10X Your Cashflow: Starting a Sober Living Home Business

Great. What is going on today? I've got Andrew Lamb with me from Vacaville, California. Just crazy, like Vacaville. Right. Vacaville, like Calville, is essentially what Vacaville is. Right. And Andrew has been a friend of mine now for several years, and most recently, he's been doing some really interesting things. And so I wanted to share him with you guys today and unpack a lot of what he's doing around sober living homes. Right. But before we get into that, Andrew, here's a question for you. Who are you? Who are you?

Yeah. So first and foremost, I'm a husband. I'm a dad. I've been married 12 years and have five daughters. I'm the son of a single mom who was a pastor. So I grew up with really good values. I grew up on a military base the first six years of my life. My mom was a captain in the Air Force. So you won't hear me use bad language. It's just not part of who I am. Yeah, I'm just somebody who I think is grounded in some solid values and wanted to share that with the world. I have a real estate team. I have, you know, ownership in my. My KW office. We started it back in 2016, and I've been in real estate 12 years as well. Okay.

How did you get into real estate?

I was. I was a teacher. This was back in 2009. So I had graduated college from University of California, Davis. Pretty good school, but it was the, you know, bottom of the economy, like the recession. It was terrible. People with PhDs couldn't get jobs. So I. Initially, the only job I could get after sending out about 60 applications was being a janitor at my church. But I. While vacuuming the entire church, which was pretty large. It seated a thousand people. While vacuuming, while cleaning out offices. I was listening to podcasts, and MIT and Harvard had classes that were, like, online for free. And I would listen to that stuff and just kind of build my business acumen. Ended up becoming a teacher after doing a leadership program at that church for about a year. Ended up becoming a teacher at a very small startup school. The school was growing, so I actually started as a teaching assistant and ended up with my own class of third graders and fourth graders by the end of the year because I had a degree. And at a private school, you can be a teacher without a teaching credential if you have a college degree. So just kind of a lot happened at once, and I had to adapt and figure it out. But it was a really fun foundation.

Andrew, what was your. What was your major? Did you say that?

No. So went in as a computer science major. Actually had a scholarship offer from the NSA and decided I didn't want to give them eight years of my life afterwards, but went to Morgan State University in Baltimore, of all places, on a scholarship. And then this ties into my journey. I ended up having to come back home the next semester. My. My stepfather had cancer. He passed away. I needed to come home and basically work 30 to 40 hours a week to support my family at that point, my brother and my mom. But computer science and then linguistics ended up being my final major. I changed majors.

Linguistics?

Yeah.

Okay. So how did you decide? I'm just curious. Right. This is fascinating. How did you decide on linguistics?

It was a time back, you know, I started college, 2004. I'm older than I look, so it was a time when, you know, being a tech guy wasn't cool. You were in a basement. It was in a cold room with servers. And I loved people and I spoke other languages. I did five years of Spanish, three years of French, went to France a couple times. And I just wanted to be around people. And I knew business was the path for me, and I loved traveling the world. So I changed to something that allowed me to study that and study, you know, language and the history of language and how to communicate better.

That's awesome. That's awesome. So did you end up graduating from. From Davis?

I did. So I went to Morgan State University for one semester, transferred back to a community college for about a year and a half, and then spent my last two years at UC Davis.

Okay, very cool. I remember that was one of. One of my options. My dad. I don't know if I ever told you, my dad, like, grew up in the Oakland area. And what was. He always says he went to Berkeley. I think he took classes at Berkeley, but he graduated. I'll have to ask him. We graduated somewhere else. Right.

But.

But for a long time, like, I thought all the. Kind of, like the California schools, this was, like, where I wanted to go, but I ended up on. On the exact opposite end. Right on the East Coast?

Yep.

Okay, so you became a teacher and you were teaching third and fourth grade?

Yep.

Okay. What did that prepare you for?

Oh, well, I had no formal training on how to do this. Right. I just loved kids, and I love to teach. And the class kept growing and growing throughout the year because it was a private school and everyone wanted to send their kids there. So it taught me how to adapt, how to teach like Just the fundamentals of how to convey your concepts and like what you want to learn to the simplest minds, but also like the best sponges possible. So they were squirrely, they were loud and they would run around, but they would capture so much information even in the midst of all that. So it honestly prepared me for real estate for sure. People all the time. Because it's just, it's the same thing, right? Dealing with clients. How do you explain something in the simplest terms so that they can grasp it and run with it and not like over complicate these things that are honestly really simple.

So why did you decide to get out of that teaching?

I got married in 2010. Six months later we found out we were pregnant and I was making less than 30 grand a year working from 7am to 6pm I was there in the morning to help kids get to school and get in their classes and kind of observe while they were on campus. I was running the after school program to make some extra money. I did kindergarten PE in the middle of the day. Like I was doing so much and making so little. And my wife was a transaction coordinator on a real estate team. So I ended up asking the team leader, hey, do you think I'd be good at the sales thing? I had done door to door sales before I sold cable. I had sold dry cleaning to your door, like delivery service.

Okay.

And if I can sell stuff knocking on your door at 6:30 at night when it's dark outside and I'm a 63 big guy, I figured I could do pretty well in the middle of the day selling houses. So yeah.

Wow.

