SBA 7(a) Assisted Living Acquisition Case Study: Six-Bed Type B Home, Keller, Texas, and Why the Bed Cap Decides the Loan

Study at a Glance

Determination

The listing discloses no revenue, payer mix or cash flow, so this study does not pretend to know what the home earns. It builds a benchmark profile from the licence type, the permitted bed count, DFW pricing for comparable homes and Texas staffing rules, values the home on that profile, and then asks what the asking price requires.

A Type B home in Texas must have a caregiver on site, awake, at all times, whatever its size. At six beds that rule is the business. Six residents at 92 per cent occupancy, paying an all-in private rate of $5,500 a month, generate revenue of $367,320. One awake caregiver around the clock and a second caregiver for an eight-hour day shift cost $199,144 a year at $15.50 an hour with payroll costs, and a part-time administrator at market costs $40,000. After food, supplies, insurance, property tax and the rest, EBITDA is $31,296, an 8.5 per cent margin. Capitalised as a going concern, that income is worth about $283,000, a quarter of what the house alone is priced at.

At the $1,200,000 asking price, a 90 per cent SBA loan of $1,186,200 carries debt service of $135,369 under the blended amortisation, and needs EBITDA of $169,211 to cover it 1.25 times. At six beds the home covers it 0.23 times. The broker's 7.93 per cent cap rate on the real estate implies income of about $81,700, a figure the home reaches only if its owner works as the administrator and covers shifts without pay. Even then, an owner-operator would cover the full loan 0.89 times and take nothing home.

The bed cap is the variable that matters. With the eight-bed special use permit the city says is possible, the same staffing pattern extended by four hours a day earns EBITDA of $116,883. That supports a loan of about $819,400 at 1.25 times, with the buyer funding about 37 per cent. At ten beds, the licensed capacity the city does not allow, the home would earn about $202,000 and carry the asking price. The study's determination is that the acquisition is not feasible at the asking price as a six-bed home, and that a lender should not commit until the city's answer on eight beds is in writing.

Scope, Basis and Data Verification

This is a model study. UnionMetric was not engaged on this property, did not inspect it, and has no relationship with the seller, the listing brokers or any buyer. The subject is a real residential assisted living home listed for sale on several portals in 2026, with its name, licence number and true street address withheld until a buyer signs a confidentiality agreement. It was chosen because it shows the economics of the smallest assisted living format in their clearest form: a Type B licence with a 24-hour awake staffing requirement, a city cap below the licensed capacity, a price set by real estate, a short seller tenure, and a market in which small Type B homes in the surrounding counties have been closing. The value indications illustrate method on public data and labelled assumptions. They are not an appraisal, they are not an opinion of market value for any intended user, and they must not be relied on in any transaction involving the property.

The Valuation Problem This Case Is Built On

A residential assisted living home is a house that runs as a business. Its value has two sources that rarely agree: what the house would sell for as a house, and what the care business in it earns. In a suburb like Keller, where large homes on wooded lots are expensive, the first can exceed the second by a wide margin.

The care business is governed by its licence. Texas licenses assisted living as Type A, for residents who can evacuate on their own and do not need care at night, or Type B, for residents who may need help to evacuate and attendance during sleeping hours. Under 26 TAC §553.253, a Type B facility must have staff "immediately available and awake, regardless of the number of licensed beds." That makes 8,760 hours a year of awake staffing a fixed cost, the same at six beds as at sixteen. Small homes live or die on how many residents share that cost.

The number of residents is set by the city, not the licence. The home is reported as licensed for ten, permitted for six, and capable of eight with a special use permit. Each additional resident adds about $60,000 of contribution a year with almost no added staff.

Under SOP 50 10 8.1 the lender tests coverage on historical earnings, caps total debt at an independent business valuation, and amortises the business portion over no more than ten years. On a home whose earnings support less than the value of its real estate, the business portion of the price is not supported by the valuation and must be paid with equity.

