The Most Profitable Way To Start A Sober Living Home (In Any Market)

Hey, and welcome back to the YouTube channel. Today we're going to be talking about the most profitable way to start sober living homes in any market. Imagine creating a sober living home that not only transforms lives, but also makes a six figure income. With the increasing prevalence of substance use disorder across the United States, that's anybody actually using illicit drugs in an addictive fashion, like more than just one time, they're constantly going back to it. The demand for sober living homes is on the rise. A recent study, in fact the 2023 National Survey on Drug Use and Health, said approximately 48 point million people aged 12 or older experienced substance use disorder in the last year. That is almost 15% of all Americans. Just think about that for a minute. That means there's likely somebody that you go to work with, somebody that you might work for who's currently battling substance use disorder. It's that prevalent. And yet homes like ours, sober living homes usually aren't talked about very much. And in fact, many people going through treatment don't know they exist. So that's why we're going to talk about the best ways to actually let people know that you have a sober living home and how to open up profitably from day one. So today we're covering step by step guidance on establishing a profitable sober living home in any market. First and foremost, step one, choose the right market. So what we're going to look at is actually how to identify what areas, in fact what neighborhoods like. Take it from all the way out to the county level down to like a specific neighborhood. Where should you put the home? I always start with market research first because simply just choosing a house and saying, hey, I hope this works is not really a strategy. We got to make sure that we're putting the home where the need is. And so a lot of people, I mean, if you're looking to really make this a big business, you can look at where there's a high prevalence of substance use disorder, or there's a high concentration of treatment programs where there's a high concentration of just people in general looking at metropolitan areas, big cities, things like that. But for most real estate investors, you already have real estate that you want to convert into this model or you have the ability to buy, but you're more familiar with a certain area. And so instead of thinking like with the huge lens of where you could buy it, although we certainly have students in our program who have done that and they've chosen certain areas of the country in order to buy lots of real estate and partner it Makes more sense, I think, to think about where do you live now, where do you currently have relationships or where do you want to own real estate to begin with and start there. Some people want to own real estate on the coast, like in California or Florida. In certain areas where, you know you're going to get that appreciation, it's going to be a higher entry fee for sure. But you're going to be able to kind of bank on the fact that if you're owning real estate, it's going to appreciate it's going to probably be worth double in 10 years, 15 years than what it is today. You can depreciate it. So if you're somebody who's a high income earner, this is a really good way to avoid having to pay taxes because you can depreciate a higher dollar volume than let's say if you, you bought a $60,000 home in Ohio, buy 10 of those, it still won't equal the depreciation I get on one house that I purchased in California. And so that's what my decision was and where I chose to buy. Plus I know and like California, I live here. But others you might choose, like hey, I'm just going to buy in my area in Texas or in, you know, Georgia. We have a lot of students in Georgia, in South Carolina, North Carolina, and that's totally fine. What I would do and what we always recommend is actually go to the source first, go to the treatment centers, go to the local county programs that work with people who have substance use disorder or mental health disorders, because it is considered one, and ask where do you have a need for housing like this? In that way you can determine, number one, does it make sense to own there or to lease there? And number two, will there be demand to fill it once you have it open. So we always start by doing that market research first, asking those questions, among many other questions and making sure that we actually have like a, a buyer, somebody to use our service before we ever offer it and you know, make a big commitment and spend a lot of money or put a down payment or all that stuff on the property. Start there, just ask those questions to the local organizations. From there you can also go on certain websites like NAR Online, n a r r online.org which is the website of the national alliance of Recovery Residences. What they do is they certify sober living homes or what they call recovery residences. Same thing. They have a code of ethics that they want you to abide by. In most states it is simply optional. There are states where they actually still don't exist. And so this is an optional step to go through the process. But what I like about it is they do have a directory. So you can see, number one, are people making use of this is that if there's a high prevalence, if there's a long list of homes on, on their directory, that probably means you're in a state where they might have legislated actually getting that certification, which doesn't take a lot of time or energy or money. It's just, it's an extra step along the way. But there are some states like Texas or Florida, Washington state is another one, Ohio, where in order to get any kind of referral from a state licensed facility, treatment center, hospital, things like that, you do actually need to get a certification through this process or be part of what's called