He said, yeah, let's do it. So by that summer after my first year, I had my real estate license. And the first week I held an open house, met somebody, and the week later had him in contract on a home. So it just worked out and you're.

Like, I'm off to the races. Okay, interesting. So walk me through your progression as an agent and then how your mind morphed into investments. Or maybe you entered in always thinking investments. You know, I don't, I don't know. I'm curious.

Yeah, it's, it's a good question. I, you know, for a long time, honestly ignored the, the investing side. I knew I always wanted to invest. I started an LLC to invest in 2009, 2010. I just didn't know what the heck I was doing. And it was honestly a really good time to buy, but everyone was scared and there was no capital that I could find for someone as young as I was, I got into real estate when I was 24. So I just sold. I did what I could do to survive. You know, that one sale made me feel like, oh, this is going to be easy. I didn't sell another house for a few months. So it was this process of let's figure out systems and models. I was not at Keller Williams, I was at another company for the first five years and I was on my own. So I started seeking out who across the country, outside of my market is doing really well. And it connected me to Keller Williams agents who were, you know, thriving because of the shift book and just everything they had done in their businesses. And they were so willing to share. And I wasn't getting that in my office. So I started connecting with people and networking and they would be like, hey, what's your email? I'll just send you this, I'll just send you that, whatever. And I implement it in my business to the point where 2013, one month, I sold like eight homes in a month and made more than I had ever made before and realized I didn't see my family in 2013. I had a wife and two little girls and I didn't see my family for an entire month because I was showing homes back to back to back to back all day long. Not really listing based yet. And I just decided I needed to build a team. So that's when that journey started. Grew it pretty well. Ended up on a couple of stages by 2016 and just decided, you know what, all those Keller Williams agents, there's something right about what they're doing. Let me start one in my area. So we brought my team over and actually started the Keller Williams office we're in now.

Fascinating. And that's, I'm sure, a whole nother journey, right? Because it's learning the brokerage side of the business and the economics of that business compared to your team and all the rest. So did you say you have four or five right now? Little girls?

Five little girls now.

Five little girls, yeah. Okay. Will you keep trying for that boy? Is that what you were doing?

Not necessarily. I just kind of felt like, and my wife, like we just weren't done yet. I'm not going to look back when I'm 90 and say I wish I had fewer kids. I probably would have thought, man, I wish this room was a little bit more full. Like I feel like we're missing someone. So we just kept going for it and it just didn't work out. Apparently the more you have of one sex, the Odds actually lower that you'll have anything else.

Really.

It's not 50, 50 each time. And for whatever reason, we got. We got five girls, and I'm okay with that. I love being a girl, dad.

That's awesome, man. That's awesome. Okay, so let's. Let's fast forward to what you're doing today, right? You own the market center or a portion of the market center. You have your team, but over the course of your career, you kind of started probably thinking to yourself, I've got to do investments. Right. I've got to start investing. I have five little ones that I need to look after. Right. And my financial future. And I'm sure you started looking at lots of different types of investments, right? And I find that most people that I talk to are normally just looking around where they live. Some start venturing out, but they focus on what they can do in their market. In every market, there's a way to make money, and every market, there's a way to lose money. Did you start focusing on investments in your market, or did you go outside the market, or what did you do? I'm curious.

Yeah. So I think I had the same thought process as anyone else. I'm in California. It's very expensive. And even though I know the inventory, my thought process was I make a certain amount, I can maximize how much I make out of state. And I actually did start trying to buy out of state. My. My family, my mom's side is from North Carolina, had plenty of opportunity there. And then we actually almost bought an Airbnb in Indianapolis through another KW agent there. The. It didn't appraise, so it didn't work out. Like we tried to get it to. To buy it and do a Burr method. It just didn't appraise for us, so we didn't buy it. And I realized, and I even hired vas, started trying to wholesale across the country, got these different list and spinning my wheels, ignoring the fact that the place I have the most knowledge, the best relationships, everything that could possibly work for me instead of against me is right here in my own backyard. So I. I finally made the decision after a year of just spinning my wheels and making nothing to just buy locally. And the first one I bought was on market. It I. I flipped a home on market. I knew the area. The agent had discounted it like 70 grand, thinking there were foundation issues. I know in that particular area, it's not foundation, it's just some support jacks that rust over. So what they thought was 70,000 cost me $1,600 to fix, and I made 60 grand in 90 days. And I thought, I need to do more of this, because average commission was 12,000 at the time. 60 grand for doing. Honestly, not much at all. My contractor did everything. We only put 20 grand into the home. It wasn't a major rehab. Like, I figured I needed to do more of that. And then. So there are a few progressions, right? So at first I was like, okay, not out of state, in state, in my backyard. And then maybe I don't want to flip as much because I was buying and flipping in an appreciating market when rates were below 3%. And I thought, there's got to be a way for me to hold these. And I connected with the private lender, same guy who did the flips. And I said, hey, I know you've never done this before, but what if I refinance out instead of just flipping? And he said, yeah, it's not our model, but if you think you can do it and you're buying a deal well enough, yeah, we'll do that. So I did that. The first one I did that one on was one of my own listings. And I think this is something real estate agents ignore, like, always look to buy first. So my clients vacant house needed some work. They didn't want to do the work, and they priced it a little too high to begin with. Eventually, some stuff was coming with tax changes in California. They wanted to get their money out of here, 1031, into another state. And they just said, let's drop the price and get it done. And I said, hey, at that price, they dropped it 50 grand. At that price, it makes way more sense for me to buy it, not charge you a commission versus you netting what you're going to net if you drop the price and still pay a commission. So it'll be a win, win. I'll buy it, I'll flip it, and then, you know, it's great for everyone. They said, yeah, let's do it. And I was surprised at how easy that was. But if you just go in and have the conversation and say, this is what we're going to do, full disclosure, these are the options, what do you think? They're like, yeah, let's do it. I then decided, because I'm somebody who thinks, how can I most efficiently use this, this asset? I had experienced several abrupt changes in my life, right? My stepfather passed. He died of cancer. Completely changed my world. In 2018, I actually became the team leader of my Keller Williams office. But my mom and my grandmother had to get moved from North Carolina to California because they both, for several different reasons, had had health issues. My grandmother ended up with has dementia and my mom had like a series of five or six strokes and the cost to take care of them far exceeded what they had. And so there's, There were these key moments in my life where I realized I can have a rental property, but waiting 20 or 30 years for it to be paid off is not good enough. I made a plan to have 100 rental properties within four years. And I still thought, that's a lot of work. I'm not going to be able to focus on anything else. I have a team, I have a brokerage, I have family. How am I going to do that? So that's where this idea of how do I use this single family home to house more people, to provide more value? I think you get paid in proportion to the amount of value you provide to the marketplace. How do I maximize the use of this home in order to also increase the income that I'm going to receive? And that's where this idea of sober living homes came from.