Method. On a small care home the first underwriting question is not the rate or the occupancy but the staffing floor the licence imposes and the bed count the zoning allows. Divide one by the other and the margin follows. A study that underwrites to the licensed capacity of a home the city caps lower has valued beds that cannot be filled.

Project Business Plan

The Project is the acquisition and continued operation of a six-bed Type B residential assisted living home in Keller, Tarrant County, a high-income suburb in the northeast Fort Worth area of the Dallas–Fort Worth metroplex. The home occupies a 3,733 SF single-storey residence reported as rebuilt in 2019, with six private bedrooms, four ADA bathrooms with roll-in showers, wide wheelchair-accessible hallways, a fire suppression system, a generator, and a garage converted into an additional bedroom and bath. It provides 24-hour assisted living for residents who may need help to evacuate and care at night, including hospice residents, with meals, medication assistance, personal care and activities, staffed by an awake caregiver at all times, a second caregiver for the day shift and a part-time administrator (modelled). The buyer acquires the real estate and the operating business, applies to HHSC for a change of ownership licence at least 30 days before closing, and operates through an eligible passive company that owns the house and a borrowing operating company that holds the licence. The home is positioned as a small, home-like alternative to the large branded communities in Keller and the surrounding towns, priced at an all-in private-pay rate of about $5,500 a month without level-of-care add-ons, and targets families of seniors who need Type B or hospice-level support near Keller, Southlake, Colleyville and north Fort Worth.

Marketing & Sales Strategy

The strategy is referral first. A six-bed home fills one resident at a time, and most residents arrive through a short list of sources: hospital discharge planners, hospice agencies, home health agencies, geriatric care managers, elder law attorneys and placement agencies. The new owner meets each of them in the month after closing, with a clear statement of the home's Type B and hospice capability, because a small home that can keep a resident through end of life is the referral a hospice needs. Families are reached through the home's own website and listing services, and through tours that show the private rooms and the ratio of staff to residents a large community cannot match. Placement agency fees, typically about a month's rent, are budgeted on each move-in. The built-in acquisition channel is the waiting family: in a six-bed home a single vacancy is a 17 per cent drop in revenue, and the owner who keeps a list of families waiting for the next room fills it in days rather than weeks.

Amenities

• Six private bedrooms in a single-storey residence
• Four ADA bathrooms with roll-in showers
• Wide wheelchair-accessible hallways
• Fire suppression system and standby generator
• Home-cooked meals in a family-style dining room
• 24-hour awake caregiver coverage
• Hospice-capable care for up to six residents
• Residential setting in Keller, Tarrant County

Subject Property: Listing, Licence and Open Items

The home is marketed by Peak Commercial in cooperation with Strata Commercial as an established, profitable six-bed Type B facility, fully occupied as of January 2026. The seller "recently acquired" it and is selling because of unforeseen circumstances, after repairing the foundation and updating the electrical and plumbing. Financials are released after an NDA and proof of funds. The public record conflicts on most of the basic facts.

Both real estate cap rates imply the same income, about $81,700 a year, which suggests the broker held the income constant and changed the price. Its basis is not stated.

The licence does not transfer. Under 26 TAC §553.35 a licence holder may not transfer its licence; the buyer files a change of ownership application through HHSC's online portal at least 30 days before the change, with a notarised transfer affidavit signed by both parties. Until HHSC issues a temporary licence, the seller remains responsible and the buyer may operate on its behalf; the temporary licence runs 90 days, HHSC conducts a health inspection, and a three-year licence follows. Proposed rules published in the Texas Register on 4 September 2026 would formalise the same sequence. The facility can keep operating throughout.

Public licensing records show at least one ten-bed Type B home in Keller with several features matching the listing, including six years of operation and a recorded garage conversion with fire sprinklers, at a different address. The match is not confirmed, and the true identity, licence number and inspection history are the first diligence request.

