--- title: 3–4 Bed Adult Family Home Financial Model (Wisconsin Guide) description: Thinking of opening an AFH in Wisconsin? See real 3–4 bed financial projections, staffing costs, occupancy math, and SBA-ready modeling. image: https://www.atlystcare.com/hubfs/AtlystCare-afh-blog-banner-1200x628%20(5).png --- [Skip to content](https://www.atlystcare.com/blog/3-4-bed-afh-financial-model-wisconsin#main-content) This is a search field with an auto-suggest feature attached. - There are no suggestions because the search field is empty. 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It is a capital allocation decision. Too many operators enter this space asking: - “How much can I make?” - “What does Medicaid pay?” - “Is this profitable?” The better question is: What does a structurally sound AFH financial model actually look like? This guide breaks down: - Revenue structure (private pay vs Medicaid) - Occupancy modeling - Startup capital requirements - Staffing cost reality - Operating expenses - Break-even math - Cash flow projections - Debt financing (SBA modeling) - 5-year scaling strategy - Portfolio expansion math - Risk scenarios - Valuation framework This is not surface-level math. This is the economic architecture of a Wisconsin AFH. --- # **1. Understanding the 3–4 Bed AFH Revenue Model** Under **DHS 88**, a licensed AFH in Wisconsin may serve 3–4 unrelated adults. Revenue comes from: 1. Private Pay Residents 2. Medicaid Waiver Residents 3. VA or Long-Term Care Insurance (occasionally) The economics depend heavily on payer mix. --- ## **Typical Monthly Rates (Wisconsin Market Range)** Private Pay: $4,800 – $6,500 per resident/month (Madison often higher) Medicaid Waiver: $3,400 – $4,200 per resident/month (Varies by county & care level) For modeling purposes, a blended rate matters more than the headline rate. --- # **2. The Blended Rate Formula** If you have: 2 private pay at $5,500 2 Medicaid at $3,800 Monthly Revenue = (2 × 5,500) + (2 × 3,800) = $11,000 + $7,600 = $18,600 per month Annualized: $223,200 But this assumes: - 100% occupancy - No ramp-up - No turnover That’s rarely reality in Year 1. --- # **3. Occupancy Ramp Modeling (Critical)** Most first-time operators underestimate ramp risk. A realistic ramp: Month 1–2: 1 resident Month 3–4: 2 residents Month 5–6: 3 residents Month 7+: Full (4 residents) That means early revenue may look like: Month 1: $5,500 Month 2: $5,500 Month 3: $10,000 Month 4: $10,000 Month 5: $15,000 Month 6: $15,000 Month 7+: $18,000+ If you do not model this ramp, your cash flow collapses early. --- # **4. Startup Capital Requirements** Many AFHs fail not because they’re unprofitable — but because they’re undercapitalized. ### **Typical Startup Costs (3–4 Bed)** Renovations: $15,000 – $40,000 Furnishings: $12,000 – $25,000 Licensing/Training: $3,000 – $7,000 Insurance Deposits: $3,000 – $6,000 Initial Supplies: $3,000 – $5,000 Working Capital Reserve (3 months): $45,000 – $60,000 Total Typical Startup: $85,000 – $140,000+ Working capital is the difference between survival and stress. --- # **5. Staffing Cost Structure (The Largest Expense)** Labor typically represents 45–60% of total revenue. For 24/7 coverage: 24 hours/day × 30 days = 720 hours/month At $18/hour: 720 × 18 = $12,960 base wages Add: Payroll taxes (~12%) Relief/OT buffer (~10%) Total Payroll: ~$16,000/month This number surprises many new operators. --- # **6. Fixed Operating Expenses** Mortgage/Rent: $2,800 – $3,500 Utilities: $900 – $1,200 Insurance: $600 – $900 Maintenance Reserve: $300 – $500 Typical Fixed: $4,800 – $6,000/month --- # **7. Variable Costs (Per