Dude, I love that you started asking yourself some really thought provoking questions, right? And you know, interestingly enough, we're going through that right now with my, my wife's mom, who's 91, and my parents are 80 and my parents are in great health, but her mom is not. She's taking care of her mom. And I'm like, wow, this is really expensive. Like, really expensive. If people don't prepare, right, that this is really expensive. And so, so what did you do? Did you Google? You're like, how do I maximize this? Were you talking this, like, how did that come about?

So, I mean, I did look into Airbnb and, you know, short term rental, midterm rental kind of things for, for what I wanted to do. Seems like in California especially, regulation is starting to happen a lot more. There is some stuff going on with people doing Airbnbs in our downtown area and causing a big uproar. So I figured that wasn't necessarily risk free if I went that direction. Plus, we're not a destination. I'm close to Napa, but we're not quite Napa Cowtown. So I just decided, you know, I've heard about this group home thing. I know somebody doing it in Arizona. Let me call and figure out how they're doing it. I called the places that were sending him people. They wouldn't answer the phone and then come to Find out they. They don't operate in California. So I figured, okay, I have to realize I have to learn who's doing this in my area. So instead of how, I started asking, okay, who do I need to talk with that knows who I need to know and can introduce me and be a warm referral, all of that. So I just called our local shelter. Like, I asked around. Someone said, oh, you need to talk with us. This person, her name is Colleen. So I called the shelter, got introduced to the director, which is this lady, and she runs this program called Housing first, which is a HUD program. It's national. Different regions have it. And she basically runs the meeting and all the committees for transitional housing and homelessness and all of that stuff. So she was like, yeah, we do have a use for a single family home. That's what I asked her. Do you have a use for a single family home? She introduces me to this whole world of sober living, which is a niche of group homes.

I love. I love that. I love that. I love just that. Because it's like, you just ask the question, right? You picked up the phone, you called and just asked the question. Okay, And. And she probably, interestingly enough, she's probably like, they probably have a big need, I would imagine. There's probably a big need, right?

Yeah, it's. It's huge. So there's not enough homes. I was underquoted on how much it could actually make because she's like, oh, they're gouging people at $800 a month. And I'm like, $800 per person a month. That's pretty awesome. And even If I charge 600, like, still be way better than. It's probably three times, you know, the cash flow of a traditional rental ended up being much more lucrative. But I started. I have five of them now in my city of Vacaville. And we could add another. Like, it's a big need, and it's the reason why we've been able to continue growing.

So let's unpack. What is sober living like? A sober living. Yeah, what is that?

So let's start first with group home, because I think that's the big, broad term. There's many different kinds you can house, you know, there's battered women's shelters, domestic violence, there's veterans. Like, there's all kinds of groups of people and demographics you can serve. Sober living, I have found to be the biggest need in a growing. It's a growing population. Like, there's. There's more and more people, unfortunately, Getting on drugs than off. And there's a lot of legislation and funds going towards it. So I just decided, especially In California in 2014, there was a proposition that passed that basically reclassified everything that was a kind of an individual drug offense. Like, you only had enough in your possession for yourself. You weren't looking to deal or anything like that. They were no longer felonies. They changed them to misdemeanors so that they can redirect the funds of imprisoning those people, from imprisoning them to outpatient treatment and sober housing. And they kind of designated this term sober living environment, which is what my homes are. So there is a flow of money specifically to house these people, which is why 99% of our people are in a county program. So that's why I chose sober living. I just think it's a big need. It's classified. Also, if you're in recovery, it's considered a mental health diagnosis now instead of a crime. So there's just a lot of things that protect the people who are in sober living homes. So much so that, you know, the government can't even come in and tell you not to open up. There's no licenses, there's no certifications needed. It's a protected class of people living inside the homes, and the home itself can be considered protected. There's actually a. Just last month, the doj, the United States Justice Department, said that a city in Illinois had no right to block a sober living home from opening because of federal equal housing laws and the fact that everyone in there was a protected class. And the city actually had to pay the operator $800,000 in damages.