Method. A care home's licence number is its credit history. HHSC's provider search shows each inspection, each deficiency and each enforcement action, and the closure list shows every licence that has ended. A lender reads both before it reads the rent roll, because a home with unresolved life-safety deficiencies may not survive the inspection that follows a change of ownership.

The zoning file decides the bed count. Texas law generally treats small residential care homes of up to six residents as compatible with single-family zoning, and larger homes need city approval. The City of Keller's zoning designation, the criteria for an eight-bed special use permit and any conditions on the existing approval were not obtained.

Market Area and Demand

Demand for assisted living in Dallas–Fort Worth is strong, and the market has moved in favour of existing operators.

NIC reports that construction is at levels last seen in 2012 and that holding national occupancy at 90 per cent would require more than ten times the current pace of development. That favours buying an operating home over building one.

The demand is not the risk. The risk is the format. HHSC's closure list for 2024 to 2026 shows a wave of small Type B licences ending in Collin, Denton and Tarrant Counties, including twelve homes under one operator's name in the target counties, seven of them in Collin County on a single day in May 2025, and other Type B homes in Frisco, Carrollton, Plano, Prosper and Crowley. The list records licence terminations, some of which are ownership changes rather than closures, and gives no reasons. Brookdale's investor materials show the same economics at scale: communities above 80 per cent occupancy generate more than twice the EBITDA per available unit of those at 70 to 80 per cent.

County and five-mile population aged 75 and over, senior household incomes and Keller-area referral sources were not obtained and are required at engagement. The nearest emergency hospital is Baylor Scott & White Emergency Hospital – Keller, which transfers patients to Baylor Scott & White Medical Center – Grapevine, less than ten minutes away.

Competitive Supply: Competitor Census

Rates were read from each operator's own website where published, on or about 26 October 2026. Aggregator rates for the same buildings differ by up to $1,750 a month and are not used for underwriting. Licensed capacity and occupancy were rarely published and are collected at engagement.

Competitor Number 1

Mustang Creek Estates of Flower Mound

This residential campus of six 16-resident homes, opened in 2024, is located at 2500 College Parkway, Flower Mound. Its all-inclusive rates are $4,665 a month for Type A, $5,535 for Type B and $6,195 for private memory care, with a $2,500 community fee and no level-of-care charges. The same operator runs a campus on Rapp Road in Keller.

Competitor Number 2

BeeHive Homes of McKinney

This franchised residential care home offers all-inclusive assisted living at $5,700 a month and memory care at $6,000, with the rate set by an initial care evaluation.

Competitor Number 3

Keller residential homes

ZIP code 76248 includes several small licensed homes, among them a six-bed Type B home on Hillside Drive and Hidden Oaks Assisted Living on Bandit Trail, as well as Truewood by Merrill, Keller. Their rates were not published.

Competitor Number 4

Village on the Park McKinney and Stonebridge Ranch

These regional communities publish assisted living from $4,780 and $4,995 a month and memory care from $5,405 and $6,795.

Competitor Number 5

Legend of McKinney

This regional community publishes assisted living starting at $5,605 a month.

Competitor Number 6

Brookdale Waxahachie

This national-chain community publishes private assisted living apartments from $3,555 a month and memory care from $4,195, with "limited availability" pricing.

The subject's modelled rate of $5,500 sits at the Type B residential-home benchmark and below the Texas and DFW medians, which describe private one-bedroom apartments in larger communities. A small home in a high-income suburb can command it; a rent roll showing lower rates or Medicaid residents would change the result.

Benchmark Operating Profile, Six Beds

Labour is 65.1 per cent of revenue, well above the 38 to 45 per cent reported for public operators and the roughly 28 per cent cash NOI margins Ventas reports for its senior housing portfolio, because a six-bed home pays for a full 24-hour post with six residents to share it. The caregiver wage of $15.50 an hour sits between the $13.00 average attendant wage HHSC funds in its Medicaid rates and the $18.27 mean BLS reports for healthcare support occupations in Dallas–Fort Worth; Argentum reports senior living wages rose 33 per cent from 2019 to 2024 and 4.8 per cent in 2024 alone. Placement fees assume two move-ins a year at about a month's rent each.