Oxford House, which is completely separate. They might have legislated that you do need to get certification through their state affiliate because you have the national think of the national association of Realtors and you have a state specific association. Like for me that'd be car, California association of Realtors. Same thing with nar, national alliance of Recovery Residences. And then in Georgia it's the Georgia Alliance. In Texas it's actually called something different. Texas Recovery Oriented Housing Network trone. And so you can find all of them on the website for the state you're in and see kind of what the lay of the land is regarding competition. Sometimes it has listed on there what rates they charge. What typically we are running is a level two home. Again, if you look at the NAR standards, they have their code of ethics, but they also have these four levels. A level one kind of the Oxford House I mentioned would be a peer led home. No real rules, no real management, not even really a curfew. It's just people kind of all in recovery equally sharing the cost of that property. Level two would be managed, structured supervised home. Level three would be, there's actually like staffing, supervised activities, a little bit additional help, maybe case management. And then level four would be like clinical services. This is a licensed home, It's a licensed residential rehab. And so typically my homes, what I recommend running and what our students run are level two or level three homes. And so just when you're looking and comparing kind of apples to apples, make sure what you're looking at on that directory is a level 2 or a type M managed home or level 3 or supervised home, if that's something you're going to be offering. That's a really Good way just to get to the understanding of the lay of the land. Is this in your area already? And I wouldn't necessarily be afraid of an area that has a lot of sober living homes already. What that actually means is there is a huge demand and you could actually get in and stand out and kind of become the go to in that area. Let's say if there isn't a high quality, you know, home or a company that's running multiple properties at scale and has a similar experience. And for example, when I started my homes, there are a lot of properties. I found out from our county there's over 120 homes you could choose from in our area. But as we started, we started five in one year. And after the third one, some county departments decided, hey, you're giving us exactly what we asked for. You're opening homes where we said that we needed them and you're doing a great job. And so we want to make you our first phone call. And so we literally got all of the calls, even though there are so many homes like my first three and then eventually my first five or six ended up being the first phone call for a lot of these different county departments. So there is room, there's the ability to stand out because usually these are very like separated, disparate, like not well run homes. And so if you can come in and build a relationship, show that you're different, show that you have great outcomes, you can actually take from all of the demand that's there and have it just in your homes. And then lastly, you just want to look at the regulatory landscape. There are some states where a license is required. That'd be New Jersey, Utah and Arizona. In some areas like Pennsylvania, you would only need a license if you wanted to get referrals from state licensed facilities. Again like treatment programs, outpatient programs, things like that. But other than that, you typically don't need a license outside of those three states. And it's very possible you don't even need a certification in the majority of states in like 40 plus states in the U.S. the certification is optional or non existent. And so just know what the lay of land is. If you're going to Arizona, for instance, we'd absolutely need a license. Is it hard to get? Not necessarily. We've walked students through that. But it's just something to know moving forward. Now the second thing I would do is really determine my business model. And what different revenue streams are you going to go after? Are you going to be focused primarily on private pay with people paying out of their own pocket. Maybe they're getting Social Security, maybe they're getting a scholarship or a stipend or something from a different local nonprofit or organization, but they're paying you directly. It's totally possible. It can work. I had a lot of that when I first started. And in fact, I have a student in Indiana who has eight homes now, literally all of them private pay. And it's working great. So you can do that. What I chose to do is I started working, working with more local organizations that had grant funds to specifically house people with substance use disorder. And what that allowed us to do was again, build these relationships, receive referrals from these organizations who are already meeting with who we want to house. And they would then pay us directly, either through a check at the beginning of the month or through a direct deposit at the end of the month for the people that we housed. And they could usually pay a little bit more than the individuals could pay out of pocket. And so either way can work. And in fact, what might be better for you is having a mix and diversifying your revenue stream so that you're not reliant on any one organization or chasing down individuals who may or may not have gotten a job and gotten paid and done what they were supposed to do that day. And so you can actually use all of these different funding sources that that would be a preference, or at least have multiple organizations so that you're sure you're going to get paid and be able to cover the bills every single month, no matter what. Again, without being reliant on something that might go away or might run into some budget