Wow. Wow.

So there's nothing to stop you from opening up a home like this and serving the community and providing housing.

Okay, Andrew, if I want to open up a home like this, I'm about to buy a house, and I'm just. I literally just. I grabbed a pen because I was like, I have a house that I think is probably perfect for this.

Right.

That I'm about to buy on Friday. And the numbers are good the way they are already, but the numbers, I think, could look completely different. And so what should I know, right? Like, help. Help us. Help me kind of understand this. Right? What should I know? What? I don't know if you have a presentation for it or anything like that, but, you know, like, just tell me.

Yeah. So definitely the location matters. It needs to be not in a super rural area, but close to public transportation, close to stores. A lot of the people in Our homes do not have a car. They need to get to a bus so that they can get to their probation appointments or their outpatient treatment or to a hospital where they might get an injection once a month, things like that. So all that matters. Also, I tend to go with four bed or bigger. I like single stories. We do cover the utilities, so it keeps the cost down. Although we do have one, two story. It was just a great deal. And then your relationships matter more than anything. I have talked to several people in my local area who have opened homes like this. They went to a course that told them about group homes. They said, I want to do this. And they didn't lead with the relationships. And they've been empty for a couple of months, two or three months. And it does start there. It's a people business. The people you're serving, but also the people who are sending them to you. And so I kind of have a framework that I call read, which is research the market, research who are the programs, who's in the. We also call it the continuum of care to get people from. From homelessness to housed. Google that for your area. Learn who those people are who are on the committees, and then call them. Engage. So research who it is, engage them, ask. And add value is a. Ask a ton of questions as much as possible. How do you pay? Who's in your program? How many people are in the program? As much information as you can get. And add value. How can I help you? What do you need? What don't you have right now? And then D would be determine your differentiator. What's going to be your unique value proposition to those people so that they do remember you and start to send you all the people they can think of. And for us, it was twofold. We were told that, you know, women are really tough because there's a little bit more drama when you're housing women versus men. So we opened a women's home as our third home. And we also allowed for children. A lot of people were avoiding children, saying it's too much of a liability. I was raised by a single mom. It's very possible I could have ended up in a home like this if things went sideways when I was younger. So I always wanted to make a place for single parents in the master bedroom so they could have their own bathroom. So opening up, having those two key things made us completely different. And we filled up very quickly. And after our second or third home became the place that the county would send people like, just like immediately, they knew we'd have a bed. They knew we were good with people. And then we also fixed up every single home. So everything I have, I bought, I fixed up. It looks beautiful. When the case managers come, they're like, oh, my gosh, can I rent this? Can I live here? Do you have another for me? So they know we're really taking care of our homes and our people.

Does it require a lot of heavy management?

Yes and no. If you have systems in place and if you intake properly and you're asking the right questions, what's your drug of choice? How long have you been clean? How long have you been out? Some people do come from jail, from residential treatment, or from prison. Once we started asking the right questions, it. It became very easy to manage when we weren't asking the right questions. We would get some people straight out of prison. They would clear the entire house, Just scaring people off, depending on the person. It's not always the case, but a couple of times it happened when we went from a full house to an empty house because no one wanted to be there with this guy. So I think that really matters. But once we nailed that down, it's a. I mean, it's super simple. I have a leader inside of each home who lives there, who get some special privileges. They report back to me. They're my eyes and ears. And now I have one employee who manages all seven of our homes. We grew to seven in about 18 months. And she does everything. So literally at this point, I don't even need to go to the houses. I get a text message. We check in once a week. It's really simple for me. It's completely. It's mostly passive. There's still an hour or two a week.

What about technology? How are you using. How are you leveraging technology?

Yeah, I already use technology in my real estate business. So we. We use CallRail. And I set up just a specific number to track all the referrals that we're getting, record those phone calls, you know, have some analytics around that. It rings my house manager, my program director is what I call her. Her name is Jessica. And then it rings me if she doesn't answer. So we're never missing calls, we're never missing opportunities. It also transcribes everything, and then we have keypads. So we use quick set locks on every single house so that instead of having to meet someone there, I can just text them a door code. And then as soon as they move out, I can disable the door code for my phone or for My computer. So really simple. I don't need to deal with keys or anything like that. Just like a real estate office. Right. We don't want to re key every time someone leaves. We have ring cameras in every single house. So I have basically all the entrances and exits covered. Nothing on bathrooms, just the public spaces and then a kitchen to make sure no one's stealing food. But it's a pretty simple setup once you have those systems in place. Like I don't need to run around anymore. It's pretty automated at this point actually.

Let's go back to that whole making sure that nobody steals food because I guess that's a deep, that's a thing, right? It's like yeah, groceries are purchased. Maybe people would have their own little cubbies. Do they have locks on the cubbies? Have you guys gone that far or.