Method. A care home's revenue is a rate times beds times occupancy; its cost is mostly hours. The study builds staffing from the hours the licence requires and the hours care needs, priced at a market wage, rather than from an expense ratio borrowed from large communities. The owner's own work in the home is valued at market, because a lender underwrites a business that could run without its owner.

The Bed Count

Two more residents add $122,440 of revenue and $85,587 of EBITDA, because they share the same overnight post. That is why the city's answer on a special use permit is worth more to this home than any change in rate, occupancy or wage.

Highest and Best Use

As improved, the property is a converted residence with a care licence, fire suppression, accessible bathrooms and a garage conversion. Its income as a six-bed home supports a going-concern value of about $283,000; its real estate is priced at more than $1 million. A large house in Keller has a strong alternative use as a family residence, and on the listing's own pricing that use, not the care business, sets most of the value. The improvements made for care, a converted garage, roll-in showers and a sprinkler system, would be neutral or a modest discount to a family buyer.

The highest and best use as improved is continued operation as a residential care home if the city permits eight beds; at six beds, the value of the property as a residence exceeds the value of the business it houses, and the care use is supported only by an owner who works in it. The appraiser confirms the residential value from Keller home sales.

Method. When a business occupies a building with a strong alternative use, its value is the higher of the two, and a lender should know which one it is lending against. A six-bed care home in a high-value suburb is often worth more as a house; the buyer is then paying a house price for a job, and the loan must be sized to the job.

Sales Comparison: Why the Community Evidence Does Not Apply

No closed sale of a small residential care home in Dallas–Fort Worth with a public price was found; listings show only asking prices. The priced evidence describes communities of 96 to 149 units.

The subject is priced above every per-unit figure in the market for a building with none of the scale of a community. CBRE's H1 2026 investor survey puts Class A core-market assisted living at a 6.5 per cent cap rate and memory care at 8.0 per cent; those rates describe institutional assets and do not transfer to a six-bed home.

Income Approach: The Going Concern

At six beds, NOI of $28,296 capitalised at 10.00 per cent gives about $283,000. The business does not earn a return on the real estate it occupies, so the going concern has no value beyond the property, and the $150,000 business component of the price is not supported by income. At eight beds the income value, about $1.13 million, approaches the asking price of the real estate; only above eight beds does the business begin to earn a value of its own.

SBA Programme Compliance Under SOP 50 10 8.1

Every SOP 50 10 8.1 provision above comes from NAGGL, law firm, lender and adviser summaries; the SOP text is read before commitment. The FY2027 fee notice sets the upfront fee at 3.5 per cent of the guaranteed portion for loans above $700,000 and 3 per cent between $150,001 and $700,000; the waiver for rural businesses does not apply in Keller. Prime was 7.00 per cent in October 2026.

Project Cost Estimate and Loan Assumptions

Location: Keller, Tarrant County, TX | Permitted beds: 6 | Size in SF (Gross): 3,733

Source: Listing data, HHSC, CareScout, BLS, NAGGL summary of the FY2027 fee notice, UnionMetric

Five-Year Pro Forma and Debt Service Coverage, Six Beds

Rates rise 3 per cent a year, wages 4 per cent and other expenses 3 per cent. Because labour is two-thirds of revenue and grows faster than rates, a six-bed home's margin shrinks every year it is not repriced.

The Asking Price Test

The owner-operator column adds back the administrator's salary and a second day shift worked by the owner, about $89,786 a year, which is what the broker's implied income of $81,700 most likely assumes. A lender that accepts those add-backs is lending against the buyer's own labour, and must still leave the buyer enough to live on.

