What actually creates the value in a sober living deal, and why most underwriting mis

Most people underwrite a recovery residence like a rooming house. Count the beds, multiply by weekly rent, back out vacancy. That math is what makes these deals look mediocre, and it is the wrong math.

The value comes from one long term lease to one operator entity, not from per bed rent. Once that lease is signed the building stops pricing like a house with tenants in it and starts pricing like a small commercial asset with a single tenant.

Disclosure before the numbers: I am the founder of Vanderburgh Sober Living, so I have a commercial interest in people believing this. Judge the numbers, not me.

Four of my own deals.

Springfield MA, roughly 10,000 square feet, formerly an institutional building. Bought May 2023 at $325,000. About $50,000 of renovations and $20,000 of furnishings. Acquisition ran on hard money at 14 percent, then refinanced into permanent debt at 7.5 percent in October 2024 at $900,000. Ten year lease to an operator at $9,500 a month. Post stabilization appraisal came back above $1.5 million.

Taunton MA. Bought September 2022 at $450,000 with about $50,000 of improvements and carrying costs. Appraised at $1,000,000 once stabilized. Sold in 2024 at $720,000 through a charitable bargain sale.

Springfield MA (again). Bought 2024 at $194,000, significant renovation, long term operator lease signed, sold 2026 at $400,000.

South Portland ME. Bought 2023 at $325,000, running at $8,250 a month.

Same pattern every time. The renovation is table stakes. The lease is the asset.

Two things people get wrong on the way in.

First, the language. There is no such thing as a "licensed" sober house in most states. Massachusetts has no license for a Level 2 recovery residence. You pursue MASH certification voluntarily, and what actually holds projects up is local zoning and use classification rather than the certification itself.

Second, the operator. A ten year lease is only worth what the operator is worth. Most of the failures I see are not building failures, they are operator selection failures. If you cannot underwrite the operator, you are underwriting a vacant building with a nice kitchen.

Happy to answer questions on any of it, including the parts that did not work.