So in the pantries? So we typically do have two refrigerators because there's eight or nine people per house. So we do have two people to a room essentially two people to a room in the master which is bigger. We'll typically have maybe a third bed or there's. We have another house that has an upstairs that's really big room. I think we have three or four in there. But yeah, it's. We have labels and then they get a designated spot to put their food. We have a great partnership with a food bank locally. So literally like we can go there once a week. They get everything that they need and bring it back. So they come, they meet us there, I'm always there present. They grab what they need and so they don't have to use their EBT card, which is their food stamps. They can just get as much food, produce, dairy, meat, everything they need. We don't want to provide that necessarily on our own because in California if you provide anything besides housing, you're providing other services, then you do need a license. So we mostly just do housing and utilities and then we, we partner with others for other services. Although we're starting a non profit now to, to provide some other things.

Okay. And I would imagine you have some house rules associated with. You know, are there like, what are some of those rules? Like lights out at a certain time. Like, you know, this is what you get to shower. I mean like what, how extensive are the rules? Right.

Yep. So it's, it's pretty extensive now because every time something has happened we've added a rule.

Yeah.

So it's just a living, breathing document. Yeah, we have, we have a curfew, we have lights out time like the kitchen's close after 8pm, lights off after 11, except on the weekends and it's 12. If you have a crazy work schedule and you work nights, send our house manager your work schedule so we know what's going on. But what's cool about our keypads is we can actually disable the locks after midnight so we know if someone's breaking curfew like they put in their code, we see it was an invalid access attempt. We can have a conversation about it. So again, this technology really just does all the heavy lifting for us. But yeah, it's no violence, no weapons, no threats of violence. And be a good roommate. I mean it's, it's a lot of, of. It's two pages worth of things, but it's basically common sense. Be a good roommate.

How long can somebody stay at your house?

As long as they need to. It's transitional, but honestly that typically means one to two years. They are typically in a program where someone else is paying for them to be there so that they can work and save up and then be able to move out. In our area, kind of a two bed, one bath apartment now starts around 23. $2,400 a month for an apartment. Our average rent's about 3,432 home. They just don't make that much. If you're on minimum wage and you like, you have a felony. Not everyone has legal issues or problems with. They don't have a rap sheet, but some do and it's, it makes it difficult. So yeah, we don't have a hard stop.

Do you do credit checks and background checks? Like.

No.

No. Okay.

No. Yeah, we don't. Only because it's, it's. If you have gone down the rabbit hole of being in rehab several times and just all that that typically entails, you usually don't have good credit. Part of why they can't get an apartment as well or rent a house. So we're kind of that place that will have a lot of grace for them and just say, you know, let's take this on a weekly or monthly basis.

Okay. And, and if somebody is breaking the rules, do you contact their case? Is there like a case manager or.

Yeah, yeah. So. So that is the nice thing of most of our people being in some kind of county program or outpatient treatment. They do have a case manager and someone who takes on all that responsibility of the treatment, which is why we can just provide housing and be fine. And so we can go to them and say, hey, this is what's going on. Or if it's probation, hey, po. Or they actually have a social worker Now. A lot of departments are learning how this works and they're bringing in social workers to help with the housing and the mental health side. So we can reach out and just say this is an issue that's been going on. Or they failed a drug test or, you know, they're. I caught someone with a, with an assault rifle. They tried to sneak it behind their back on one of the cameras. And I sent it to his PO and three days later we had a sheriff raid and they found it in his car. And he went back to jail and never, never came back. So, you know, he violated his probation. And in that case, like, I'm not going to go over there and confront the guy. I'm just sending it to the proper authorities. And they took care of him.

Mm. Yeah, you don't want to go there and like, hey, let me see that assault rifle.

Yeah. But what's crazy is there's, there's people living these dual lives because he's, he seemed like the nicest, sweetest guy. He just also happened to still be a 42 year old gangbanger. Actively gaming.

Yeah, it's just wild. Interesting. So somebody that, that does this, I would imagine that a lot of the reason that they might do it is because there's some passion around, around helping as well. Like, yes, it's good economically. Right. But it's also a lot of work. Like, I'm hearing a lot of like, weird late night calls that could happen. Right. Some, some, some things I've never dealt with before. Right. Kind of happening. And so of course you just adjust and you figure that stuff out. But there's also got to be passion around that. Right? Yes, I would imagine.

Yeah. So for me, it is about providing space for people to make mistakes and giving them grace. So if someone, you know, if they do have a dirty drug test there, we allow them to go to detox and get clean. Typically it's medically assisted treatment to come down off of whatever they were on. And then when they're clean, they can come back. We're providing that space for them. It's part of relapsing, is kind of part of recovery. There's kind of a limit to that. Like, but typically we found if we're providing a safe, clean environment and we're showing that we trust them, they. They live up to that and they get better. So I do love people. My house manager loves people. She's five years in Recovery herself. She's lived in houses like this. She spends way more time than she really needs to serving the community and showing up in NA and AA meetings. So you're going to have to. In order to do this long term, you have to have a heart for people or you're going to be like, why am I doing this.

Now? Does she live in one of the houses? Is that what you said?

She doesn't. She has in the past. She actually recently opened up her own home like this, which I fully support because she's going after high risk females like she was. Mm.

I could see that. It could be a calling. Right, I can see that. So then you pay a salary to somebody like that, Right?

A salary and a percent of profit to keep the base salary low.

Got it. Got it. That makes sense. And keep incentives aligned. Okay, what about insurance? Just regular insurance with a blanket. I think I asked you that before.