The asking price needs EBITDA of $169,211 to cover a 90 per cent loan 1.25 times. At market staffing that is about nine occupied beds, one more than the city's best case and three more than it allows today. The seller's tax returns, the rate roll by resident and payer, the payroll register and the City of Keller's zoning file answer the question, and a lender should ask for them before ordering any third-party report.

Method. When a seller discloses no earnings, solve for the earnings the price requires and express them in the unit the business is limited by. For a care home that unit is beds, and the limit is set by the zoning, not the licence. A price that needs more beds than the city permits is a price for an approval the seller does not have.

Sensitivity Analysis, Six Beds

A single Medicaid resident removes almost all of the margin. STAR+PLUS pays $67.18 to $74.04 a day for assisted living services from September 2025, about $2,043 to $2,252 a month, plus room and board of $909 a month in 2026, roughly $2,400 to $2,600 a month less than the private rate. A home of this size cannot carry acquisition debt on Medicaid days.

Where the Feasibility Conclusion and the Value Conclusion Meet

The valuation says the six-bed care business is worth about $283,000, while its house is priced at more than $1 million. The feasibility analysis says the same business covers a 90 per cent loan 0.23 times on market staffing and 0.89 times if the owner works in it unpaid. They meet in the bed count: a Type B licence fixes the staffing cost, the City of Keller fixes the number of residents who share it, and at six residents the business cannot pay for the house it occupies. The determination is that the acquisition is not feasible at the asking price as a six-bed home on market staffing; that it becomes workable with about 37 per cent equity if the city grants the eight-bed special use permit; and that at six beds it suits only an owner-operator who works in the home and funds about two-thirds of the price.

Risk Factors

The bed count is capped. The city permits six of the ten licensed beds, and the eight-bed permit is a discretionary approval.

The staffing floor is fixed. A Type B home must keep an awake caregiver on site at all times, whatever its census.

Small homes are closing. HHSC's closure list shows a wave of small Type B licences ending in the surrounding counties in 2024 to 2026.

The identity is withheld. The facility name, licence number and true address are not public, and three addresses appear on the portals.

The seller's tenure is short. The seller recently acquired the home, so tax-return history under the current owner is limited.

The licence does not transfer. HHSC must issue a temporary licence, and a health inspection follows the change of ownership.

Wages are rising faster than rates. Senior living wages rose 4.8 per cent in 2024 and labour is two-thirds of this home's revenue.

Medicaid would erase the margin. Each STAR+PLUS resident pays about $2,500 a month less than a private resident.

New rules add cost. HB 3595 requires emergency preparedness and temperature control plans to be fully implemented by 1 January 2027; the generator helps, and the plan must still be documented.

The rules are summarised, not read. Every SOP 50 10 8.1 provision used here comes from secondary sources.

Conditions and Limitations

This is a model study prepared to illustrate feasibility and valuation method on a publicly listed property. It is not an appraisal, it was not prepared under an engagement, it was not prepared for any intended user other than the readers of this site, and no one should rely on it for any decision about the property. UnionMetric did not inspect the property, review its books or licence file, or communicate with its owner, the listing brokers, any buyer, HHSC or the City of Keller.

The study relies on the extraordinary assumptions that the home holds a valid Type B licence in good standing; that the city permits six residents and could permit eight with a special use permit; that the improvements are as described in the listing; that all residents pay privately; and that the SOP 50 10 8.1 provisions apply as summarised in the cited sources. If any proves false, the conclusions may change. The operating profile, rates, occupancy, staffing hours and wages, expenses, the capitalisation rate, the allocation and the interest rate are UnionMetric assumptions. Figures are rounded, and totals may differ slightly from the sum of their parts.