issues or whatever and prevent you from being able to be profitable from day one. I would also, at this point, highlight, what are you going to charge? What's going to separate that you could even, even charge more for. For instance, if you're going to do meals versus homes that don't have meals, or maybe you're in an area where that's not normal. If you provided meals, could you then charge a couple hundred dollars more per month? It's something to think through. I would never just offer a service and kind of just throw it out there. Always ask the local people on the ground, either who are in homes right now or that are going to be sending people to you. Would this make sense? Like, is it going to help people? Have you seen this offer before? Was it taken advantage of? Because honestly, sober living has been done for decades. People have tried certain things. That doesn't mean new things won't work. For ex. Another example, I was told in my area that I could charge only 800, $850 for the person who introduced me to sober living homes. What I found by kind of seeing a list of homes in the area and identifying, okay, they're getting paid this, they're getting paid that, I found that the government, local, county programs were actually paying twelve hundred dollars plus per month per person in our area. And so although I ran my numbers conservatively and things still made sense on the 850, we were initially able to charge 1200 plus to these organizations. Now if somebody didn't make that, we were going to work with them case by case. And so that's where the private pay you have to look at what, what's their income, do they have a job now? Do they have savings? And then in our area typically mean we were charging 900 to 1,000 for those individuals who are doing private pay. All the organizations that had grant funds and all that stuff, they were able to pay a bit more. So that's also okay. You can mix people, you can mix and match from different organizations. Step three is going to be finding the right property. So once you actually identify the right location, now you're on the hunt for the right home. That's usually going to be something that's four bed, two bath or bigger. So four bedrooms, two bathroom at least, usually with enough room for two twin beds per room. That's the way I like to run it. I don't like bunk beds. I just think that introduces a whole host of issues, especially for people who might have recently been in incarceration. Doesn't even have to be recent. Somebody might have had a really traumatic experience in prison years ago. And just, you know, having to be in a bunk bed, dealing with who's on the top bunk, who's on the bottom bunk. Multiple people in a room kind of on top of each other. It tends to cause problems in higher turnover. And so from the very beginning, I've always just done individual twin beds and rooms. We might put a third bed in a larger bedroom with a private bathroom, but we're usually not doing any more than two. Unless that's the case. It's a bigger footprint room with its own private bathroom. That's worked out very well for us. And even the caseworkers really like seeing that they enjoy that we take pride in our properties and that we treat people like humans and not like cattle. And so what we're looking for really is, you know, just something with ample space. You don't need a ton of common area space. Honestly, I thought I needed a huge dining room table and a big dining room and all this stuff. What we found kind of three homes in was nobody used it. It would use the kitchen island, they would kind of eat on their own. There wasn't a big community like dining time mostly because people weren' all at the same time. They had different work schedules. Some would work days, some would work nights, some swing shifts, some grave shift. And so we didn't have everybody there at the same time anyway. So it just didn't make sense to invest in a huge dining table and all this space. In fact, my second home, we ended up turning the dining room into a bedroom because it was just there, you know, it was a big open space. We were able to install French doors and have that be a fourth bedroom and a 3B two bath house. And again, this is why I recommend going four bed, two bath or bigger. But there are ways to buy a smaller property and make it a four bedroom pretty quickly. Either by converting, converting a garage or converting the dining room like that. But we didn't sacrifice living room or family room space. It was just that dining room that was never going to be used. So we turned it into a bedroom. I would also look at access to public transportation, accessibility of shopping, things like that, like walking distance, biking distance. I usually say if you're within 15 minutes walking or 1 mile of a bus stop or shopping, you should be just fine. Because an able bodied person can walk about a mile in 15 minutes, sometimes less. Also you can look at leasing versus buying or maybe doing a joint venture. And so we have a lot of folks, a lot of students right now doing creative finance, seller financing deals, subject deals, where they're able to kind of negotiate a lower down payment than the 20% a traditional loan might need. But also they can negotiate those terms and they can take over like a 4% interest rate even though today's rates might be 7%. I've done this personally and we've taught our students how to do that and it's really been cool to see them have success doing it. But you can also lease. We have a lot of students who are doing rental arbitrage. They're negotiating a two or three year lease with the landlord coming in, sometimes with even six weeks of free rent, like nothing due to upfront, so that they can furnish the property. They'll use a business credit card to furnish the home and in many cases have people move in and start making money before they ever have to have a true out of pocket expense. So there's