Yep. Regular landlord insurance. Because we own. You can do this by renting as well. But then you would probably want some standard commercial liability insurance if you're going to be renting in your business name. But we own. And regular landlord insurance and an umbrella policy is really all we need.

Okay.

And we don't have kids who are just kids. Like we have kids with their parents. So we don't have any additional liability. The parent takes responsibility for their child.

Got it. They sign some kind of lease before they enter into the house.

Yeah. This is like the best thing that people don't know about. We have them sign a license agreement. They don't sign a lease. They have a license to a bed. As long as they follow our rules. As long as if they break a rule and we no longer want them there for whatever reason, it's up to our discretion. We're pretty lenient, but it's our discretion they have to move immediately. They don't have tenants rights. So I've never had to evict anybody. And in California that's a big deal. We're a very tenant friendly state. But I've had police officers come and remove people without an eviction just simply by saying we're a sober living home. Here's the paperwork that shows they have a license, not a lease. So we've automated that process too. One other technology piece I didn't mention is we have a sober living software that has some automated forms where they've taken our paper forms and they've digitized it. So I text the link to the client, they fill it out, sign it on their phone, it comes Back to me automatically puts them into our system as admitted. And then I can I have that. And we never had to meet. We never had to have them hand sign anything. So we get that license agreement every single time.

Fascinating. Fascinating. What am I not asking you that I should be asking you about this process?

I've realized that I've done. We've grown quickly, you know, seven. Seven properties and. And 60 or so people that we house in less than two years. There's a lot that I've learned that I know that I don't. That that I didn't have written down or that I just did naturally, because I have other businesses and I'm like, oh, well, that's what we do there. Let's do it here. So I'm still discovering all the things that should be asked because I just kind of ran and went after it. It's who I am. Oh. So here's. Here's something. How lucrative is it? If you're really going to help people and you do have a heart for them, what's the payoff? And I think there is this idea of it checks all the boxes of it's great income, but it's also purpose and passion. Like, literally daily we're being told we're saving people's lives. Thank you so much for having me here. I have a lady who has four boys and they were living in their car, and now they're living in, like, one of the additional units at one of our properties. A two bed, one bath, and they're housed. And she's so thankful. I have, you know, a house with three single parents. A guy has four little girls that are living in a motel. And the county vouchers, the program stopped. It only allows 14 days. He would have been homeless. And he gets to live in one of our homes. So that, like, it just brings joy to my heart to be able to do that. But also, you know, there's a house that we had that was my first house ever. We converted it into this. It was a traditional rental making $600 a month. It's now. I looked at the math. It's now making $7,000 a month cash flow. And it's not even completely full.

That's wild. That's wild. And it's not even completely full. Wow.

Yeah. It could go higher. So there are really cool things you can do. And again, this comes back to, where else can you make this much of an impact in someone's life? Serve the community, feel like you're doing something really good and make great cash flow, more than you would make if it was a traditional rental and it was paid off. Like, I no longer have to wait 20 or 30 years.

Yeah. The truth is, with interest rates where they are and where they're going. Right. You've got to get creative about the different ways that you can extract value from an asset. And housing. There's just a tremendous shortage. Right. Of affordable, affordable housing in our area. And so, yeah, you know, so you saw a lot of people say, oh, I could convert this property to an Airbnb in markets where they could. And now instead of it being 2,000amonth, you can collect 5,000amonth. Right. It just kind of makes those numbers work. So this is an additional way to be able to do that. It's a business, right?

Yeah.

I would imagine each property is in its own llc. Or do you keep. You have, like, a cluster.

So I had them in a cluster because if you have. You don't necessarily need its own LLC if you have debt on it, because if someone sued you, like, the bank's going to get paid first anyway, so you have limited exposure.

You.

Your equity is the only thing exposed. So now that we have all the equity that we've amassed over the last couple of years of the market going up, we're looking at that. I have them in my trust. I had them in an LLC previously, actually just moved them to my trust because we shut down that llc, it was out of state. And now we're looking at some different strategies moving forward because, I mean, my gross rents this year might exceed seven figures, and I got to figure that out.

Andrew, that's crazy. So. So what do you, you know, when I. I believe, and this is, you know, just my opinion, but I think it's backed by. Anybody that's ever done anything at a super high level is that when you find something that's working right, you just blueprint it, you just start stamping it. Right. You know, Gary talks about doing the one thing that by doing that makes everything else easier or unnecessary. Right. In the book, the one thing which, you know, I believe that when you find something like that, sometimes what it does is it opens up your eyes to kind of like value and effort. Right. You could work really hard in one area and grind, barely make anything. Right. Or you can, you know, explore a different area where there's just this massive need and value, and it's all of a sudden, like, your effort gets rewarded disproportionately. And when you find something like that, it's like Okay, I just need to do more of this, which means less of that. Right. Which then makes some hard discussions happen in your own brain about where do you put your time, you know, where do you focus effort, but also like, how do you scale this thing? Right? Like, how do you do it so that it's not seven and you capped at seven. It's like, how do I do this? And I do 700 or, you know, whatever. Whatever the number is, Right? Not that you, not that you need to. Right, you don't need to do that. But.

