anyone rent to tenants with cognitive disabilities?

16 Replies

Has anyone been successful (i.e., made the numbers work) renting to adults with cognitive or developmental disabilities? These are individuals who are high-functioning but are probably in a program of some sort, and have caseworkers who look in on them periodically. They are renting rooms in a house or apartment and sharing common space. Perhaps some or all are able to work. Not talking about a staffed halfway house or assisted living--at least I think I'm not. Would like to hear your experiences doing or trying to do this. I have a 2-unit in Baltimore that I'm thinking of upgrading for this purpose. 

Many thanks,

Nancy Roth

Lots of legal compliance but could be lucrative. Be sure to comply with the American with Disabilities Act (ADA) and Fair Housing laws. There are likely HUD regulations as well.

@Nancy Roth    I rent almost exclusively to non profits companies that take care of individuals with special needs.  These companies (and some are for profit) get paid by Medicaid to provide "community based living services" for these individuals. The trick is to get the company paying the rent, not the individual. There are typically 3-5 individuals per house.  If someone moves out, your rent doesn't change.  If they damage the property the company is responsible to make repairs.  They tend to stay as long as you maintain the property and don't raise the rent too much.  It works well here in Iowa but the cost of living in the DC area might be prohibitive.  These individuals are on SSI disability, EBT (food stamps), housing and utility assistance, etc.  Even if the company pays their rent to you, they still have to pay to the company.  

Why. Is there more profit involved in renting to handicapped tenants. Is your property in a area where regular tenants are not available.

You are taking on more problems than dealing with regular tenants so where is the upside.

Hi, everyone, thanks so much for responding. To clarify one point, although I live in Washington DC, my rental business is all in Baltimore City (hope to expand to County). I grew up there and know it very well, and the market is much better suited to rentals than we have in DC. 

Glenn, your model is exactly what I'm trying to achieve. I'm interested to know if your group houses must be staffed or if the residents are allowed to live independently with case workers visiting to keep them on track. I'm finding in Maryland the practice seems to be keeping the number of occupants down to 3 or at most 4 per household. Do you have those limits in Iowa?

Also, did your houses have to go through a licensing process by the state? In Maryland that is one path to becoming a housing supplier for special-needs tenants, but I'd rather not do that. Another path seems to be partnering with/subcontracting to a nonprofit that already has a license. I'm exploring that now, and trying to identify the right partner. 

You are exactly right that it's better for the rent to be paid or supplemented by Medicaid, because these folks may be able to work but don't have much earning power and cannot pay market rates. One more question: are your tenants paying by the room, or is the agency paying overall a single price for the unit? I'm so far finding nonprofits want to pay for the unit, which is less lucrative.

Jim, yes, there is legal compliance with this, but the whole rental business, in Baltimore City especially, has a lot of legal compliance issues you have to be mindful of. Of course housing for special-needs tenants has to be compliant with Fair Housing but so does everything else. As for ADA compliance, it depends whether the tenants have physical challenges. With this two-unit I expect to make the lower unit wheelchair accessible but the upper-level unit is better suited to able-bodied residents, as there is no elevator. At this point I don't see why I should go to the expense of making it accessible although it's not problem to enhance safety with grab bars, etc. 

Greg, the goal of my business is to achieve a stable, predictable passive income flow. There is such a dearth of housing for this population in the Baltimore area that when you get someone with physical disabilities or other challenges moved in, and their support systems are set up, they are not going anywhere. So they constitute an unusually stable source of rental income. Plus there is a pent-up market for this kind of housing, so you can replicate this kind of rental unit almost endlessly. Another upside, as Glenn mentions, is there is an intermediary who is responsible to see the rent gets paid and the maintenance done, which is another stabilizing factor in the income flow. It's not particularly sexy, and not that many in the business are drawn to it. In a way that's why I'm interested in exploring it. 

Many thanks to all,

Nancy Roth

I'm not sure about special needs housing, but I do know several people who live in group homes.  These are people who have mental health disabilities.  From what they've told me there are 2 residents per bedroom at a rate of $650 per month.  So this type housing is lucrative around here.  They do supply meals, however.  Nothing fancy.  A typical one around here would be a four bedroom house, with the director occupying one bedroom.  Income potential $1300 x 3 = $3900 month.

To keep full, you'd need to keep in contact with area psychiatric hospitals.  

