The market for selling a Skilled Nursing Facility (SNF) in San Jose, CA, is strong, with high demand and rising valuations. This creates a significant opportunity for owners considering an exit. Realizing your facility’s full potential, however, goes beyond just finding a buyer. It requires careful preparation and a deep understanding of today’s market dynamics and regulatory landscape. This guide provides a look at what you need to know.
Riding a Strong Market Wave
If you own an SNF in San Jose, you are in a uniquely strong position. The market dynamics, both locally and nationally, point toward a favorable environment for sellers who are well-prepared.
Unmatched Local Demand
San Jose stands out. The area reported a senior housing occupancy rate of 95.7%, among the highest in the entire nation. This is significantly above the California-wide average of 87%. This high occupancy indicates a robust, sustained demand for skilled nursing services in your specific area. For a potential buyer, this is a very attractive signal of market stability and growth potential.
A Growing National Market
Looking at the bigger picture, the U.S. skilled nursing facility market is in a growth phase. It was valued at over $180 billion in 2023 and is projected to expand to more than $253 billion by 2033. This growth attracts sophisticated buyers, like private equity firms and large healthcare systems, who are actively looking for quality facilities to add to their portfolios.
Three Things to Prepare For
A strong market is a great start. But a successful sale depends on how well you prepare for the unique challenges of the SNF sector in California. Buyers will look closely at these three areas.
- Navigating State Regulations. California’s regulatory environment is strict. A potential buyer must submit a detailed application to the California Department of Public Health (CDPH) at least 120 days before the transaction. Ensuring your facility’s compliance record is clean and all documentation is in order is not just important. It is foundational to a smooth transition.
- Demonstrating Staffing Stability. Buyers will verify that you meet the state-mandated 3.5 hours of nursing care per resident day. Beyond the numbers, they will assess staff retention and overall team stability. A well-run, stable team is a significant asset that reduces a buyer’s perceived risk.
- Achieving Financial Transparency. You should be ready for a deep dive into your financials. Buyers want to see clear records of revenue, expenses, and profit margins. This is where many deals encounter problems. Having professionally organized financials that tell a clear story of profitability can dramatically speed up the process.
Valuations Are on the Rise
The strong demand for SNFs is directly impacting what buyers are willing to pay. Current transaction data shows clear momentum in the market, making it an attractive time for owners.
Rising Valuations
Recent deals in 2024 show skilled nursing facilities selling for approximately $94,000 per bed. This represents a significant increase in value, with the average price per bed having already jumped by $17,000 between 2020 and 2022. This upward trend shows that well-run facilities in high-demand markets like San Jose are commanding premium prices.
The Time to Prepare is Now
We often hear owners say they plan to sell in two or three years. That is the perfect time to start preparing. Buyers pay for proven performance, not just future potential. The work you do today to streamline operations, clean up financials, and document your facility’s strengths is what allows you to capture these peak valuations when you decide the time is right.
What the Sale Process Looks Like
Selling your practice is a structured process, not a single event. While every sale is unique, the journey generally follows four main stages.
- Preparation and Positioning. This is where we work with you to gather documentation, organize financials, and create a compelling story about your facility’s strengths and growth opportunities.
- Valuation and Marketing. We determine a strategic valuation and confidentially market your practice to a curated list of qualified buyers from our proprietary database. This creates competitive tension to maximize offers.
- Negotiation and Due Diligence. After selecting the best offer, we move to the due diligence phase. This is where the buyer verifies all financial, operational, and regulatory information. It is the most intensive part of the process and where many deals falter without proper preparation.
- Closing and Transition. Once due diligence is complete, legal documents are finalized, and the transaction is closed. We also help plan for a smooth transition for you, your staff, and your residents.
How Your Facility is Valued
Determining your facility’s true market value is more than applying a standard formula. Sophisticated buyers look past the net income on your profit and loss statement. They value your practice based on its Adjusted EBITDA.
This means taking your reported earnings and making adjustments to reflect the true cash flow of the business. We normalize for owner-specific expenses (like a vehicle lease) and one-time costs to present a clear picture of ongoing profitability.
Most owners are surprised to learn their practice is worth more than they thought once these adjustments are made.
| Financial Metric | Example Amount | Explanation |
|---|---|---|
| Reported Net Income | $500,000 | The “on-paper” profit. |
| Owner Salary Adjustment | +$150,000 | Adding back above-market salary. |
| One-Time Expense | +$50,000 | Adding back a non-recurring cost. |
| Adjusted EBITDA | $700,000 | The true cash flow buyers value. |
This adjusted number, combined with a compelling story about your facility’s reputation and growth potential, is what forms the foundation for achieving a premium valuation.
Planning for What Comes Next
A successful transaction is about more than the final sale price. It’s also about securing your future and ensuring a smooth transition. Thinking about these things early is key.
- Protecting Your Legacy and Staff. Your facility is more than an asset. It is a community you built. The right deal structure and the right buyer can help protect your staff and ensure the standard of care you established continues.
- Defining Your Future Role. Selling does not always mean walking away completely. Structures like strategic partnerships or equity rollovers allow you to retain a stake in the future success, providing a potential “second bite at the apple” when the new, larger entity sells again.
- Optimizing Your Financial Outcome. The way a deal is structured has major implications on your after-tax proceeds. Planning ahead with a tax strategist can help you keep more of your hard-earned money.
Selling your practice is one of the most important financial decisions of your life. We believe every owner deserves to understand their options and enter the process with confidence.
Frequently Asked Questions
What is the current demand for Skilled Nursing Facilities (SNFs) in San Jose, CA?
San Jose has a very high senior housing occupancy rate of 95.7%, which is among the highest in the nation and significantly above the California average of 87%. This high occupancy rate shows a strong and sustained demand for skilled nursing services in the area.
What are the key areas I need to prepare for when selling an SNF in California?
The three key areas are: 1) Navigating California’s strict state regulations, including a required application to the California Department of Public Health 120 days before the sale; 2) Demonstrating staffing stability by meeting the state-mandated 3.5 hours of nursing care per resident day and showing strong staff retention; 3) Achieving financial transparency with clear, professionally organized financial records of revenues, expenses, and profit margins.
How are Skilled Nursing Facilities in San Jose currently valued?
Valuations are currently rising with recent deals showing SNFs selling for about $94,000 per bed. This is a notable increase from previous years. Facilities are valued based on Adjusted EBITDA, which adjusts the reported earnings for owner-specific or one-time expenses to reflect the true cash flow of the business.
What does the typical sale process for an SNF in San Jose involve?
The sale process generally involves four stages: 1) Preparation and Positioning — gathering documentation and organizing financials; 2) Valuation and Marketing — setting a strategic price and marketing confidentially to qualified buyers; 3) Negotiation and Due Diligence — buyer verifies all details and documents; 4) Closing and Transition — finalizing paperwork and planning a smooth handover.
How can I protect my legacy and optimize my financial outcome when selling my SNF?
Protecting your legacy involves choosing the right deal structure and buyer to safeguard your staff and ensure care standards continue. You can consider deal structures like strategic partnerships or equity rollovers to retain a stake in the future. Financially, planning ahead with a tax strategist can help minimize taxes and maximize the proceeds from the sale.
