Sober Living Success Secrets from a Seasoned Expert

Hey guys, Andrew Lam here. As I'm sure you've seen, I have been a guest on many podcasts now and I was recently on the Dynamist podcast with Tim Gurule. Tim is a mortgage professional and he just asked a lot of different questions than what you've heard me answer on other podcasts. So I wanted to share this one with you. He's a mortgage broker, so he asked a lot more questions about operations, financials, how to actually get lending on a property like this and just really like dug a little bit deeper into certain items of how to run a sober living home. So hopefully you enjoy this as usual. If you like this content, please like this video and subscribe to the channel to see more as I'm going to be producing more content for you guys and going live pretty soon where you can answer, get your live questions answered. A live Q and A coming up soon. So I will see you soon and and enjoy.

Welcome. In this week guys, we have a guest that I have been chasing down for months. He's been super elusive, but I'm glad I finally got him in the studio today we have Andrew Lamb who is an expert in all things sober living. He runs an awesome coaching course that teaches people how to execute on these, how to find these things, how to put the systems in place, really get you going, get your momentum to not only get your first one, but get scaling. And and how I even learned about Andrew was we both have a mentor, quasi mentor. His name's Matty A or Matt. He's got this awesome podcast called the Millionaire Mindcast podcast. We're both gobundance bros or go Bros as they call it. And so I was listening to Matty a interview Andrew and he gets on the podcast and he blew my socks off by what he was talking about. Obviously all of us are real estate investors. We're entrepreneurs, we're business owners. We're trying to get to the next level and a consistent that we always run into, especially in this market in the what I call the post bigger pocket days is we're all competing for scraps and when we find a deal it is very hard to cash flow. And when I mean very hard if you break even or are at a hundred dollar two hundred a month deficit, a lot of investors are calling that a win these days. And what Andrew's doing is he's tying a business model that is working to buying real estate and 10xing cash flow returns. And so I'm super stoked to have you here. Andrew, welcome to the Studio. I am over the moon that I finally got you in here.

Well, thank you for your, your persistence and I'm excited to be here as well. But yeah, I just have been slammed teaching people how to do this based off of what I was able to do over the last three years, but found some time today. So excited to chat.

I think the best place to start here is, and we're not going to, we're not going to go too deep into like, how did you get here? Tell us who you are. But do think I would love to know the race that you were running before you found sober living. Just some context of what were you doing before and then what led you down this path and why did you pivot? So give us some background of like, why did you have authority in the space of real estate leading up to sober living?

Yeah, I, I started off in 2011 as a real estate agent and so I, I quickly did well in real estate. Soon after becoming married, six months later, found out we were pregnant and I was a teacher at a small private Christian school. And I was like, this isn't going to pay the bills. It's not going to pay for diapers. Rent's going up. Like, I got to do something else. So I jumped into real estate sales. Spent the last decade or so really growing that, starting a sales team and eventually getting to a place where, you know, I know all the top real estate agents in the country and on TV with, you know, commercial with Barbara Corcoran and that kind of stuff. But Covid and like, everything shutting down March 2020 changed my perspective on everything. And instead of just collecting a fee for being a middleman helping people buy and sell homes, I really realized I needed to, to get some control and some passive income and not have all of my hard earned money tied to my time. I had 14 deals in escrow when Covid hit and I didn't know if any of them would close. That was me personally. Fourteen transactions that I was like, man, that's over six figures in commissions that could be gone. And I just decided that year, that month, really March 2020, to start investing more and started learning how to flip and wholesale and all that stuff. And by the end of that year, we had completed several flips and, and then I also realized, oh man, flipping is just like going out and taking listings and doing real estate. It's. You're always looking for the next deal and if you don't show up to work, although it's a bigger payday if you don't show up to work, you just won't have a payday. So that's when I realized, McMahon, I need to hold on to these. And it was 2021, January 2021, when I realized man rates are under 3% and I'm mid flip and I have another one under contract. How can I transition this to something that pays me every single month and is real mailbox money instead of, you know, having to continue to keep searching for that next deal? The mantra of every flipper is, you know, send me your deals, let's find the next one. Yeah, I didn't want that anymore.

Yeah, it's a very active income source. It's active income. It's what we call vertical income, not horizontal income, meaning, you know, if you stop doing the work, you stop getting paid. This is a classic funnel or trap that a lot of successful, you know, sales individuals find themselves in. Is they, they're working in a model, the system works really well. Their income is really high. It looks like it's going to go forever. And a lot of agents in particular, you know, if you're a real estate professional, you get sucked into this false sense of security and forgetting that real estate is cyclical. And if you are in the real estate industry, if you're a lender, if you are a realtor, this is totally different than the rules of being a drug dealer. Like you got to buy your own supply. You got to buy your own supply. You really do. Because, you know, in order to stay in the game, having success in this game is all about longevity. And for you to have longevity, you need to get fed when there's famine. So, you know, just like Joseph had, you know, the, he interpreted the Pharaoh's dream of like, okay, we need to start harvesting grain to, to put away because there's a seven year famine that, that set aside is what carried them through that fam. It's the same thing when you're in real estate, except the set aside here is passive income. And if you're finding opportunities that look really good, you should take serious consideration into how can I partner or get this deal done to provide passive income through the highs and lows, to carry us through those times. So I just want to clarify up to that point in 2021, had you ever or had you owned any rentals yourself up to that point?

