Leasing to Carehome Operators?

4 Replies

@Gary F.

Hi, my mom experience has been great so far. I kind of the just fell upon this model, but I’m a great believer in it. I actually used to work as a consultant in a ALF group so I was a bit familiar with the business model and how lucrative it is for the operators.

I met with the operators prior to leasing my SFH(Los Angeles area) and validated their business was on the right track. I secured a 2 year lease at $1000 above market value. I could have gone $1300 above but I want to build a relationship with the operators with plans to scale with more properties.

I’m in the process of purchasing property to do the same thing.

Have you started with yours yet? Ir are you just inquiring . I’d love to chat(pm me) I’m in the Monterey area.

@Gary F.  Has anything changed for you in the past 7 months since posting?

I'd agree with @Michael Encoy and his evaluation at the beginning of a partnership. I currently own four homes that I rent to residential care home operators in TX. I met with the business owners, looked through their books and listened to their business plan. It helped with this particular operator that there was a family legacy in the industry and they were incredibly competent. We signed a five year commercial lease (state promulgated) before purchasing each of the homes averaging about $1000-1300 above market rents. The tenant is responsible for most of the day to day repairs, with me being responsible for the roof, A/C and water heater.

Be aware that if you do this, the insurance requirements change significantly. You most likely cannot use a DWF landlord's policy. I have a commercial policy consisting of home coverage plus $1MM general liability for each property, and the latter is secondary to the operator's (required and primary) $1MM general liability policy on each of their business locations. 

Originally posted by @Andrew M. :

@Gary F.  Has anything changed for you in the past 7 months since posting?

I'd agree with @Michael Encoy and his evaluation at the beginning of a partnership. I currently own four homes that I rent to residential care home operators in TX. I met with the business owners, looked through their books and listened to their business plan. It helped with this particular operator that there was a family legacy in the industry and they were incredibly competent. We signed a five year commercial lease (state promulgated) before purchasing each of the homes averaging about $1000-1300 above market rents. The tenant is responsible for most of the day to day repairs, with me being responsible for the roof, A/C and water heater.

Be aware that if you do this, the insurance requirements change significantly. You most likely cannot use a DWF landlord's policy. I have a commercial policy consisting of home coverage plus $1MM general liability for each property, and the latter is secondary to the operator's (required and primary) $1MM general liability policy on each of their business locations. 



@Andrew M, good point on the insurance. It may be different in other states, but I opted for a landlord's policy supplemented with a $1MM umbrella.   This is what property owners who lease to operators who I spoke with opted for.  

Hello, Micheal and Andrew.

Coming back from time here. I've been away. I didn't get to lease my home due to local (stupid) HOA restrictions. Had I known that I'd have never bought there. Anyhow..


I'm in Honolulu, Hawaii now. Definitely a shortage of RCFEs here. The returns are lower here with SFRs prices being very high, many old 1950s built homes, and rents not high enough to comp the costs. But it can still be done.