What I Learned From 7 Years of Recovery House Investing (Alongside My Son)

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Fairly often, people hit me up for advice on opening and running a recovery house. What they may not realize is that it could be considered as another form of special needs housing. For me, my journey with special needs housing began almost 25 years ago.

At that time, I was providing low income housing through the government Section 8 programs, which provide government subsidies for those who are of low income, due to a variety of reasons, including disability.

My second experience came from working with folks, who utilized Community Action either for emergency housing or for down payments or rent, often due to a distressful situation, such as being homeless with children or a being a battered parent or spouse with children.

But my third experience, which led me to owning and operating a drug and alcohol (privately owned) recovery house, happened pretty much by accident. My oldest son was in recovery, and he was asked to manage a house for the owner of several recovery houses in a nearby county. This is where my son had gotten well after having a long run of multiple attempts at recovery with little previous success.

The second part of the perfect storm was that my wife and I were looking to downsize from our primary residence, mostly for lifestyle reasons, but the real estate market had already tanked. So, we both took some chances and decided we would open up our own recovery house with our primary residence, especially since there was a drastic shortage of facilities in our area.

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Related: Should I Accept Section 8 Tenants — Or Run the Other Way?

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Starting a Recovery House

Once we had the buy-in of me as owner and my son, who had lots of experience with recovery, as a manager, the rest was the easy part. Having a good property, location, and furnishing a place might not seem like the easy part to the typical real estate investor, but it is. The hardest part is having a good manager, culture, and reputation. It also helps to have a big “why.” That’s what keeps you going during the tough times. Most real estate investors have dollar signs in their eyes when they think about renting beds out, but there’s also a lot of responsibility and liability that can go along with it. Personally, my son and I don’t really do it for the money, as there are much easier ways to make a buck.

Biggest Challenges

In the beginning, besides filling up the house, the biggest challenges for us were the township and neighbors. Everyone thinks a recovery house is a good idea as long as it’s not next to them. The truth of the matter is that we never have really had any criminal problems.

The types of issues we usually have are things like an uptick in turnover or someone breaking the house rules. Occasionally, though, we do lose a resident or former resident, and it’s a grim reminder of the life-and-death battle being fought out there on the streets in terms of addiction.

Advantages

There is some light at the end of the tunnel, though, just in the fact that you never have a complete vacancy. Residents also do chores, like maintaining the grounds and shoveling snow. There is some wear and tear, but usually someone at the house is handy in a trade as well. For example, some residents have been chefs, plumbers, electricians, etc. Also, residents can span anywhere from ages 18-65 and are from every walk of life.

Another challenge for us is the enabler in the addict’s life — usually a parent or spouse — who inhibits the resident’s recovery. The most common traits I see in a typical resident are selfishness and a lack of maturity. There have been times when we had to tell a parent that they need to let Junior grow up and to stop calling the house.

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Related: “Low Income” vs. “Bad” Neighborhoods: Yes, There IS a Difference. Here’s What Separates Them.

Biggest Rewards

By far, the best part about owning and running a recovery place has been what it’s done for my son and for me, as it’s probably one the most rewarding things I’ve ever done in my life. I’ve had people come up to me crying and saying that my son or I have saved their life, their child’s life, or their spouse’s life — and it’s very hard to put a price on that.

Nothing is better than to see a resident or former resident move on, land a good job, get married, buy a house, or even start a business. It’s one of the greatest feelings of accomplishments in the world.

Many of us know someone struggling with some type of addiction and feel like we would like to do more to serve this community. So, if you are on BiggerPockets and you are contemplating opening some type of drug and alcohol recovery house, a great resource when starting out is going to the Oxford House website to learn more about running recovery houses in general.

Anyway, who says you can’t manage rental properties and do some more socially conscious investing at the same time?

Let me know about your socially enriching real estate projects with a comment!

About Author

Dave Van Horn

Dave Van Horn is President at PPR The Note Co. - an operating entity that manages several funds that buy/sell/hold residential mortgages, both performing and delinquent. Dave has been in the Real Estate business for 25 years, starting out as a Realtor and contractor and moving onto everything from fix and flips to Raising Private Money.