Just one. So my family, my wife and I bought Our first house 2017 and a year later, due to some other stuff with, with my family, I had to move my mom out to, to Northern California from North Carolina, and then my grandmother within a year of each other to. To move into assisted living. So we thought they might need to move in with us first. We got a bigger house in 2018, and we turned that first one into a rental. And it was doing okay, but it was up until we refied, it was maybe 250, 300amonth in cash flow. But then we refinanced in 2020 or 2021 under 3%. And that changed everything. It was like 600amonth, which is pretty awesome.

Yeah, yeah. And so you did a rate and term refi, I'm assuming, to lower your monthly principal and interest payment and squeeze a little more cash flow while rates were low. Excellent. Excellent move. So here we are, it's 2021. You have these 14 escrows. Covid's happening. You have no idea if anything's going to close. This is. Guys, if you remember, I mean, it got super weird. Countries were closing. If you were buying real estate, you had to be completely masked up. You had to go through like a decon process. It was one person allowed to walk through the house at a time. The agent had to stand at the front door. It was just weird. It was like weird times. So you're seeing the writing on the wall of.

Oh.

The comfort that I had become accustomed to is uncertain. I need to make some serious shifts here. How do you go from that flipping, you know, having a successful brokerage sales model, flipping wholesaling to sober living is the answer. Like, what was that bridge?

Yeah, that was a transition for sure. But. And here's the funny thing. Going back to, you know, using your own supply. That very first sober living home was my own listing that I purchased.

That's amaz.

They decided they wanted to get their money out of California. There were some tax laws that were on the horizon that would change things. And they wanted to just drop the price, 50 grand. And I was like, if you're going to do that, I will not charge you a commission. I will just buy it myself. It's going to save you money in the long run because now you're not paying two commissions and I'll just take it. And so I got a great deal on that house and it became the first sober living home. But the plan was initially to flip it. When I decided I wanted to turn it into something that was a long term hold, I was like, man, $600 a month that I'm getting with my first rental. My first and only rental is awesome. And I had two insurance claims on that property as well, once was a plumbing backup. The second time was an appliance failure. And if we didn't have insurance, honestly, after the deductible, like many months of cash flow were just gone. Right. So even though you have a good property that's cash flowing, well, it doesn't really help that much. Especially in Northern California, expensive area to live. You know, $600 was, was nice. I could take my wife out to dinner a couple of times, but it wasn't doing it for us in terms of creating wealth and freedom. So I figured, you know, the thing I learned in business is if you provide more value, you can probably get paid in proportion to the value you're providing. So if I could help a lot more people, if I could house more than one family, whether that's renting by the room or Airbnb or whatever, residential assisted living is something I looked into, then I'm probably going to make a lot more money. And so I looked into a lot of different models. I went Section 8 first and talk to the housing authority and they were actually going to pay below market rent. So I was like, well, that's not going to make sense. This is a house that market rents 2,800amonth once I'm done with the flip. And they were going to pay like 22 or 2300. And so then I looked at other things and what I stumbled upon was I called my local shelter and just like, hey, do you have any use for a single family home? I'm working on this property. I don't want to sell it. I'd rather hold on to it. Interest rates are great, but I want to help people. Do you have any need for this? And I got lucky. The director. I ended up talking with the director of the, of the shelter and she's like, I am the head of this organization called Housing first, which is a HUD organization. They're basically all about getting people off the street into housing because it's hard to access services and support if you don't even have an address. And she was like, they're called sober living homes. This is what it looks like in California. These are the people you should talk to. And she introduced me to everyone I needed to know. So I believe that was like a God ordained thing and like there was just favor on it because as soon as I decided I want impact more than I want profit, everything just seemed to line up like the universe just said, here you go, here's everything you need. And it ended up being far better. Than I ever imagined. I had never heard of sober living before. I had never heard of being able to house people, to get paid by the government besides Section 8 before. And this ended up being, I mean, literally 10 times better than the traditional cash flow I was used to.

