Realtor · Phoenix, AZ · Member since 2026 · 9 posts · 5 votes
I came across a property that would be perfect for a group home, community residence, assisted care, ect. or similar type of property but don't want to actually run it. Another option is to master lease it to a group home operator but I don't know what that process looks like or how reasonable that is. Anyone have any experience or advice? Any advice on how to underwrite for this?
I can share how this looks from my side of the table. I'm in San Antonio and I'm building in the supportive housing space, so I talk to group home operators regularly.
The master lease structure is real and operators do sign them, but here's what I've learned they care about. They need a long enough term to justify licensing and setup costs, usually they're thinking years not months. They need control of the day to day inside the home. And the house has to fit their model, bedrooms, bathrooms, accessibility, neighborhood rules.
On underwriting, I'd work backwards from the operator's revenue. Their income is per resident, so the rent you can charge has to leave them a healthy margin after their staffing and care costs or no operator will touch it. If the numbers only work with the operator squeezed, it doesn't work.
Still learning this side myself, but that's the shape of it from the operators I talk to.
Find another investor that is self managing their own group homes in the area and if they can arbitrage the master lease with their subleases a lot will take that deal.
I can share how this looks from my side of the table. I'm in San Antonio and I'm building in the supportive housing space, so I talk to group home operators regularly.
The master lease structure is real and operators do sign them, but here's what I've learned they care about. They need a long enough term to justify licensing and setup costs, usually they're thinking years not months. They need control of the day to day inside the home. And the house has to fit their model, bedrooms, bathrooms, accessibility, neighborhood rules.
On underwriting, I'd work backwards from the operator's revenue. Their income is per resident, so the rent you can charge has to leave them a healthy margin after their staffing and care costs or no operator will touch it. If the numbers only work with the operator squeezed, it doesn't work.
Still learning this side myself, but that's the shape of it from the operators I talk to.
Yes, that is the order I would use. Chris Colton here in San Antonio. The operators I talk to are clear about what they can pay and what a house has to look like for their model. If you start with their numbers, you can tell fast if a property fits or not. If you start with the property, you can end up trying to force a deal that never fit their model in the first place. I am still learning this side myself, but talking to operators first has saved me from chasing the wrong houses.
Operator here — floor work in detox, residential treatment, and sober living across SoCal, NOC shifts up through BHT Supervisor and Director of Client Services. I'm the tenant on the other side of the lease you're describing, so I'll answer the follow-up you asked: yes, find the operator first.
The reason is the rehab. If you rehab a house first and then hunt for an operator, you are guessing at their model — bedroom and bathroom count, accessibility, where staff sleep or don't sleep, how the house handles visitors and curfew. An operator who has to rework your rehab, or live with a layout that fights their program, is an operator who either walks or pays less. Get their spec before you spend the rehab money, not after.
On underwriting, work it backwards the way the San Antonio reply said, but with the operator's costs in it, not just their revenue. Per-resident income minus awake overnight staffing, intake and drug testing, documentation, and turnover — that's the margin your rent has to leave intact. If the rent only works when the operator cuts the overnight shift, it doesn't work. The overnight is where this business actually happens, and it's the first place a squeezed operator cuts.
Three things to settle before you sign, from the operator side: term long enough to justify their licensing and setup costs — years, not months. Control of the day-to-day inside the home — intake calls, house rules, discharges — has to sit with the operator, or you own the program's problems without the authority to fix them. And visibility you don't have to beg for: incident reporting to you within a set window, and walk-throughs on a schedule.
The master lease is real, and it's a good structure when the operator is real. Pick the operator first, rehab to their model, then sign the term that fits them.
If you don’t want to operate the group home yourself, I’d look at the operator first and the property second. A master lease can work, but I’d want to know what the operator can realistically afford to pay, what licensing or zoning is required, who is responsible for the improvements, and what happens if the operator leaves. I’d underwrite it first as a normal rental so you know your downside, then treat the group-home/master-lease income as upside only after you’ve confirmed there’s a qualified operator ready to take it.