13 Comments

  1. Randy Phillips

    That was a great story, I really appreciate your honesty about your son’s addiction. I struggle with family members being addicted, being homeless turning tricks and stealing. A while back I was watching a program called the Meth Capitol of the world, I thought this will be interesting. And guess what? It was my city.
    I wudnt do what your doing, but I’m glad there are people like you.
    rando

  2. Walt Wiley

    Excellent article Dave, a niche area that is a real need for newly recovering individuals. As you said, not for individuals that are just looking at it as an investment, certainly not a passive one. Pretty much like running a business which involves real estate. It is my opinion that to be successful it needs to be managed by someone who is in recovery like your son. Thanks for sharing some of your personal story with us.

  3. Mark S.

    This is something that I hope to work towards one day. It’s one of my longer-term goals as I already have a background in social services and have been gaining more real estate investing experience. But it’s not simple- there’s a lot of logistical issues that need to be addressed that can be off-putting.

  4. Harold Looney

    Thanks Dave for sharing your story. I use a similar model to lease an apartment to a Social Services Agency in NYC. The agency is the lease-holder and they provides all of the supportive services and place/manage the tenants. The Agency is allowed to place up to three tenants in the apartment. I get paid the same market rate rent regardless of how many tenants are in the apartment.

    I would love to the scale this model and increase the inventory of these supportive co-living environments. There is a high-demand for these type of apartments in NYC. I did look into Oxford House, but they do not have State Reps in NY and I did not get strong engagement from the NJ Oxford House State Rep.

    I have pitched the idea to investors and landlords, and the conversation usually ends when they hear that a Social Services Agency is paying the rent.

    Do you have any thoughts on how to break the stigma and get more REIs and landlords comfortable investing in these type of properties?

    Blessings

    • Dave Van Horn

      Hey Harold,

      That’s an interesting model. I can’t speak for Oxford House since being a private operation, we’re not affiliated with them but they do have case law in their history in dealing with municipalities. That along with their general advocacy of this type of housing is one of the reasons I like to recommend them.

      But to answer your last question, that’s precisely why I wrote this article. I think education is the best method to combat the stigma. So my advice would be to teach your model. Show your investors how it’s both profitable and a good cause. Another possible step further would be to set up a non-profit. Many times having that status partnered with a good cause may help make investors feel more comfortable.

      Best of luck

      – Dave

      • Harold Looney

        Thanks Dave for your response. I agree that education is key to combat the stigma. I am realizing that it will probably take me showing investors instead of just telling them. So my plan is to continue investing in traditional real estate opportunities and use the profits to start a Foundation that invests in Supportive Housing.

        I believe the best way to build a sustainable Supportive Housing portfolio is to have a capital stack that includes Equity REIs, Private Lenders, and Banks making traditional market returns and Foundations and Gov’t making below market returns. This is a win-win-win scenario.

  5. Jerry W.

    Dave,
    Thanks for sharing your story. You are kind of a role model for investors with your wealth of experience. It is nice to see you are a great person as well. Thank you for helping others. In my job I see many with addictions. There is never enough money or beds to help everyone. It is truly gratifying to see someone make it. I usually see the ones who do not.

    • Dave Van Horn

      Hey Jerry,

      Good to hear from you! And as always, thanks for the kind words.

      It definitely seems like there’s never enough beds or help for people with addiction. I think that there definitely could be enough space, but currently there just isn’t enough acceptance/understanding. Insurance companies don’t appropriately recognize the troubles of people in recovery and society generally treats the problems of addiction criminally, which make it much worse.

      Hopefully our work does a little bit of help moving forward one step at a time. I think articles and general education are a great way to combat this lack of acceptance and help start to change the public’s attitude.

      Best,
      Dave

  6. Jackie Botham

    Wow, Dave! I am impressed with how well you and your son have done with running your recovery house! I have been in recovery for over 15 years and have just started my investing career with buy and hold. In my own experience, I have seen a lot of “recovery” houses that were managed very poorly and the owners either did not know what they were doing or they were just in it for the money. Those houses were in constant chaos and the majority of people who went there were quickly lost again to their addictions. I agree that with this niche, it is essential to have a manager who is solid in their own recovery. This person can relate to the residents on a level that only an addict can and can also spot any BS a mile away.
    I commend you for taking on this difficult special-needs niche and making it work! More people like you and your son are needed in this field, as safe and healthy housing for recovering addicts is sorely lacking. Good luck to you and your son and thank you so much for writing this post!

  7. Brandon Sturgill

    Thanks for sharing, Dave. I have been putting together a business model for a similar venture (likely VASH)…but not opposed to other options. I think my main concern is related to the nuts and bolts of the operation..do you work with the local metro housing authority…or the county to get funding?…

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