenance
- System replacements
- Upgrades needed
[ ] Long-Term Needs (3-10 years)
- Major systems
- Renovation plans
- Expansion potential

Environmental Assessment

[ ] Phase I ESA
- Site history
- Recognized environmental conditions
- Recommendations
[ ] Phase II (if needed)
- Soil testing
- Groundwater testing
- Remediation needs
[ ] Other Environmental
- Asbestos survey
- Lead paint assessment
- Mold inspection
- Radon testing

Legal Due Diligence

Title and Survey

[ ] Title Commitment
- Ownership verification
- Liens and encumbrances
- Easements
- Restrictions
[ ] Survey
- Property boundaries
- Improvements location
- Encroachments
- Access
[ ] Zoning
- Current zoning
- Permitted uses
- Variances
- Compliance

Contracts and Agreements

[ ] Resident Agreements
- Standard form
- Key terms
- Compliance with law
- Transferability
[ ] Vendor Contracts
- Material contracts
- Assignment provisions
- Termination rights
- Pricing terms
[ ] Employment Agreements
- Key employee contracts
- Non-competes
- Severance obligations
- Benefit commitments

Litigation and Claims

[ ] Pending Litigation
- Current lawsuits
- Threatened claims
- Insurance coverage
- Potential exposure
[ ] Historical Claims
- Past litigation
- Settlements
- Judgments
- Patterns

Insurance

[ ] Current Policies
- Property insurance
- General liability
- Professional liability
- Workers' compensation
- Other coverage
[ ] Claims History
- Loss runs (5 years)
- Claim patterns
- Open claims
- Reserves

Market Due Diligence

Competitive Analysis

[ ] Competitor Identification
- Direct competitors
- Indirect competitors
- New developments
- Market positioning
[ ] Competitive Comparison
- Rates
- Occupancy
- Services
- Quality
- Reputation

Market Demographics

[ ] Population Analysis
- Senior population
- Growth trends
- Income levels
- Payer sources
[ ] Supply Analysis
- Current inventory
- Pipeline projects
- Absorption rates
- Market saturation

Referral Sources

[ ] Referral Analysis
- Hospital relationships
- Physician referrals
- Placement agencies
- Online sources
- Family referrals

Due Diligence Timeline

Typical Schedule

Phase	Duration	Activities
Week 1-2	Initial	Document collection, site visit
Week 2-4	Analysis	Financial, operational review
Week 3-5	Reports	Third-party reports ordered
Week 4-6	Legal	Contract review, title
Week 5-7	Resolution	Issue identification, negotiation
Week 6-8	Completion	Final verification, closing prep

Critical Path Items

Long Lead Time:

Phase I Environmental (2-3 weeks)
Property Condition Assessment (2-3 weeks)
Appraisal (3-4 weeks)
License transfer application

Red Flags to Watch

Financial Red Flags

[ ] Declining occupancy trend
[ ] Unusual expense patterns
[ ] High accounts receivable
[ ] Inconsistent financial records
[ ] Unexplained variances

Operational Red Flags

[ ] High staff turnover
[ ] Negative online reviews
[ ] Resident complaints
[ ] Family concerns
[ ] Referral source issues

Regulatory Red Flags

[ ] Repeat deficiencies
[ ] Serious violations
[ ] Pending enforcement
[ ] License restrictions
[ ] Poor survey history

Physical Red Flags

[ ] Deferred maintenance
[ ] Safety issues
[ ] Code violations
[ ] Environmental concerns
[ ] Major system failures

Conclusion

Thorough due diligence protects your investment and identifies issues before closing. Use this checklist systematically and engage qualified professionals for specialized assessments.

Key takeaways:

Start due diligence immediately after LOI
Engage qualified professionals
Document everything
Identify issues early
Negotiate resolutions
Verify before closing

Ready to Finance Your ALF Acquisition?