So you just hit the nail on the head for me. And it's a consistent theme that just is just regularly showing up, impact over profit. And I want to reiterate that. Impact over profit, right? God knows the contents of your heart, just. He does. Right. And when you steward the resources he gives you, well, when you have good intent, when you have a heart to grow the kingdom, he absolutely has the ability to multiply your abundance, to just literally reach down and hand you those keys. And sometimes it's as easy as that is making that impact over. What am I going to get out of this? How can I serve? You know, and sometimes when you ask that question, you cannot quantify the abundance that is bestowed upon you in the aftermath of that. And that when you said that just now, Andrew gave me, it literally gave me goosebumps. That is an incredible, incredible story. So you reached out, you called this, you know, this shelter, which, by the way, excellent outside of the box thinking, because, you know, I don't know if I would have had that forethought to do that. I mean, obviously watching you on social media, watching your journey, and in the interim, I've met a couple other, you know, sober living operators locally because I was so curious. You sparked this curiosity in me. But up front, I mean, you saw a problem and looked for a need that other people weren't solving. And in that delta found abundance. And that is just that speaks to your ability to problem solve, your tenacity. That's that entrepreneurial mindset that we all need to have, have that outside of the box thinking to solve a problem, a problem that people may not have even known existed. And you were there to provide the opportunity in that problem. So you call her and you have no idea what you're doing. You call her, hey, do you have a need for this? She's like, yeah, people need these addresses. I mean, what were the first early phases of that? I'm sure it was somewhat murky gray, like, what's the next step?

Yeah, none of it came with, with a handbook or manual, so. And I never dealt with people who were in recovery before. And so it was a lot of just, how do we provide as many beds as possible? Right. I had that first home that was almost done with the flip. I had a Second one in contract. And what's crazy is throughout the rest of that year, we bought and fixed up five homes using the BRRRR strategy. So used hard money and private money to buy those, fix them up, and then refinance into long term debt and fill them up. And so five homes in one year, which meant most were four bed, two baths. So eight or nine people because we're doing shared rooms, two people to a room, maybe three in the master because they get to share that private bathroom and it's a little bit bigger. And we filled up. So there was a lot of people moving in. Me not knowing what questions to ask, me realizing a week later, oh, this person's been drinking or they've been using drugs or they have a mental health issue I didn't know about and they weren't taking their medication. And so it was a school of hard knocks for sure, just figuring it out, cleaning up bodily fluids, all the crazy things you can think about when you have people who are in recovery and it's messy and you're not actually used to working with it. But after six or seven months of that, we had three homes open. By then we were filling up and I realized, man, I'm really good at business. Created a real estate team. I started a brokerage that's a franchise, Keller Williams Office. So like, I know systems and models really well. Like, Keller Williams is really good at systems and models. It's Gary Keller's thing. What if I just apply that to this business? And what if I have a set of questions that I ask every single time, just like when I'm meeting with the buyer or seller. What if I have a checklist on. This is what every home should look like. This is what every home should have on a monthly basis. This is what we should be checking for. What if I set up simple systems, cameras so I know who's coming and going and when, all of that stuff. And after I implemented that six or seven months in, 90% of the headaches went away. And it just started to run extremely smooth to the point where now we have eight of those homes and I spend very little time managing it. I have a manager now who's a substance use counselor, but it became something that really just took off and became that passive income for me.

All right, let's dive in a little bit more tactical here and then we'll kind of touch back on the trajectory of the story. How did we get where you are implementing these systems and processes? So you're saying, okay, we're Typically we're looking for a four bedroom house, two to three baths. I heard you mention in the master or the primary we call it these days, that it's a little bit bigger square footage. So potentially you can put three beds in there. You, you just, you, you gave a little cookie crumb there. You said they had the, the primary usually has its en suite bathroom, meaning it's a, it's a bathroom that's only accessed through that primary bedroom. I'm assuming the way you, you made it sound is, is that only the occupants of that bedroom that share the ensuite are allowed to use that bathroom. Is that correct?

Yes, that's correct.

So how many people, when you say, all right, typically two people to room, to a room, is there like a square footage? I guess a minimum square footage amount that each person needs in the room? I mean, you're probably not doing bunk beds, right?

Correct. Well, so some people do. And I think sober living, if you look it up, you end up finding, you know, news clips and articles of people doing it very poorly. And I think that actually is what allowed us to grow quickly and to stand out because we're doing it at a very high level. But there are homes that historically aren't well maintained who do put people in bunk beds. In fact, there was a home in my area next to the over that would shove 12 people into a three bedroom house. You know, two bunk beds each room, four guys. And it's just not a great situation. Well, again, so for me, I decided I, I love people. I can't imagine living in a situation like that. Let's just do two to a room.

Going back to impact.

They're sharing that. Yeah, that, that bathroom. It's, it's three in the, in the primary.

Well, just like you said, like, we're going back to impact, right? We want, we want to know what is the impact? Well, the purpose of this is to serve. And so we're trying to give these individuals a second chance on life here. The ability to thrive and grow and prosper. And if you're, if you're putting them in positions where they're more susceptible to fail, it's stressful. The living conditions are less than standard. I mean, is your intent really impact at that point? You know, when you're prioritizing profit over impact, you know, I think that makes a big difference. Right. And how you're stewarding these resources. So I really like that model. And something just to highlight here is like what you're doing is optional. Like you said that there's houses with 12 people in there. I'm assuming there's no regulation. I mean, what's the regulation on these types of homes? Like there's not a government agency out there saying like, hey, you can only have X amount of people in these facilities. Right?