What the Lender Received

In an engagement on this file, the lender would receive:

• A diligence request built around the asking price test: the facility name, address and HHSC licence number; three years of tax returns, the rate roll by resident and payer, the payroll register and staffing schedule
• The HHSC inspection, complaint and enforcement history for the last three years, with any plans of correction and the life-safety record
• The City of Keller zoning file, the conditions of the existing approval and a written view on the eight-bed special use permit
• A change of ownership plan with the HHSC filing date, an operations transfer agreement and a payroll reserve for the transition
• A Keller-area market study with population aged 75 and over, competitor rates and occupancy, and referral sources
• A going-concern appraisal by a qualified Certified General appraiser, with the residential value of the property and the allocation to real estate, FF&E and business value, and a credentialed business valuation
• The Appendix 15 coverage test on market-staffed and owner-operator bases, at six and eight beds, with wage and payer-mix sensitivities
• A data verification register separating primary-verified, secondary and modelled figures

To discuss an assisted living home, a senior housing acquisition or any change-of-ownership file, request a feasibility study.

Sources

• Established 6-bed Type-B Assisted Living Facility for Sale, listing BW2392757, BizQuest, 2026
• Established 6-bed Type-B Assisted Living Facility for Sale, listing 3834374, BusinessesForSale.com, accessed October 2026
• Assisted living and nursing homes for sale, Dallas–Fort Worth Metroplex, BizBuySell, accessed October 2026
• Tarrant County assisted living facilities for sale, CityFeet and LoopNet, accessed October 2026
• 26 TAC §553.5, §553.35 and §553.253, Texas Administrative Code
• How to Become an ALF Provider, Texas Health and Human Services Commission
• Assisted Living Facility Closures List, Texas Health and Human Services Commission, report dated 19 October 2026
• Proposed amendments to 26 TAC Chapter 553, Texas Register, 4 September 2026
• STAR+PLUS rates effective 1 September 2025, Texas HHSC Provider Finance Department
• Information Letter 2025-17, Texas Health and Human Services Commission, 18 August 2025
• 2026 SSI federal benefit rate, Social Security Administration
• HB 3595 and HB 2510, 89th Texas Legislature, 2025
• 2025 Cost of Care Survey median cost data tables, CareScout, March 2026
• Senior housing occupancy releases, Q1 to Q3 2026, NIC and NIC MAP
• Top markets for senior housing transactions of 2025, NIC MAP
• Occupational Employment and Wages, Dallas–Fort Worth–Arlington, May 2025, U.S. Bureau of Labor Statistics, 13 August 2026
• 2025 Forecast Report, Argentum, 8 January 2025
• Mustang Creek Estates of Flower Mound, BeeHive Homes of McKinney, Village on the Park, Legend Senior Living and Brookdale, operator websites, accessed October 2026
• Sonida closes previously announced senior living asset acquisition in Dallas–Fort Worth, Sonida Senior Living, 10 September 2025
• ESI brokers $9.2M sale of Sonoma House Assisted Living in Carrollton, Seniors Housing Business, 17 October 2024
• The Pearl, Lewisville, sale announcement, Business Wire, 8 August 2023
• U.S. Senior Housing and Care Investor Survey, H1 2026, CBRE
• Brookdale Senior Living, 2025 annual report and 2026 quarterly results, U.S. Securities and Exchange Commission
• Ventas and Welltower senior housing operating results, 2025 and 2026
• Baylor Scott & White Emergency Hospital – Keller, Baylor Scott & White Health
• Two Major SBA Announcements: Issuance of SOP 50 10 8.1, National Association of Government Guaranteed Lenders, August 2026
• SBA issues notices announcing FY 2027 7(a) and 504 loan program fees, National Association of Government Guaranteed Lenders, 4 September 2026
• SOP 50 10 8.1 changes of ownership commentary, Womble Bond Dickinson, Pioneer Capital Advisory and Starfield & Smith, 2026
• Table of Size Standards, U.S. Small Business Administration
• H.15 Selected Interest Rates, Board of Governors of the Federal Reserve System, 23 October 2026
• Uniform Standards of Professional Appraisal Practice, The Appraisal Foundation, current edition
• The Appraisal of Real Estate, Appraisal Institute