Investor · NY · Member since 2020 · 5 posts · 6 votes
Hi everyone,
I operate a licensed Group Family Child Care program in Queens, NY, and I’m currently expanding into a second location through a residential property acquisition.
With NYC increasing public investment in child care, it’s become even clearer that demand still far exceeds supply- especially for infants, extended hours, and flexible care. Licensed group family programs like ours fill that gap quickly, and I’m finding the model pairs very well with residential real estate.
I’m interested in connecting with investors or operators who are already:
Purchasing 1–2 family homes to operate licensed child care
Using the business cash flow to support acquisitions
Structuring deals with conventional, DSCR, private, hard money, or seller financing
Scaling thoughtfully while staying compliant with local regulations
I’m not looking for theory- more interested in real-world experience:
What lenders understood the model best?
How you structured your first few deals?
Lessons learned dealing with boards, zoning, or underwriting?
Happy to exchange notes and learn from others who are already doing this successfully.
Thanks in advance — looking forward to the discussion.
Appreciate the comment, Jay. The Minneapolis situation is certainly making headlines though not exactly the playbook I’m looking to follow.
I’m hoping to connect with folks who’ve successfully scaled legitimate, licensed child care operations through real estate and can share what’s worked from a financing and underwriting standpoint.
Appreciate the comment, Jay. The Minneapolis situation is certainly making headlines though not exactly the playbook I’m looking to follow.
I’m hoping to connect with folks who’ve successfully scaled legitimate, licensed child care operations through real estate and can share what’s worked from a financing and underwriting standpoint.
Hi @Victor D.Pairing residential acquisitions with operating cash flow can work well if zoning and licensing are addressed upfront. In practice, lenders who understand both small commercial income and residential collateral tend to be the most flexible, and keeping early deals simple and conservative usually makes scaling easier.
If you want to do this correctly, the loan product matters.
If your goal is to build a business that does not get attacked later for doing things improperly, you should avoid Fannie Mae loans unless you are actually living in the property. The industry consensus is that Fannie Mae is already using, or is in the process of using, AI to identify and pursue mortgage fraud.
I do not think we will see a flood of prosecutions immediately, but I do think enforcement will be targeted. High-risk use cases will be first, and Child care is very likely to be on the short list.
Once you read Fannie Mae’s guidelines, it becomes clear that this model cannot be legally scaled under their rules. The operator must live in the property, and the business use must be clearly secondary to residential use.
DSCR loans and certain alternative investment lending products are the more appropriate path here.
I am currently working on an adult day care acquisition, and my strong recommendation is to focus on states that compensate operators well. You also need to think about exit options at acquisition. If you are the operator, flexibility matters. The ability to pivot the property to STR, MTR, or co-living use is valuable.
If you are only holding the real estate and not operating the business, then who you choose as your operator matters more than the specific house you buy.
PM me if you want to talk through this in more detail.
Fannie Mae's guideline
Fannie Mae purchases or securitizes mortgages that are secured by properties that have a business use in addition to their residential use, such as a property with space set aside for a day care facility, a beauty or barber shop, or a doctor’s office.
The following special eligibility criteria must be met:
The property must be a one-unit dwelling that the borrower occupies as a principal residence.
The borrower must be both the owner and the operator of the business.
The property must be primarily residential in nature.
The dwelling may not be modified in a manner that has an adverse impact on its marketability as a residential property.
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