Yeah, it's. So this is the crazy thing about sober living. It is the wild west in most areas. No license, no certification required. Nobody's really checking on it. You're protected by fair housing laws because most of the people in the homes are protected class. So no one can really tell you that you can't do this. We're not offering services or anything that would be licensed. We're just providing housing. Like they're getting their services. Anything that would require a license through an outpatient program, through case management, through like a local government program. We're just providing beds and a clean and drug free environment with house rules. And I mean technically they're not even tenants, they have a license to a bed. We're not giving them a lease because that allows us to, if they do relapse or if there's violence or weapons or anything like that, we can just kick them out. We can revoke that license. So it's really easy to fill up homes like this. And the city an hoa, they can't tell you to stop.

So the management company is handling and we're going to get a little more tactical here on how we're finding people, how we're putting heads in beds, essentially the systems that we have in place. But you just said right there, there's a license for them to occupy a space. So the management company is having them sign an agreement that essentially I'm assuming is like a binding contract that says they're agreeing to certain behavior terms and expectations and if there's a violation of that, then they're forfeiting their right to occupy. Is that essentially the license that you're talking about?

Yeah, for us. And we, we own and operate. So we're the management company technically. But yeah, they get a license. So the license says very clearly there's rules, there's expectations, there's a curfew. If you don't abide by these things, your license will be revoked. But if you want to stay here, like you have to sign this, agree here, initial here. So there's a lot of waivers and you know, things like that. But there's also a lot of protections for them because my goal is for them to be able to move into permanent housing. So if we had a Lease, they have a time frame where they're actually stuck in our house. And I want them to be able to, if they can get an apartment next month, they can just go. They don't have to wait. So it's actually a dual benefit of allowing them the freedom to be able to move on, but also allowing us the. The freedom necessary to protect the house and make sure it stays clean and sober.

Yeah. So as far as. I really love that model, I love what you're talking about there is that they're not like in a long term binding lease, that if an opportunity for them presents, they can capitalize on it. What are some of the expectations inside the house? You mentioned that there's like curfews, timeline expectations, behavior expectations, no drinking, no drugs, things like that. But also, is there like a seniority? Is there like, you know, rules? Is there chores? I mean, what, how, what is the operation, the day to day look like, who's in charge essentially of the home?

Yeah, when it first started, it was me, so I actually bought my first two within walking distance of my personal home. So I was able to every single day just stop by, which was fine for me because I was doing a 75 hard. I had to do an outside workout anyway, so I would just use that as an excuse to go and stop by each house. I learned that that wasn't necessary because the guys that we were housing really should have jobs. They should be working and saving, especially while the government, like a local program was paying for them to be there. And so these guys could just work and save so that they could afford their own apartment and a deposit and stuff in the future. And so I learned I could just put in cameras and then have one of the residents be my eyes and ears and kind of make them what we call the house leader or a house captain. You'll hear that pretty frequently throughout sober living homes. What we later did was we implemented a second person who was like a chore monitor. Because all these guys contribute back to the house by doing chores. It fosters responsibility and community and just life skills in general. And so they're helping keep the home clean, working together, all that stuff. So we would have a second person in charge just so the. There wasn't a power trip from the house leader thinking they could just tell everyone what to do. Now there's two guys. It's kind of a balance of power. And they act like big brothers, almost like an RA in a dorm. That's really their job. No confrontation, no dealing with, with stuff like that they just observe and report and let me know what's going on later. I hired somebody to do that because I was still a busy realtor, right, and an investor doing flips. And I just, you know, I couldn't be in two places at once. So I brought in somebody who full time could handle intakes, handle taking phone calls from different programs when we get referrals, things like that.

What was the breakover point for you to make that position a full time hire? You mentioned that they have like a background in like substance. They're like a counselor. Substance counselor. But not only are they doing like the in house, you know, conflict de escalations, they're also making sure people are adhering to the rules, they're intaking people, making sure check in, you know, rules are signed, etc. Which is brilliant. It's brilliant to like, you know, kind of make them the taskmaster of all of those things. What was the breakover for you? Like how many properties until that full time position comes into play? And it makes financial sense.

It was so for me it was three. So I didn't have anyone paid until my third home, which I started very quickly, but it was also in another city. So my first ones I could walk to, that third one was a 25 minute drive. And it's because the way I open homes, I do a lot of market research, I ask all these different housing liaisons, case managers, what's the population that needs housing and where should it be? And my first two homes were in my city for single men because that's what I told the need was, that's what I was told. But then the third one was like, hey, we really need a place for women and children over here. And so I found a property, it made sense, had multiple units, so it was like a triplex. And we turned that into a women and children's home and it filled up immediately, but it was further away. And I actually just like to build a relationship and have this almost a partnership with the case managers and the people sending folks to our homes. And one of them was really honest and was just like, you really need some help? And I took that to heart and was like, great. Do you have anybody? Like my. My best hires have always been by referral. And so I asked her like, can you think of anyone? Because I could really, I could use the help. And she referred. Somebody who's a little bit older, had volunteered at another suburb, living home for like eight years, just really loved people. And honestly she just wanted to volunteer and I decided to pay her. I was like, this is more like a part time job. Like, can I just pay you like $500,000 a month?