Yeah, it's. I've definitely had that conversation and I've had, thankfully, coaches in my life who have really pushed and said, why aren't you focusing more on this? So part of why we're even talking about this is because of some pushing and prodding from people in my life who care about me and want to see me actually make a difference in the world to stop focusing on like just this thing, which has been real estate sales for a very long time, and really focus on, well, what's building wealth and what's changing lives. So I've thought through now, okay, how do we go from seven properties to 70 and then potentially 700. Who do I need to partner with to do that? Because honestly, it is capital. Capital is a constraint. 7%, 8% rates, especially if you're doing a DSCR type of loan. 8%, that's not fun. I went from, you know, $2,000 a month payments to 3,500, $4,000 a month payments. We still have with this type of specialty tenant. We still cash flow, but it's just not as much. And so it increases the risk. I've looked at, you know, maybe potentially one day we bundle these together and sell to a hedge fund. What does that exit look like? What kind of multiple? Cause now it's not just the real estate, it's his business that's just kicking off cash. So they're all conversations I'm talking through. But at the end of the day, I think it does mean I probably need to step out of my sales business and really put the investor head on. I thought this would be passive. I just have two or three of them. And now really makes sense to make it my active thing.

And I think that's just the evolution, right, of if, as you go kind of through this, you know, what, what I call seven levels of just wealth building. Right. It's not necessarily wealth is defined so many different ways, like wealth is health, wealth is impact, wealth is, you know, passive income. There's a lot to wealth, right. Relationships, all the rest. And you start going on this journey. And in the beginning there's this, there's this I need to, to create active income type of journey. And then hopefully what happens is you, you start becoming a business person. Some people never do, but, you know, you become a business. Start asking yourself, how do I actually create systems and models in order to get back my time? Because otherwise you'll do the eight deals a month, you know, and not work 24, seven like you did. And then something breaks. Like a relationship breaks, family breaks, something breaks. So you've got to convert it to like a business. And then you go on this investment journey. And that investment journey then takes you into other avenues and you got to decide, okay, can I, can I turn my agent practice purely as an agent business? And am I okay if it doesn't work out right like that? And, and some people are like, yeah, that's fine. Because this opportunity on, on this other side, so much bigger. But there's a lot of fear around that. So let me just like, first and foremost, like congratulate you. Right. I think it's awesome what you're doing. I really do. And then also encourage you, like so many are encouraging you that, that especially if you're going to find, like, if you wanted to keep that age of practice going, it is about who, not how. Right. Finding the right people that they then see you as the person that they can grow into and you give a young Andrew Lamb an opportunity to build their thing in that and then learn what you do and you just bring people alongside you, which is a lot of what we've done within our business. Right. It's like, okay, how do we just keep opening up new offices and giving people opportunity and there's equal opportunity, unequal reward. Right. In that respect. And then I'm excited to see where this journey is going to take you. Right?

Yeah.

So capital, that's important, right, to keep this.

Yep.

How are you, how are you thinking you might finance this with? You know, we're going through this exercise right now because we're buying a lot of sub 2 deals and it requires a lot of equity and because you don't want to burr out of them, otherwise there's no purpose of doing.

Yeah, no point. Right?

There's no point. So there's, there's this capital requirement that's needed and, you know, one is, okay, well, we bring in partners that, that are going to be capital partners and we put in some money and they put in Some money. But eventually we run out of money. Right. At one point we just run out of cash. So it's like, do we start a fund? You know, do we? I'm sure these are all questions that you're asking yourself.

Yeah, I went down that path. Thankfully. I'm, I'm in a group of guys, a mastermind who ton of them have funds and I was able to talk to somebody who runs like a hundred million dollar fund. Hey, what would you do? And he's like, well if you only need. And for us like I would like to use delayed financing which is basically just you purchase it and it's a Fannie or Freddy product. They allow you to pull out everything that you had on the closing statement. So you can actually put your, your closing funds and your rehab on the closing statement and pull out up to 80% LTV. And they will base it on the appraisal after the repairs. And it's just as if you purchased it. So you don't need to refi, you don't need to wait for, you know, six months of seasoning. You can immediately, once that work is done, turn around, pull your cash out, do it again. So if we can accomplish that with the local credit union, I only need a couple million and I can do three homes a month. We're buying around 400. Once we're done with the work, which typically cost us 40 to 50 in six weeks, we've built in 150 to 200,000 in equity, we can refi easily at 80% LTV and get all your money back. Yep. And then reuse it. And even if we have to leave 10 or 15,000 in, if I have 2 million and we're cash flowing the way we do on these properties, I can easily pay back my investors. And after doing this on, let's call it 10 or 15 homes, which will kind of be the first tranche that we're trying to, then we might just be able to do bank financing at that point because we have everything happening. And I now have two years of historics on my current portfolio of seven. That's been the issue initially, just trying to do everything the way you've been doing it. There's another question you didn't ask that I need to remember for next time. Financing is hard when you don't have long term leases and this is very short term transitional. DSCR has been the only way to really do these, which when it was 3.5% that was easy, but now it's double.

Yeah, I'm facing that with our, our Airbnbs. And the answer is, you know, we're getting private funds or hard money funds to, to do the initial work or the buy it and do the initial work. And then we started getting quoted eight and a half percent, right? Two points. But they're like, listen, if you could show a year of seasoning, then right there the rates change significantly. Right. They're still expensive, but not, not as crazy. So what is this delayed financing? Like, why haven't I heard of delayed financing?

