There’s been a big boom in the sober living home industry in the last several years. With more and more people in recovery seeking appropriate housing to support their sobriety, real estate investors and entrepreneurs are scrambling to meet the surging demand for sober living homes.
If you’re looking to take on the risks and rewards of this high-return investment strategy, there are a few things you should know before taking the plunge. Investing in sober living homes is a unique real estate niche with its own pitfalls—but when it’s done right, you’ll have a cash-flowing investment to be proud of for years to come.
Read on for our sober living home real estate deal must-haves.
Sober Living Home Purchase Must-Have #1: At Least 3 Bedrooms
Most people who manage sober living homes choose to operate with two residents to a bedroom. Because of disability rights laws, typical city and/or county rules limiting the number of unrelated persons in a home frequently don’t apply to sober living environments, so don’t worry too much about having too many unrelated people in the home.
When you’re thinking about the number of bedrooms, consider how you plan on financing your purchase. Most buyers opt for conventional loans on sober living homes because the interest rates are lower. If you’re planning on using a conventional loan, limit your search to single family homes with at least three bedrooms or duplexes with at least two bedrooms in each unit. Both of these types of properties can be purchased using conventional loans.
Remember that just because you have three bedrooms doesn’t mean you can necessarily have six residents in your sober living home. We recommend employing a full-time house manager at your facility and giving them a room to themselves rent-free in exchange for their house management work. So, for a three bedroom single family home, you can house one house manager and four residents comfortably. A four bedroom can house six residents.
When the time comes to manage all these beds, check out the Sober Living App’s bed management features to simplify and streamline the process, saving you time and money. Our all-in-one cloud-based system makes it easy to keep track of residents, move-in dates, applications, resident incidents, UA results, and payments from any device.
Sober Living Home Purchase Must-Have #2: Turn-Key Condition or a Very Healthy Rehab Budget
Because the monthly cash-flow of sober living homes is typically high, most investors choose to buy properties that are already in good condition so that they can start collecting rents right away.
Why? Because time spent in rehabbing a fixer-upper is time lost in rent collection and money lost in holding costs. It’s also common to run into unknown issues during renovations that can easily destroy a rehab budget and put you in the red before you even open your facility.
For all these reasons, we recommend buying a turn-key property with only a few make-ready repairs at most.
Remember, of course, that all properties need routine maintenance regardless of condition at closing. Toilets will leak, gutters will clog, and windows will break. Expect higher maintenance costs and more maintenance calls in a sober living home versus a traditional buy-and-hold rental due to the higher number of residents in the sober living home model.
In addition to budgeting at least 10% of the total rents for maintenance costs, check out the Sober Living App’s property management features designed to simplify sober living home property management tasks like routine maintenance. We put all repair information, contractor contact details, maintenance appointments, invoices, and recurring bills into one easy-to-find place. All staff members and residents can instantly access updates about maintenance issues, like when the toilet will be serviced, from their phones.
Sober Living Home Purchase Must-Have #3: A Great Location
When shopping properties for your first sober living home, location is a critical consideration.
First, check zoning laws in your city to make sure that the property you’re looking at can be used as a sober living home.
Next, remember that many people don’t view a new sober living home in their neighborhood as a positive development. NIMBYism is a major obstacle for new sober living homes. We recommend getting to know your neighbors, building relationships with them, and explaining how your facility will be a good community partner. If this seems like an impossible task, consider properties that have some form of built-in privacy, whether that’s a large lot, a fenced lot, or a lot with few immediate neighbors.
Finally, you’ll want to find a property in a decent residential area with access to public transportation and community resources, like libraries, career centers, community support groups, and other social services. Reintegration into the community is an important part of recovery for sober living home residents.
Managing all of the various vendors, organizations, and health care providers that interact with your residents is a big job. Check out the BehaveHealth Sober Living App’s Community and Organizations features to see how we easily organize this information for your staff and your residents, putting the resources they need at their fingertips to ensure a smooth transition into the recovery lifestyle.
Ready to Take the Plunge?
Planning is important, but it’s easy to over-analyze your first sober living home real estate deal and prevent yourself from taking action. With these three must-haves, you’ll be well on your way to opening a functional, profitable sober living home.
When you do, remember that we at BehaveHealth are here to help. Feel free to reach out to us with any questions you might have about our Sober Living App’s property management solutions.
Or, better yet, test the app out for yourself. Why not claim your free trial today?