Resident)** Food: $300–$400 Supplies: $180–$250 At 4 residents: ~$2,000–$2,400/month --- # **8. Full Monthly Expense Example** Payroll: $16,000 Fixed: $5,000 Variable: $2,200 Total Operating Expenses: ~$23,200 Now compare that to revenue. --- # **9. Break-Even Analysis** If blended revenue at full occupancy = $18,600 Expenses = $23,200 That model fails. But that example assumes lower pricing. If rates are: Private: $6,000 Medicaid: $4,000 2 + 2 mix Revenue = $20,000 Still tight. This is why: Pricing discipline Staffing efficiency Property cost control Matter deeply. --- # **10. What a Healthy Model Looks Like** Target: Revenue: $22,000–$26,000 Expenses: $18,000–$22,000 EBITDA Target: $4,000–$6,000/month Annual EBITDA: $48,000–$72,000 This is realistic for well-structured 4-bed homes. --- # **11. The Role of Owner-Operator Structure** If the owner works shifts: You reduce payroll expense. If owner replaces 160 hours/month: 160 × $18 = $2,880 saved Owner-operated homes often outperform investor-owned homes. --- # **12. Debt Financing & SBA Modeling** If you borrow $120,000 10-year term 9.5% interest Monthly payment ≈ $1,550 If EBITDA is $5,000: Debt Service Coverage Ratio (DSCR) = 5,000 / 1,550 ≈ 3.2 Very healthy. But if EBITDA is only $2,500: DSCR = 1.6 Tighter. Lenders prefer DSCR above 1.25. --- # **13. 5-Year Projection Strategy** Revenue should increase annually (2–4%). Expenses inflate (2–3%). Proper modeling shows: Year 1: Stabilization Year 2: Optimization Year 3: Expansion readiness Year 4–5: Portfolio build --- # **14. Multi-Home Portfolio Math** One Home: $60,000 EBITDA Three Homes: $180,000 EBITDA But centralized management can reduce cost per home. Scaling without systems increases compliance risk. --- # **15. Sensitivity Scenarios** Conservative: 85% occupancy Higher payroll Lower pricing Moderate: Full occupancy Stable pricing Aggressive: Higher private-pay mix Premium pricing Controlled staffing Always model downside first. --- # **16. Risk Factors That Destroy Margins** - Overpaying for property - Underpricing private pay - Poor occupancy ramp - High staff turnover - Frequent medication errors - Compliance citations - Poor payer mix --- # **17. Cash Flow vs Profit** Profit does not equal cash. Cash impacts: - Payroll - Insurance - Supplies - Loan payments Always track cumulative cash position. --- # **18. Exit & Valuation** AFHs often trade at: 2.5× – 4× EBITDA If EBITDA = $70,000 Valuation ≈ $175,000 – $280,000 Multi-home portfolios command higher multiples. --- # **19. Building a Lender-Ready Financial Model** Lenders expect: - 60-month projection - Sources & uses - Debt schedule - DSCR calculation - Occupancy assumptions - Expense assumptions - Sensitivity scenarios Professional modeling increases funding odds. --- # **20. The Strategic Advantage** Operators who: - Understand their numbers - Model ramp correctly - Maintain compliance - Protect margins Outperform dramatically. This is not a get-rich model. It is a structured healthcare business model. --- # **Final Thoughts** A 3–4 bed AFH can be: - Stable - Profitable - Scalable - Financeable But only if: - Capitalized properly - Modeled realistically - Managed systematically If you want a lender-ready financial model customized for your market: AtlystCare provides: ✔ 60-Month Projection Models ✔ SBA-Ready Debt Structures ✔ Break-Even Analysis ✔ Multi-Home Portfolio Modeling ✔ Scenario Planning ✔ Compliance & Financial Integration Schedule a Financial Strategy Session. Blog Post ## Related Articles Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. 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