Yeah, it's just something people don't know about. You even call up loan officers, they're like, I don't know what this is. So I've learned, and this is just part of me being a, a 12 year vet in real estate, I've learned to know loans and guidelines better than some loan officers. And so if I talk to somebody who doesn't know it, I will literally send them the guidelines. It's online. You can find it and say, this is what it is. Do you have an investor that will do it? And then they'll go and find it, or they'll ask their back end loan support, hey, is this possible? And then they're told yes. So I heard about it from some people in North Carolina and there's been, I think, one or two bigger pockets podcast about this specific thing where, yeah, it's Fannie and Freddie. As long as you qualify, you can pull out all of your invested capital and it's treated like a purchase even though you've already bought it. The one thing is, it cannot have a first lien. That's why if you buy with private money, who's in first position? You can't do it. They want to know that it's cash and it's unencumbered, there's no lien, and then they'll pull out as everything you put in.

Got it. So it is an all cash product to pull your money back out.

Got it.

Okay.

And that's why we're raising the cash as Basically it's an LLC with just four or five guys. We have less than 10 people from what I'm told, not an SEC attorney, but if you have less than 10 people who raise the funds, they're all accredited investors. You don't need a PPM or all this stuff you would typically do for a fund. So it'll save us a lot of money and allow us to pivot. If we didn't want to do sober living, we wanted to go to midterm rentals, change things Up. We totally could. With the fund, you typically can't.

Fascinating. Two important things right there for us.

Yeah.

Okay. Okay. Well, I'm going to go Google that so I can learn a little bit more about it. There was also something you said early, and I want to make sure I don't forget because you said it. And then I was like, okay, I got to make sure that I write that down. You said google something in your local area to find out. What was that?

Yeah, yeah, yeah. So, oddly enough, I just started doing this for people who don't have the time or the energy. But google transition, transitional housing, and continuum of care. So it's like continuum of care, your county name. Google that, and you typically will come across a whole slew of people who are actively working with the community that you're looking to serve. If it's over living or transitional housing, like reentry type of housing, they're coming from jail, homelessness, or rehab.

And who would you say is the main point of contact?

Right.

Like in your area, you got connected with somebody who is the main point of contact to call.

Mine happened to be the housing first director. She's no longer in that role, but she was the chair of that last year or when did I start? 2021. So she just. She just happened to know everybody. But you can see the meeting minutes, the agendas. Like, you can see the people involved. You can get phone numbers, email addresses, and that's the best place to start if you just want to get connected. You can attend the meeting. A lot of them are still on Zoom, so it's easy to attend the meeting when it's coming up. Just, you know, tell people your story, let them know what you're trying to do.

Well, I love, by the way, just kind of the tips right off the bat, you said, you know, location matters. And the house that I was thinking about. Right. Based on the location, no access to Metro, no access to, you know, to, I guess, easy transportation or stores. So that. That would pose a problem there.

Yeah, right.

The area that we were buying, some properties are a little bit more rural, but there are places in town that could work. So we'll see.

Yeah, I have one that's honestly on a street that most people wouldn't want to be on. It's a very public, busy street, and that makes it perfect for something like this because they have easy access to everything, and we're getting great cash flow in a home that might not rent very well because it's such a busy street.

That's exact that's exactly what I was thinking. This one property that I have in mind is on a double yellow line and normally I never buy on a double yellow line, but the financing, the underlying financing is so attractive that we're going to buy it. And, and that's what I was thinking. This opens up the market for the types of properties you could buy and those houses typically sell for less. They have a harder time to sell just in general. But if you look at the property slightly differently, then it opens up what it's worth to you. Right. So that's interesting. Okay.

Yeah. And as long as you're okay with collecting high cash flow now and potentially not maximizing the for sale value later, if you're just, if you're playing the whole long term, it's totally fine.

Well, long term, long term everything's just going to rise. Right. With, with inflation. So let's see what happens with interest rates and inflation. Right. That's kind of like Dave. Right?

Yeah. I do think, I hope, I pray that interest rates will at the end of this year go down and we can refinance some of these, but if it doesn't, we're still fine.

Yeah, I think that's the thing. I think give us a couple years, I think. But yeah, we'll see what happens. Well, Andrew, thank you so much, dude. This has been an education and also just getting to know you a little bit more. That's cool. Like I enjoy that. If anybody wants to follow you, what's your Instagram handle?

Yeah, it's the Andrew Lamb. So at the Andrew Lamb also I am just. Because I continue to get questions about this, I will be launching a like six week live coaching through this like a course and weekly Q and A and coaching calls. April 1, that'll start. And you can go to soberlivingriches.com to kind of get into that. I will say right now it is not 100% set up, but it will be in the next day or two. And I've literally already had people who have flown in to see our operation and paid us good money to help them get started. And for half the cost. That's going to be like really cheap. Initially you get access to me and everything.

Here's what's going to happen, Andrew. Like early on people will have access to you and it won't be that expensive. But after a while it's, you're going to be too busy. You're just going to be too busy. So access to Andrew is, is going to be tougher. So I Love it. Sober. Soberlivingriches.com simple, effective. Makes sense. Got it. Yeah. Okay, man. Well, you have a. An awesome day. Thank you so much for spending time with us today. And. And hopefully I catch up with you sometime soon, man. You take care.

Appreciate it. Thank you.

Sure thing.