Yeah.

And that's what it turned into. So this was like past her second career. She was pretty much retired and just out of the goodness of her heart, wanted to help people in recovery and pick them up, drop them off, buy them clothes, take them to get some groceries, partnership with the food bank, take them to the food bank, that kind of stuff.

That's amazing. My, my immediate thought is what's the succession plan for that? Right. Like when that person, I mean, it's past her second career, what's the, what's next? What's the succession plan? But obviously, you know, that's, that's one of those things, like, you know, fix it after it's broken. Probably like it's working right now.

So it worked great for a year.

Oh, okay. So that, that. So that person has already moved on then.

Yeah. Her husband honestly was like, because we kept growing. So this went from three homes to five homes to seven homes. And she was spending a lot of time and there is, you know, the occasional conflict, mostly just words, but her husband was like, you don't have to do this and I like to see you more often. And so she decided to back away from it. And then we ended up hiring somebody full time who went kind of the opposite direction. So the thing you learn is what personalities work well, you know, what, what makes sense. And so she was great because she was a volunteer, but she was really more like a grandmother would bend over backwards for people. Sometimes we get taken advantage of.

Got it.

And so we ended up bringing somebody on who was a registered substance use counselor, meaning had hundreds of hours of supervised group therapy time, all that stuff, but also was in recovery herself, so understood what people were going through, had lived in homes like this for four years before they became a house leader in one, and for another maybe year and a half that went really well until it didn't. And she had some personal stuff in her life. And so this is a real business. You're going to deal with managing personalities. And the same thing I dealt with, with running a real estate team. People are with you for seasons and then things change. And so we ended up maybe six months ago hiring someone new who was even further along in like the certification process. So instead of being a registered person, this is A Certified Level 2 Substance Use Counselor who does group therapy sessions at a local rehab and honestly already knew half the people in our homes and she's just done an amazing job of continuing to have everything run very smoothly. And reputation is everything in this business. It's a really small community. And so just the feedback has been like, she's been a great addition and our houses are running really smoothly.

Yeah, that is awesome. I want to jump into a little bit more tactical. I want to talk very specifically about a couple of things you had mentioned. You know, four bedroom house, we're putting eight people in there, nine people in there. Are you in the space of doing, you know, formal dining room conversions or garage conversions into living space? Like, is that, what's the general rule of thumb of like living space? How many bathrooms per people? And then, you know, what are you, what are you bringing in on these properties every single month?

So to answer the first question, I don't like doing major renovations. I don't like moving walls, I don't like converting garages because I still think about, I want resale value to be high on these properties. So there's a lot of people out there doing what's called pad split now or co living, where there's every little bit of common area space. They're putting up a wall and creating a tiny room and sticking people in there. And I think for a lot of different reasons, fire hazards, lots of other things, unpermitted additions that, that can cause it to not sell in the future. That's not a great idea. I want the ability to, if every program in my area shut down and I can no longer house people like this, to just sell off the properties at top value. And so that's always been my thought process. So there is one home, the second one, where we converted a formal dining room into a bedroom because it already had an egress window. And we just needed to basically put in two solid double doors. We didn't wall it off, we didn't add a wall, but we did french doors and just made it its own space. And so that turned that into a four bed, two bath. But a four bed, two bath for us, we average over a thousand dollars per person. And so if you think about that.

Eight or nine people, eight grand a.

Month, bringing in eight, nine grand a month. There are some programs where we charge more. So it's more like 11, 12 grand a month when the houses are full. So what programs are about 3,000?

What would differentiate between, you know, a thousand or more than a thousand?

It really just depends on, on the program. There's a lot of different kinds and they're different everywhere. So I tell People like, what I teach is a framework on how to find them. Because what happens in my county is going to be called something completely different in the next county over versus the next state over. In California we have, you know, mental health, behavioral health, probation, parole. Got it. But those same departments don't exist in like Ohio. They're going to have mental health boards and something completely different. And so that's where you really have to ask a ton of questions. And so part of my process is connect with all these organizations who are face to face with the population. I want to house, ask a ton of questions, analyze that data, and then determine what's going to make my homes different and help them stand out. Like, I just found out there's over 150 homes in my area that could be used for sober living. The county actually told us there's, there's that many in their database. I house 20% of their people in my homes.

Wow.

And so when you develop that type of rapport, you ask those questions and then you give them exactly what they said they're looking for. Like, why wouldn't you be their first call? Why wouldn't they fill you up?

