Investor · Broomfield, CO · Member since 2010 · 187 posts · 54 votes
Has anyone heard of investing in residential treatment facilities (group homes)? These facilities would offer services to adults with disabilities like mental retardation or down syndrome. Supposedly, Medicaid reimbursements are quite high and you can put two people to a room. I read somewhere that the reimbursement for each person is something like 3K a month. However, this may be totally inaccurate. Does anyone own these and how do they work?
Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
13y
Hi Reid,
Steve B. is right I've been running a drug & alcohol recovery house for close to 3yrs. with my eldest son, & we find it very rewarding. The key is the on site manager. We are privately run & considered a single family residence as the residents are a protected class under fair housing since the residents are considered disabled while in recovery. Hope this helps.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Those are two completely different beasts. Residential "treatment" facilities need to be licensed by the state, and meet specific criteria for the treatment. Treatment can range from minimal to extensive counseling, rehab therapy, etc. What types of licensing will be required in your area, cost, etc.? In addition, you'll want to check on the number of staff required to oversee the facility, cooking, housekeeping, maintenance, etc.
For sober living houses, they can be set up basically as room mates, with agreements month to month, allowing for them to be evicted without the normal process if they don't comply with the program. This too is not as simple as it seems, and requires A LOT of time. People doing drugs on premises, disagreements between tenants, calls from police in the middle of the night, medical emergencies, etc.
Neither of these populations are easy to work with, and are very high maintenance.
Investor · Broomfield, CO · Member since 2010 · 187 posts · 54 votes
13y
I have heard of people setting up group homes and renting them out to ex-cons, people with down syndrome, and sex offenders. I'm not sure I'd be able to deal with sex offenders, but I do feel like I would be giving back to society by setting up group homes for ex-cons and people with mental challenges. Has anyone set up a group home before?
Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
13y
The tax implications can be quite different as well and become more complicated.
A halfway house quite likely would be treated as a boarding house because the stays would likely be short term. Which means self employment tax.
The residential treatment facility might be considered residential investment property or not depending on the level of care, regularity of assistance, and if the majority of tenants have long or short terms stays.
A more careful analysis is needed for both of these situations to determine the taxable nature of these activities.
Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
13y
Reid Levy there can be advantages both ways. I happen to know quite a few investors that own assisted living homes that own them as for profit companies. They can be quite lucrative depending on how they are setup and in most cases are very much like running a business.
Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
13y
Hi Reid,
Steve B. is right I've been running a drug & alcohol recovery house for close to 3yrs. with my eldest son, & we find it very rewarding. The key is the on site manager. We are privately run & considered a single family residence as the residents are a protected class under fair housing since the residents are considered disabled while in recovery. Hope this helps.
Investor · Broomfield, CO · Member since 2010 · 187 posts · 54 votes
13y
Hi David,
Where did you go to learn how to set this up? How much do you receive from the government for each person? How many people can live in one bedroom? What's the minimum amount of services you need to provide to them?
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
If you do something like sober living, you are just providing room space, and it's not a group home. However; you need to check with the local government entities for zoning and other requirements. Some areas have restrictions because there are so many popping up from investors wanting to find a way to pay for their real estate, and not really in it to help those in recovery.
Also, make sure you're cut out for dealing with 'ex cons' as they can be very high maintenance, and there can be problems. You have to screen very carefully. As for the drug addicts, unless they're coming from a program where they've been clean for a period of time, and going to meetings, etc. plan on problems, spending their rent money on drugs, etc. As for sex offenders, I personally would never rent to one, and if you do, make sure your house is far enough away from churches, parks, schools, etc. to satisfy criteria.
If you're strictly doing it for the money, there's much easier ways to make it.
Hi Dave, I'm interested in your response to Reids question as well.
Hi David,
Where did you go to learn how to set this up? How much do you receive from the government for each person? How many people can live in one bedroom? What's the minimum amount of services you need to provide to them?
I forgot you were involved in sober living real estate. I am looking at a few of these opportunities which are being offered for sale but I don't know anyone in CA that invests in them. I'm having a hard time finding information about the legalities and requirements of running one. Any suggestions? Also, do you know if any management companies specialize in this so that I don't have to be directly involved but can just manage the manager?
Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
12y
Hi Reid Levy
To be honest with you, I learned how to set it up through my son’s experiences and visiting my son. There is also a lot of information available at oxfordhouse.org/ on how to set up a recovery house and the laws surrounding it. We don’t receive any money from the government because we are privately run.Since it’s treated as a single family dwelling, people per room depends on the size of the bedroom. There are no requirements for services, but in our recovery house, we always provide staples, and then four nights a week we provide diner. We pay all utilities, including cable, internet, and phone. We have a weekly house meeting that’s followed by an AA meeting.
In our sober house, they pay for their own food and a room that they have to themselves. Their room fee covers rent and utilities.
Ron Kelly - I hope this information is helpful. Let me know if you have any questions.
Tiffany H. - oxfordhouse.org/ has a legal section on their site. I do believe that the key is finding the right manager, and that this is usually someone who has been in recovery and can be on-site. I don’t know of any management companies that specialize in this, as we don’t hire outside managers—all of ours come from within. We also have assistant managers, so that if the manager left, we would have someone already in place.
Rental Property Investor · Long Beach, CA · Member since 2011 · 102 posts · 12 votes
12y
@Dave Van Horn Thanks for the Oxford House link. Do you set up your leases this way where the group is one entity renting from you? Or do you do individual leases? If one lease, how do you remove someone who is in breach?
Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
12y
@Tiffany H. the recovery house I own and lease it to my son, the sober house we don't own, my son leases it from a third party. None of the other residents sign a lease in either case. They do sign a contract to follow the rules or be asked to leave. There's no security deposits and payments are made weekly. In 4 yrs. we've never had to evict anyone, although many have left on their own , and a few were asked to leave. That's what's unique about this, you never have a complete vacancy. So even if you did evict someone you still have all the other paying residents.
The Poconos, PA · Member since 2014 · 34 posts · 9 votes
12y
I know this post is old but I hope ya'll are still following the thread. I have a quick question for you about turning homes into halfway houses in general (if you know) and if you can speak to specifics in NC that would be even better. I have a friend who was in and out of them a year ago and he is now a small business owner doing well… long story short he told me of the cost and the immense potential for earnings if you do it right. You get a guaranteed check from health insurance from these people since its technically rehabilitation and they pay out every week. He did his stint with hallways in FL down near Boca Raton and said there’s a huge market down there for it, obviously since it’s sun and beach destinations. And my partners' vision is to help others with his experience and what he did to get off that path.
Any experience that you may have on starting one of these will be of great assistance to me. This will be my first investment and I want to do it right. With my business mindset and my past friends' experiences since he is too now "recovered" we will make a great team. @Dave Van Horn sounds very similar to your situation with your son, so I would like any advice.
Investor · Eureka, CA · Member since 2014 · 233 posts · 222 votes
12y
@Steve Hyduchak I'm a masters level social worker for my day job and serve on the board of the largest of the local substance abuse recovery non-profit. I would NOT recommend this area as your first REI. As mentioned previously in the thread, there are a lot of specifics as to what you need to provide at any particular level of care to qualify to bill your local gov't, Medicare/Medicaid, and private insurance. For many of these varieties of housing, you will need to hire staff, often with specific qualifications. These vary state by state and insurance to insurance. If you haven't had experience in running a healthcare business, there will be a very steep learning curve to get to the point where you can comfortably navigate the never ending changes and roadblocks with each form of payment. There is a high level of need in most areas, but unfortunately, the landscape for payments for these services is VERY volatile.
Now, depending on your local laws, you may still have a couple options to help out folks in recovery without having to enter into the murky world of healthcare. First, the most simple way to help is to reach out to local non-profits and see if they are expanding their residential treatment or aftercare housing programs. Many of these agencies have trouble finding a house/building to expand into due to the cold feet of many landlords, so a few phone calls offering to master-lease or lease a good size building to the agency could solve many problems for them. Second, you could offer sober living housing by the room, essentially renting out a house by the room, to local folks in recovery. This is even a higher work rate for the landlord than normal low income housing, as you will probably need to have an on site manager at each residence, you'll have very high turnover, and you'll regularly have folks that blow out. In some areas, renting individual rooms is actually prohibited. There is certainly money to be made in that field, but don't expect it to be passive income.
Hopefully this doesn't dampen your enthusiasm to help those in need and those working to resolve their substance use issues, but this is a VERY challenging route to go for someone with a lot of experience. I would be afraid that taking this kind of thing on with limited experience would burn you out from REI and substance abuse recovery all together.
The Poconos, PA · Member since 2014 · 34 posts · 9 votes
12y
@Bradley Bogdan Thanks for your experience and pointers. I know the forum is halfway house, but I mean to focus my ambitions on sober homes. As you said Brad that when running a halfway you need full time staff and there is a bunch of legalities. My partner has experience in these sober homes and he would be the one running the day to day and making sure our "tenants" were meeting all criteria and staying clean as part of the guidelines.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
12y
@Steve Hyduchak I have gone into much of this in posts above too. My sister has been involved in sober living for several years, and I have worked with that population myself. You need to check the requirements for your state, and local governments, as different areas have different licensing laws, requirements, zoning, etc.
In order to be paid by insurance companies, that would probably require another layer of scrutiny.
Some programs are required to have a set number of counselors, etc. Also, are you looking at it from the real estate aspect alone or as a business where you are actually involved with the addicts, etc.? The devil is in the details in all of these situations. Sober living or a medical facility where detox takes place, etc., big difference.
The Poconos, PA · Member since 2014 · 34 posts · 9 votes
12y
@Karen Margrave I definitely only want to focus on sober living, where the efforts are focused around the camaraderie aspect of support. My partner would be the actually involved with the addicts while I handled the business side of things and the legalities in our designated area. Do you have any investments in sober living now or are you trying to gain perspective like myself?
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
12y
@Steve Hyduchak I don't know the market for such things in your area. However; the sober living is basically broken into two types, one is where you are renting them a room in a drug and alcohol free environment. There can be 1 or more tenants per room, where they are charged room rate. Each person is responsible for their own food, etc. They sign an agreement to adhere to the house rules, and if they don't or if they don't pay rent, they have to move out immediately. (no eviction process, but make sure it's legal in your area) You also want to have it so that they are subject to random drug testing.
Another way to go is to offer some type of rehab where tenants are required to participate in a 12 step program, have meetings at the house, counselors, etc. where there is more time involved, etc. and therefore; higher rates.
You might want to check with the local rehab community and find out if there is a need in your area for such housing, for men, women or there's possibly a niche of women with children.
I do not invest in this type of real estate, as we do spec new construction. My knowledge is from working with addicts, and my sister running her houses.