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.

Ashish Acharya · Answer

@Keith Mintz

Hey Keith,

I love hearing about new strategies, and this one is very clever. I’m glad you’ve found success with it! I did see a thread back in November about house hacking and assisted living, but that approach didn’t seem quite as promising because it required more hands-on work, along with entity structuring and considerations like caregiver wages, food, supplies, licensing, insurance, overhead, etc.

I liked Alex’s answer about looking into cost segregation studies. I don’t know your full tax picture, but from a high-level perspective, and based on the fact that you’re a real estate agent, which already puts you in a great position to source these types of deals, there are a few additional tax layers worth thinking about. If you qualify as a Real Estate Professional (REP) (which you may already) and meet the material participation requirements, your rental losses don’t have to remain “passive.” They can be treated as non-passive losses, meaning they may be used to offset other non-passive income. This is where the strategy can really help with scaling. As an agent earning income from real estate transaction activities, rental losses accelerated through a cost segregation study could reduce your overall taxable income in the early years. Depending on how much you’re earning from those transactions, it may also make sense to look at entity structuring, potentially even an S-Corp, to better manage taxes, cash flow, and liability as things grow. This is just a very, very high-level view and would depend on your full situation.

It sounds like you got lucky with an operator who has a ton of experience, but I would definitely make sure you’re covered on all the points Stuart mentioned above. Liability could be a real concern in this space, so having the right structure, insurance, and agreements in place is key. Good luck with your future investments and happy to connect!

Sean Graham · Answer

Agreed, cost segregation will help boost cash flow as well.

Ying Tang · Answer

@Stuart Udis thank you for the insights!

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

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.