Yeah.

So that's how we quickly became like the go to place.

So, okay, so we have $1,000 a person. Let's just say you have eight residents in a four bedroom house. You know, you're typically on a four bedroom. You're depending on your area, anywhere from 2500 to 3500amonth. You're taking that to 8000amonth. So I want to, I want to Talk strategically here. 8,000 minus your liabilities, which is your mortgage for, let's just say your debt service. And then what are you taking and setting aside for the business for? Like what kind of business expenses comes out of that as well.

Yeah. Here's what's crazy. So that same home, and I use this as an example because the numbers are just perfect. That same first rental where I was making $600 a month after doing an FHA streamline refinance, which people don't even know you can do on an investment property. Like I lived in it, then I moved out and I still could do an FHA streamline, $600 a month, we convert it. Once those guys move out, we convert it to a Sober Living. Within 90 days, it's netting $6,000 a month. Because all in my mortgage was a little over 2,000. We paid for utilities and Internet, like 60 bucks a month for Internet. So that was it. Roughly $3,000. And if I spread out my manager over all of my homes, it's very minimal. So, yeah, 3,000, 3,500 tends to be like our actual cost per home. And then.

Are you paying utilities?

We do pay utilities.

So you pay utilities, but no food? Nothing like that?

No food. They usually are low income and have food stamps and they're on Medicaid.

Okay.

And so they get an EBT card. They could do all that. And then we like to work with food banks that can just. Our guys can go and get whatever they need on a limited basis because they can afford food. I don't want to take food from people and families who really need it and don't have food stamps. A lot of military don't get paid well, but they don't. They're not under the threshold of being able to get food stamps. Right. So there's a lot of military folks who. I grew up on an Air Force base. I know there's a lot of folks who end up going to food banks who are employed.

Yeah, I'm a. I'm an army veteran myself, and I can corroborate that story. I know people that were getting food stamps while active duty in the military. So kind of. That's a whole other topic of conversation that we could have another time. But so I guess the biggest. Now the next major question here is there's really two puzzle pieces is how are you putting. How are you finding these people and placing them? And then like, are there hard and fast rules where like, no, you're not taking certain individuals, you know, so first is, how are we finding these people who's calling you? And then are there hard no's for you?

It's a good question. So, yes, the number one thing is connecting with those organizations. So I'm gonna. My number one way of marketing is to go to the source. So I'm finding everybody who is a paid employee whose job it is to get face to face with folks who don't have housing and who are in recovery and can make the decision to pay for them to stay in a place, whether that's a hotel or a motel or a house like ours.

Those people like charitable, charitable organizations or.

Those like government officials, It's a combination of local government. The problem with local government is you have all these different departments, but they're like silos. They don't talk to each other. They don't even know what the other one does. And so I had to just kind of figure out over time who did what. And now I Actually know, okay, if somebody's in this program, once they're off of this program or they age out or graduate, I can now put them in this other program. I can make a referral here and over there. And there's just ways to not necessarily self refer, but it's like, okay, you need to actually get in this outpatient program and then this program will pay for you for nine months to be in a home like ours. And so we've, we've figured it out for our local area. It's different everywhere, but that's usually how it goes.

That's a big puzzle piece right there is the industry knowledge of the programs. Like that's massive. Massive.

Yeah. It takes time. But once you figure it out, you have the keys to everything you need. And so that's what I do. I teach people how to do the market research, how to connect. We have an email template, all this stuff, exact questions to ask. I've recorded phone calls in our coaching program so people can hear me doing this in multiple areas. But we go, we ask, we figure it out. And then I don't have to market anymore because now my best friend who's face to face with them, literally this person comes in saying they need housing. I'm the phone call, right? And we business systems, we have a trackable phone number. I know who's calling that number. My manager gets it. If it doesn't, if she doesn't pick up, then it rings me so that we never miss a phone call. So again, if, if it's 4:30 on Friday and this person needs to place somebody before the weekend, before they can go home, they know they can call us and we'll have a bed available and we'll answer. And so if we're just providing that value to them, like why wouldn't they just call us first anytime? And that's what it ended up being. So that's, that's what we do. I do not put stuff on Craigslist, on Facebook, Marketplace, on Zillow. It's just those relationships.

Yeah. What do you do with the hesitation and the opposition from neighbors?

There isn't any, oddly enough, so. Or it's very limited for the most part. They can't do anything. I've seen this over and over and over. I have like court cases and stuff just from last year where even a city can't stop you from opening. And so there's really nothing they can do. But for the most part we have rules that are like our, our people have to be good neighbors. They can't just loiter and hang out outside if they want to smoke. If they want to hang out, it's got to be in the backyard in private space. They can't just park in open spaces in front of someone else's house. They need to be by our house. We choose our locations for that as well. Although most of the people in our houses don't drive because they lost their license, DUI or dwi. But yeah, it's more just controlling the rules and doing a good job of screening and making sure the right people who actually want more than just a roof over their head, they want to rebuild their lives. They have recovery related goals, they have a savings goal. You just want to make sure they're really in it to be able to rebuild and move forward instead of just have a warm bed and a roof over their head.