ways to do this with very little money, but preferably you would have at least a cushion, some savings. I started off with savings. Even though I didn't use my own money, I was able to keep it and have that be kind of a just something where I could sleep well at night and know that if anything happened I could cover costs in the future. Step four is going to be setting up and operating what you really want to make sure you have intact is a strong intake process. What we learned was by just spending a ton of effort on the front end, it actually saves a lot of effort on the back end. The homes ran more smoothly. There were no headaches, things didn't go awry. When we really took the time to make sure the person that we were letting in was motivated, was truly drug and alcohol free. They had recovery related goals. They wanted to get a job, do what they needed to do and then find permanent housing. They didn't just want to use this as a place to lay their head and be protected from the elements. Like they truly wanted a place to get better. Remember, this is a place where people are choosing to be in homes like ours. There's no court order, no one's telling them they have to do it. It's a choice they're making to live in a sober living environment. And so we just want to make sure they are actively making that choice. For example, we recently had a shelter call us and say, hey, we have somebody here who we would like to have move into your home. We had to ask the question, well, is this their idea or is this your idea? And they literally said like they were just trying to free up beds in their space and if it's not the individual's idea, they're just not going to thrive, they're not going to do well in our home. So we denied that person. We said, you know, if it's not them reaching out, saying hey, I want this, then it's not not going to be a good fit for us because they're just not going to have long term success. We also have very clear house rules and structure. And so it's extremely clear what it takes to stay in our home, what the expectations are from the very beginning. These are visible on our website, like everyone knows what to expect coming in. So we have the intake sheet for sure, we have an application, but they also agree to and sign our house rules that say, you know, they're going to be doing their chores when they're supposed to. They're going to follow our curfew and abide by certain rules. There will be no weapons, no violence, no threats of violence, no fights, no weird sayings or things, you know, being said to our staff. And these are all things we've experienced in the past to learn from. So this was a living, breathing document that has, you know, every mistake we've made in the past or every situation we've encountered is now like in stone in that document so that everyone knows what to expect moving in and they abide by it. When you have the right people move in again, it's, it's a safe, clean, friendly environment that literally anyone can walk into and like do an inspection and feel like, man, I really want to live here, or it's case manager. Man, I really want to send my person here. I would really want to make referrals to you because what you have is just run so well. You would also want to look into management. And so that could look like actually hiring a manager, you being the manager, or just delegating daily operations to somebody who can be your eyes and ears. My first three homes, I was the manager. I later then kind of had people who I could trust who are very communicative with me, who I gave additional perks and experiences to or would give them a discount on their rate if they were paying out of pocket. And they became my eyes and ears. We have cameras and a whole bunch of systems, you know, that run smoothly. But it's nice to have a human actually let you know if you need to show up what's going on or just, you know, show somebody around, let them know the lay of the land, show them where the rules are posted, all of those things. Later on. I hired somebody part time to do that. And now we have full time help because we have 11 homes to help things run smoothly. They stop by every house every day. You don't necessarily have to have them live in the home, but it's very nice if you have them stop by every single day. From there you can actually scale pretty efficiently and systematically using processes and just kind of rinse and repeat what you've got in one home. Because once you establish that initial house and all the contacts that are referring people to you, whether they're paying out of pocket or not, then you can just simply take that and rinse and repeat. They're already calling. You just have them go to another home nearby if you're ready to dive deeper into this sober living. Riches is a coaching program I created, created to help people start and scale sober living homes effectively. So if, if that's something you're interested in, you can book a call with my team at the link below or go to sober livingriches.com apply and we would love to help you out. So from there you're really just focused on getting your first residence. And that can start as soon as you're doing your market research and you know, you can start building a waiting list right there. Now you have to have a home coming soon. It doesn't necessarily have to be open, but it needs to be open soon because a lot of these placements are important, emergency placements. Somebody is literally showing up in an office, talking to their case manager or probation officer or whoever it is, saying, hey, I need housing. This probably isn't something that's like six months off, but it could be as close as four to six weeks out, depending on, you know, what's available in the area. If there's very few homes, which is typically the case across the United States, then it's very possible people will need to and want to wait six weeks for you to get your home