Hope this helps

Hi, Leslie, that's really interesting. My daughter lives in Houston and I am exploring that rental market a little.

What you are describing sounds like a halfway house, in which people who are returning to the mainstream from prison, or are recovering from addiction and learning to live an abstinent life under supervision (and daily testing). I have a colleague who runs housing like that for recovering alcoholics, and he hired the director. It's quite lucrative. But it is a little more hands-on than I want, at least for now. I want to provide housing, period, and let the social workers do their job. 

As far as keeping full, yes, absolutely you'd need to partner with area service agencies. But they seem to have an endless supply of clients for whom there simply is no appropriate housing, so I think once it's up and going the vacancy issue is not going to be a big one. 

No, but I know where there are a bunch of "low functioning" people in Washington DC....

Bada Bing!!

@Nancy Roth ,

Have you explored government programs for housing such people? You may be able to get rent subsidies or possibly even grant money.

I just met someone locally who teaches grant writing. I could pass her info along if you want to connect with me here on BP. There may be programs available for your business.

Yes, I have been exploring government programs, but their grants are targeted to local social service nonprofits who do the programming and support for the people who have been identified as having challenges. Some of those nonprofits, like Associated Catholic Charities, own their houses, and I believe they can get grants to identify and convert a house for their clients to live in. Others, like The ARC, rent units owned by landlords, but The ARC pays rather modestly. 

I might qualify for a government grant if I really get into the business, develop a couple of residences, and form a nonprofit. But I don't foresee that in the near future. As a rule I think the government grants are not aimed to for-profit businesses. They may give incentives, such as loans with slow payoffs or low interest, or a property tax break, but grants, I don't think so.

Rent subsidies, that is something I'd be looking for. 

Thanks, Dave. 

@Greg S. There are several reasons to rent to these companies.  I do not have to show the house to prospective tenants, no tenant screening, the rents come to my account electronically from the non profit, some even have maintenance people so I don't get bothered with minor repairs, and exceptionally low vacancy.  The first one I bought was in March of 2008 and have not had one day of vacancy since.  We have close to 40 that we rent to 7 different companies and I have only had one instance where they moved out.  The lesson from that was, don't buy in a small town because it's more difficult for the companies to back fill a vacancy.  The rents are in line with the market rate but I make my money on no vacancies or turnover.

@Nancy Roth   In my town, you can only have 5 unrelated people in a house.  I do have a few 5 person programs but most are 3 or 4.  I have one that has only two individuals but they have severe disabilities and require a great deal of constant care (this is the exception).  In  most "programs" as they are called the folks go somewhere during the day, they might take the bus or work at the grocery store, etc.  Others they are there most of the time except when the staff take them to appointments and activities.  There are no special requirements from the city to rent to these people or companies, just the normal registration.  In my town, a "group home" is defined as 6 or more individuals and that falls under separate rules, regulations, etc.  I do not have any of those.

Is it permissible to say the names of these companies, non-profits and government programs? I would like to research further.  If it is not permissible, can you tell which terminology to google?

Thanks

@Chelle Knijnenburg There are a few national organizations (Catholic Charities for example) that provide these services, but most are local nonprofits. So the names of the organizations in Cedar Rapids may mean nothing in Colleyville, Texas. I went online to the Maryland Developmental Disabilities Administration and looked up their contractors. There were maybe 200. I went to all their websites and pared it down to about 40-45 based on what I could discern about the services they offer. I have been calling them one by one to tell them about my house and ask about their programs. So far have not hit the right one. There may not be a right one, but if there is, I will find it. 

Because the funds for this kind of housing comes through HUD, and goes to the states, and the states contract out locally, you have to look in the state where you want to do business to identify the right partner. So you would start in Texas, find the department in the state government that deals with people with disabilities, and go from there.

@Chelle Knijnenburg   google "community based living services" and your town.  The Mentor Network is a big one across many states.  Some are local and just run a small number of programs like 6.

Sounds like partnering in some from with the government or social agencies is more intrusive to a independent investor than it is worth.

To each their own but obviously there are draw backs or more investors would be doing it. Some what like housing welfare recipients, not appealing to most investors as too management intensive.

@Thomas S.

I'd do upgrades to match or slightly exceed your similar competition and not limit yourself to one applicant pool. I think this will meet or exceed the potential for your business and give you better overall results.

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