And that's reassuring. You know, as a neighbor I would be concerned, but if I saw that you actually were caring about these people, the tenants were good, the houses were clean. You know, I was a firefighter for seven years and I can tell you I've ran on a number of these, you know, transitional houses, sober living. And oftentimes they're tough. They're rough and tough and the quality of living is substandard. And you know, if neighbors are seeing that actually they're nice places and there's pride of ownership, there's, there's definitely gonna be less hesitation. You know, what's the biggest difference between someone like you and an organization like, let's just say the Oxford House for, for example, you know, like these, these nonprofit organizations that really do the management, because I know some other sober living operators where they'll go find the asset, they'll partner with a management company like Oxford, for example, to like fill up the space. You know, what would you, can you speak into that at all about, you know, pros and cons?

Yeah, 100%. So there's a national alliance of recovery residences. And so although I said before that it's mostly non regulated, that's changing in some states. So if you're going to get state funds, some states like Texas, Florida, Washington, Ohio, they want you to be certified through this body. It's almost like being a realtor, the national association of Realtors and then the state association of Realtors underneath that. And so there's the ability to do that and get certified. But what was the question again, the.

Difference between like an Osford house versus like your, you know, like what you're doing, like instead of just Buying the asset and bringing in like the Oxford House to do the management versus your model, you know, which is really running the management, you know, taking that on and owning the asset.

Yeah. So nar, this national alliance of recovery residences has what they call four like levels of housing and Oxford House would be level one, which means not monitored, very peer led. The way Oxford House usually works is people come in who are in recovery but they just equally share in the cost. So they'll equally split the rent and utilities. But there's really no oversight, no one's monitoring it, no one's really drug testing them. And usually what you hear from my experience is if someone brings drugs into the house, like the whole house could just start using again. And the problem with that is now you have nobody overseeing it. No one's paying the rent. So I've actually talked with many landlords who have evicted Oxford House for non payment and it's because they, they're a non profit. They do things through charter and nationally. They have a good intent. It just doesn't always play out regionally where there's, there's actually like a representative of Oxford House who's checking in on these homes.

Yeah, that makes a ton of sense. And actually brought up an additional question. I have two last questions for you and then we'll give you the floor and you know, tell people how they can find you. But my, my next question is, is, you know, you mentioned that you, they sign like a license in the instance that there's a relapse on, on one of your, you know, one of your, your tenants, I guess. Well, I don't know what you like to call them. Occupants of these, these houses. Residences. Yeah. If one of your residents is rehabs and is consistently causing problems and there's damage, what is the is, do you have to go through a standard eviction process or is it different?

No, not at all. So here's what's crazy. Most of the people who live in our homes have lived in similar homes before and they understand how they work. The unwritten rule in many of them is that if they use, they're kicked out. We're a little bit different. If somebody relapses, we want them to go to detox. We want them to get through seven to 10 days of going through withdrawals with either medically assisted treatment or somebody watching them. Because if you just binge drink over the weekend and you stop cold turkey like you could die. Withdrawals are that bad. So we want them to be monitored and get that help away from the house, but then we'll hold on to their space and their stuff and they can come back in. Honestly, that's happened so many times where somebody has moved in. We test them, they're dirty, they go. But they're so thankful that we let them move back in that they're, they're not messing up again. And they stay a year to 14 months and then they move into permanent housing. But for us, it's, it's really. The license agreement is very clear on the rules and the expectation is set forth in a way that if they mess up and they aren't willing to go to detox or there's a fight or weapons or something's found, they just leave. I've never had to evict in three years.

Interesting. Yeah. And their rent, I guess the cost of being there, that's being paid for by the organizations that are matching you with the tent, with the residents. Is that correct?

Yeah, in most cases. Some have graduated their programs and they're paying out of pocket. Now we have somebody who's been with us for two and a half years, clean for three years. And she, she went from, because of her medications, sleeping all day long to now she's a manager at a local fast food place. She's doing great.

And so there's like male houses and then, you know, women and children. I'm, I'm assuming. Do you have homes for like, dads, like single dads with kids?

We've always made a space for single dads. So usually that primary bedroom. When I first started, I would, it would be the last room I filled up because just in case we had a single parent, I wanted them to be able to move into that space. And we've helped a lot of single parents be able to, to move on to permanent housing that way. Yeah, we even created like a second phase of housing where a home I moved out of a year ago, six bed, four bath, that ended up being for the people who like, did so well in our sober living homes and were no longer on their programs anymore and had been cleaned for over a year, that they just basically rented a room from us in a normal type of rent by the room situation instead of a sober living house and then moved into permanent housing.

What's the typical time frame that a resident stays with you guys? What's the average stay?

