Best RE investment strategy 2026?

Question

Hi BP community,

I am an investor in Sacramento and an agent. I found a niche strategy that seems to have been working extremely well. I want to share it and get feedback...What is your thoughts, what possible issues do you see with this...etc.?

Basically I hunt for homes 5b+ with the intention of it being an intentional co-living space (by the room rental)...but I am currently niched in a specific type of care home. The best part is the I don't actually operate the home. Instead I rent it to my tenant for premium price that allows me to cash flow 10%+ cash on cash and WITHOUT paying repairs, managing the home, or worrying for the next 5+ years. The tenant pays premium rent with rent increases, signs a 5 year lease, pays all repairs, and manages the property...etc. I just rinse and repeat.

Has anyone else investigated this niche or is already invested? Any other community or care home operators in Sacramento here? - Would love to hear your experience.

Stuart Udis · Answer

@Ying Tang Yes, that's often the case.  Most base zoning does not allow group living. While recovery homes are a necessary service, the well-heeled residents in more affluent neighborhoods have the financial resources to push back on this use meaning these properties tend to be located in lower class neighborhoods where the residents lack the same resources. Someone living in an affluent neighborhood does not want a revolving door of recovery patients living next door.

Ying Tang · Answer

@Stuart Udis thank you for the insights!

Ying Tang · Answer

I've heard a lot about sober living home and assisted living houses. The outcome is highly dependent on the operator. You mentioned you have a good connection so that's your advantage. Curious 👀: are most sober living homes located in Class C neighborhoods?

Stuart Udis · Answer

I understand that the building is leased to a sober living home operator and that, as the landlord, you are not responsible for day-to-day operations or routine repairs. I wouldn't go so far as to say the liability is minimal on the building owner. Presumably, those responsibilities fall on the tenant. With that in mind, how are the following issues handled in practice:

When plumbing, HVAC, or other building systems require service, does the tenant independently select licensed and insured vendors and obtain all required permits where applicable?

Are you named as an additional insured on the tenant’s general liability policy, and have you received the actual endorsement rather than a certificate alone?

Does the tenant impose the same additional insured and indemnification requirements on the contractors and vendors performing work on the property?

How do you verify that vendors are paid and that no mechanics’ liens are filed against the property for work performed at the tenant’s direction?

These are the types of operational and risk-management issues that often get overlooked in triple-net or operationally delegated structures and can materially shift risk back to the property owner if not handled carefully.

From my experience the Credit tenant possesses the sophistication to understand these responsibilities and has asset managers and systems in place whereas shifting these responsibilities onto the tenant without the wherewithal can lead to unnecessary exposure and liability on the part of the building owner. For this reason if I have a commercial property that is not going to attract a credit type tenant I will not sign a NNN lease. I will not trust the tenant to manage the risks prudently and will instead utilize a modified gross lease where I will retain control over physical work orders, snow removal and items that I view as greater liability occurrence related activities.

Stuart Udis · Answer

@Keith Mintz A 10% cash on cash return on a single-family home, where maintenance and management is contractually the tenant’s responsibility, feels like a relatively thin margin given the risk profile. Setting return aside for a moment, I’m trying to understand how liability exposure is actually managed under this structure.

Specifically, how do you maintain control over the quality of vendors performing work on the property when maintenance and management is delegated to the tenant? This seems materially different from a commercial NNN lease with a credit tenant that has internal contract management, established safety procedures, and the sophistication to ensure all work is performed by properly licensed and insured contractors, with warranties and with the owner named as an additional insured.

How are insurance requirements enforced in practice, what indemnification language is built into the lease, and what rights does the owner retain to approve vendors and verify compliance?

Keith Mintz · Answer

Hi Stuart, That is a very good question. The liability is very minimal especially for me. I have my regular home insurance, I could also get general liability insurance, but more importantly the tenant has the insurance for the home and their business. Regarding control of quality vendors, it takes time to find the right connections. I have met many sober living home operators that wanted to rent my properties until I met my tenant. He has 20+ years in the business with many successful operating homes in the city. Many other operators I met referred to him as the king of sober living, teaching other operators. His success record it was struck me as the right tenant. So I have stuck with him rinse and repeat, he is my tenant for all my properties.