Behavioral Health Real Estate · Real Estate Goldmine (free)

Behavioral Health Real Estate

Attached below is a great article highlighting the need for real estate in the Behavioral Health Sector. Most large behavioral health companies opt to lease their properties instead of own. Why might you ask? Two reasons really.

They believe their capital is better spent in providing better care to patients
Zoning

Behavioral health (substance abuse treatment in particular) is a difficult problem to for many to understand. Patients are legally considered to have a disability. This makes them protected by the federal fair housing act of 1988. Cities are not allowed to craft land use code to specifically make rules that ONLY apply to people in recovery.

However, this doesn't stop many cities from flexing their discriminatory muscles. I have faced this in the past. I was forced to sue the city and they did in fact settle prior to facing the judge. That being said, it was a pain.

What does this mean for potential real estate investors or operators? OPPORTUNITY.

Our operators know we are there to help them in more ways than just fixing a leaking roof.

Part of the reason this is so lucrative is that it's not always easy. Sober living in particular doesn't fit into a box in the code. Legally, you can do it. Period. However, some cities make it easy, some cities don't. Often times, the city just doesn't understand what a recovery home is.

There are 3 main reasons we've become so successful with this model.

We understand real estate (property management, construction, raising money etc.)
We understand what operators want (close to public transportation, enough sq footage to serve maximum clients, low start up costs to help them get the property open and stabilized).
We understand the laws

Operators want to run their programs. Period. They are the experts in treating clients. They do the most important work.

Our job is to be MORE than a "landlord". Buying a property, rehabbing it, and leasing to someone is honestly the easy part. Helping the operator navigate unruly cities. Keep in mind, most times the cities are cool. I'm not writing this to scare you. However, when the time comes where it's time to fight, you have to be prepared. Also, there are certain properties you can buy (licensed boarding houses for example) that already have the correct zoning.

Why do we get such good rent? If the city decides to start acting up, we help the operators fight. If the city says we need a commercial fire alarm in the property, we write a check and put it in. This allows the operators to feel safe with us.

The longer leases benefit the operators as well. I saw a great operator whose entire business collapsed as it was built on a house of cards. She leased properties for very cheap (relatively speaking) from landlords who truly didn't understand or care about her business. Since their return wasn't anything special and the lease was just month to month, she started getting non-renewal letters from landlords.

"We want to sell the property, and the buyer wants it vacant"

"I have decided to move my wife and kids into the first floor and rent the top floor to my uncle"

"The city says we need a sprinkler system, and I am not investing that into the property"

Just like that, her whole business is gone.

This is how our operators are protected:

Long term lease--If we sell, the lease stays. Also, we can't just randomly raise their rent.
Right of first refusal--If we decide to sell, the operator has a chance to purchase
We agree to always keep the property in compliance with life safety code--the operator doesn't have to worry about the fire department coming in and shutting their business down.
We give the operator their first month of rent free to help them get going
We do not charge "first, last and security". We simply charge a one month deposit.

As you can see, our goal is to SERVE our operators. Yes, we want to get paid and paid well. However, you can't just expect higher than market rent if you're just going to be some bum landlord.

We do what we say we're going to do. Every time. With no exceptions.

I can teach you everything. Let's get rich and help save lives doing it!

-Dan

https://bhbusiness.com/2022/10/06/why-more-behavioral-health-operators-are-opting-to-lease-real-estate-instead-of-own/

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