For us it's 12 to 14 months. And I think it's because we put an emphasis on this should be the last place you ever live before you get an apartment or move into like your own rental situation. Yeah, I know too many sober living homes that are like a weekly situation. You could pay 15175 a week. And the problem with that I think is that they're only in it for a week at a time.

Yeah.

And I want people to realize like we support you and we believe in you and we think you can be here 12 months and stay clean and then move on. That should be plenty of time to save and be able to do that.

And what's your, what's your vacancy like? Like if somebody moves out, you know, how soon is that space filled?

The beauty of our model is we have these relationships where they're reaching out to us every day to see if we have openings.

Wow.

So in many cases we have a waiting list. Wow. Wow.

Okay, last question. I know I said I was going to only ask two more and like ask six more, so sorry, my brain, I just like had all these extra questions. Okay, my last question and then the floor is yours, Andrew. And I cannot tell you how grateful I am of you and how much I appreciate your time. You say when you talk about cash flow. This is an interesting question I like to ask all investors, not just you specifically as a sober living. It could be a single family buy and hold person. It could be a multi family apartment syndicator. I love to know what cash flow is to investors because a funny little pattern I have seen arrive over the year and a half and 87 plus episodes that we've done here every week. Nobody gives the same exact answer. Cash flow is different to every single investor. So what Andrew, what do you consider as actual pure cash flow?

Are we talking just from a basics of like your income?

I'm not talking, I'm not talking asset minus liability. I'm talking like you specifically, like what do you consider as cash flow? And I'll, I'll give you an example of what I consider cash flow if it's helpful. So I, let's say I have my, my portfolio, I bring in my gross rents, I deduct out my mortgage. Ok. But then I have a little piggy bank on the side and I put in, you know, vacancy capex reserves, maintenance, property management, boom. The caveat to that for me personally is once I reach a total number of, in this general fund based on either a couple of things, if it's a single property, six months of, of total expenses or a portfolio, I figure how many, how many doors do I have? Okay, I need to have at least X amount in reserves. Anything above that at that point is cash fl. So my cash flow is zero, essentially. Now psychologically, I could say, okay, I'm making 200 bucks a year, a month here after I pay all my expenses. But essentially, like, you know, for me, I factor cash flow as capex, maintenance, reserves, mortgage, you know, property management. What's remaining, that little portion of pie that's remaining, that's what I consider cash flow. How do you consider cash flow?

Interesting. So I consider cash flow the total amount left over after my debt service and utilities for my model. However, I also have that divvied up because we follow profit first for real estate investors. Yeah. And it's divvied up into a tax bucket and you know, a reserves bucket and owner compensation, operating expenses. Honestly, it's a very high profit type of business. Yeah. So the owner compensation can be higher. Plus we make use of a lot of tax strategies, bonus depreciation, cost segregations, all that stuff. So my taxes aren't huge. So I can take the excess taxes and move it into owner compensation later. So it's just, I guess, semantics. Yeah, yeah. It's when you decide to put it.

Into those different buckets and it's completely irrelevant. It really doesn't matter at this point. This has just become a social experiment for the podcast for me of like define cash flow. Because I think it's. We all, we all talk about cash flow and what's interesting is none of us are speaking the same language. I've come to realize that we're all talking about the same thing, we all define it differently. But, but I think it's really what, what's more important is just like consistently defining it in the same way. So Andrew, this has been freaking excellent. I love your heart. You're obviously out there trying to do the Lord's work and it is paying off. It sounds like your program is incredible. I'm hyper curious about it. I'd love to learn more and follow up with you. Where can people find you, reach you? What's the next step? If you have sparked some curiosity and people want to reach out to you and take the next step.

Yeah, they can find me on Instagram, of course. The Andrew Lamb is my handle there. Or sober livingriches.com is our site that can kind of give you an overview of sober living and then potentially schedule a call with myself or my team and talk through what that would look like. Because our coaching program is, is truly that. It's a full on coaching program of six months of here's step by step, like a business in a box. Here's how to do the market research. We even give you a list of 40 or 50 organizations in your area to get started with. The scripts, with the email templates, everything you need, plus policies and procedures, how to handle the day to day, all that stuff. And we've had a lot of students be able to. One student started five homes last year in six months. Wow. The last three months of the year off completely financially free time and, you know, freedom to do whatever he wants with his family, stuff like that. We have another student who started homes in Ohio but lives in Austin, Texas. They've been with us for two months and they started three homes already. Another student who has two homes in California but did it all from Brazil. Wow. This doesn't have to be right down the street from you, like my first two were. So we have students who are seeing a lot of success. So if you want to learn more about that, it'd be soberlivingriches.com if you just want to connect with me, follow my journey. TheAndrew Lamb at Instagram.

Awesome, Andrew. Thank you so much. I hope I know that people out there listening in Dynamis land took something away from this. Thank you for your time. Thank you guys for tuning in and listening and we will catch you all on the flip side. See you next week.