open. And that's totally fine. It's more time for you to really just establish that waiting list. So as soon as you're open, even if you're buying real estate or renting real estate and furnishing it, as soon as you're open, you should fill up right away. We always say you should fill up within 90 days if you're using that method. And then again, just screen for success. Make sure that you're implementing an intake process. We have a seven page intake form with literally every question you could think of that we use. We give that to all of our students so that they can repurpose that and use it in their business. And I encountered a lot of problems early on in my first sober living homes because I didn't know what I was doing, didn't ask the right question questions. And literally every single one of my students has been able to avoid making those same mistakes by following the system that we put in place to solve that problem for ourselves once and for all. They've never had to experience it. And then at the end of the day, once you do have your first people in and then you continue to fill up. Now you just want to keep people as long as possible. And retention and like reducing turnover is very important. But this comes from holding weekly house meetings. Could just be the residents themselves holding those meetings. You could lead them if you wanted to. I found they Tend to be lot a little bit more honest and vocal with each other. If you're not present as the owner of the home, but someone can then bring to you everything that was stated. And if it's an actual issue with something in the home, you can address that. But usually it's just issues with each other, like they need to be good roommates to each other. It's a way to air out grievances and make sure bitterness doesn't develop. Especially if it's something as simple as, you know, somebody's not doing a chore that they're supposed to be doing or not doing it to the standard that somebody else is expecting. And instead of letting that just build up, you're addressing it right away. And just like having an open forum, being fully transparent, and everybody's like a part of a community focused on having the home run well because they want a smooth environment. They just want to work, save, relax, rebuild, recover. They don't want to have to come home and then be stressed out. That was the whole point of coming to a sober living environment in the first place. They want to avoid the triggers, avoid the stress that caused them to stay in their substance abuse in the past. If they had a home they could go back to or felt comfortable in, they would. They're in homes like ours because they honestly don't have that yet, or they're rebuilding relationships and, and you know, going through the 12 steps, making amends, all of those things. And so we've successfully seen people like have great outcomes and move back in with family and their, their significant others and their kids and all that reunify. But it takes time. So they're in our homes to try to get back to that place. And what we can do and a life skill they can learn is effective communication. In those weekly house meetings, I also always tell people that this should be the last place they live before moving into permanent housing. We really saw a lot of people moving into our homes early on who had been in sober living homes, homes for years, just bouncing from home to home. Or they would be in a home for six months, relapse, go to treatment, be on the street, go back into a home, relapse, stay in a car. In this circle, you know, the cycle continued. And so what we really took, took hard in was sitting down, listening to people's stories, especially my first a year or so, sitting down listening to their story while we went through the intake sheet process asking, hey, how did we get here? Like, how did this end up? And as heart wrenching as it was those first few times, to hear the terrible like trauma that people have been through, it really cool to then sit and look at them and say, I believe in you. You've made a decision to better yourself and to not stay in that situation or to not let that kind of derail their life moving forward. They've chosen a better future and this should be the last home that they stay in before they move on to their own permanent home. That simple statement, that belief, man, we've seen a lot of people move into their own apartments, move back in with family and loved ones and really get their life back on the right track and not go back and into addiction. In fact, I just heard about somebody, one of our former residents who is three years clean now, recently got married and reunified with his three sons. And those are just amazing stories to me to hear that we had a part in that and all they needed was a safe, clean, drug and alcohol free place to lay their head and focus and rebuild. So that's really it. I mean, we talked about from choosing the right market to choosing the right business model and revenue streams to finding the right property and at the end of the day, running the right model and like setting everything up to operationally run smoothly. This is really everything you need to start and run a sober living home profitably in any market. If you want help starting a sober living home, visit soberlivingriches.com and our team would love to talk with you about your specific situation and see if you're a good fit for our program. We have hundreds of students now who are starting sober living homes across the country and it's really been amazing to see the impact they're making on people's lives, but also the income they can make while doing it. And comment below with questions or experiences in sober living homes with your questions or experiences in living in or running sober living homes homes, we'd love to hear from you and we'd love to know what questions you have. For next videos here on our channel, subscribe.