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Beyond the Property: What It Really Takes to Build a Profitable Sober Living Business · Brick by Brick - Wealth Building Conversations

• Jim Boad: If you want to be the investor, there's great passive income in this because there's always an operator out there that doesn't have the same resources. So one of the big things I try to do is connect operators with investors because I have a guy who has 24 active sober living homes, doesn't own a single one of them. All of them are rented. And that's what he wants. doesn't want for him. It's a big responsibility to own homes and he doesn't want to deal with taxes. He doesn't want to deal with any of the things that come with being an owner, but he just actively runs 24 sober living homes. That's a lot of homes and especially to not own one of them. So, you know, it, it, what, and once, once an investor gets in with a good operator, especially if they're running the homes, right. Like I've got another lady I helped to the beginning of last year. She's on her fourth home with the same investor. He's actively finding homes just to buy so she can open up more of these. So it can still be a passive as long as you just want to be the investor and not the operator. But if you want to be the operator, one of these homes cash flow wise can replace anywhere between three and five regular rentals. Loren Wernette: Welcome to another episode of Brick by Brick. I'm your host, Lauren Wernette, and today we have a very interesting topic talking about group homes. With us we have Jim, Jim who currently resides in Seattle, is the founder of a company that works all with group homes and is gonna talk us through how they work, what they look like from a passive investing side, what they look like from an operational side of things, and kind of the connection between real estate, hospitality, and healthcare. So Jim, thanks for being on the show. Jim Boad: I'm excited to be here. Loren Wernette: So I gave a real high level overview of who you are and what you do. And to be totally frank, my understanding of what group homes are and the overall strategy of them is very, very shallow. So can you tell us who you are, how you got into this, and then we'll get into the group home. Jim Boad: Absolutely. I'm Jim Bode. I actually am in a smaller town just outside of Seattle and I specifically run sober living homes and there is a pretty good gamut of different levels of group homes, you know, there's there's kids transitioning out of foster care. There's elderly care all those different types of ones and my background is is I've been a real estate investor for about 25 years now started out just doing fix and flips worked into the burr model and really just kind of had some fun ups and downs through a couple different markets, you know, through COVID and then through the crash in 2007, 2008. And now all I do is I focus on building, scaling, sober living homes and I teach other people how to do exactly the same thing. Loren Wernette: So I assume you didn't start in sober living group homes if you've been in 25 years. So how did you get into real estate and what was the component that transitioned you from whatever you were doing into what you're doing? Jim Boad: kind of stumbled into real estate. I got out of the army and didn't really have a clue what to do. I didn't spend a lot of time in the army, so I got out pretty young, because it was 25 years ago. And my mom actually gave me a book called Buy It, Fix It, Flip It, Profit. I read the book, found a hard money lender, and bought a home. And then just kind of started building and building and building from there. I went from one home that took me six to eight months to do to where... I was running between 10 and 12 projects a month. And then what really, you know, we'll skip all the other stuff, because it's just a bunch of real estate stuff in there. But what really got me into doing the sober living homes was COVID. I was really heavy into the burn, I was really building my portfolio, and that was going to be my retirement and my cash flow. And it literally overnight turned off. Because all of the rules and regulations that came out, almost every one of my tenants stopped paying. And as I called them all, they all told me basically the same thing. We don't have to pay you and there's nothing you can do. And they were absolutely not wrong. There was almost nothing I could do. So the way I got into the group homes and the sober living was I just, was just done looking at all the red on my spreadsheet. So I was just doom scrolling online and something came up about group homes and how they were cash flowing even in this market. So I'm like, okay, you know, I'm dying. Let's take a look. Took a look. It was a cool little program. It was a good little pitch. I bought the program and then pretty much instantly started taking action on turning my new projects that were about to become rentals into sober living homes. four plus years later, I haven't looked back. That's all I do now. Loren Wernette: Sure. So I think that there's a bit of a stigma around sober homes or, you know, these group homes. So talk to me about, you know, where you find these houses, that stigma, how you kind of get around it and what operationally actually looks like. Jim Boad: Absolutely. I think one of the biggest starting point I have to get with people is the difference between an inpatient drug clinic and then a sober home. So, you your inpatient drug clinics are where people go to actively get off of drugs and they kind of detox in there and it's much more structured and much more commercial. And like, you can't just do it out of a residential home like I do. And then the biggest miss that we're having right now with most places is people come out of these rehabs and they get themselves cleaned. and there's not enough sober living homes for them to go and actually have a functional structured place to reinforce all of what they've just learned and went through to get sober. So normally they're just going back to where they were. So they're going back to exactly what they were doing. So a properly structured and run sober living home is that that bridges that gap between getting clean and staying clean. So the way that these look are the sober living homes get to be run out of just residential homes. There's in most states, there's no specific licensing required. Like I can open as many sober living homes as I want. I could have a whole block of sober living homes here. There are about five states that have some pretty good restrictions on it. And you know, those are there's some licensing requirements. And then there's like some distance requirements, like you have to have six, 800 feet between these types of homes. You can't be around schools, like they just have some restrictions, but they're still absolutely doable to open. And anytime there's friction involved, you tend to be able to make more money as well. So you can get more per bed in a state where there's more friction, like licensing requirements and things, and there's less competition. But structurally, these run really smooth. There's really two ways to run them. You can run them self-managed or you can run them where you actually have a staff management. And the self-managed is exactly what it sounds like. You tap someone in the home and kind of put them as the house leader and they kind of enforce the rules and report back to you, which I don't love that method. because you're kind of turning that person over pretty regularly. mean, the ultimate goal of these homes is to solidify people's sobriety and then get them lifted back up to where they can get back out on their own. So I don't like to have to constantly rebuild leadership. So I structure mine to where I have a leadership team. I normally have two people. I have an admin type person, and then I have a field type person. So the way we run all of our homes and I teach people how to run theirs is exactly that structure. And it can be the same person if you have the right person, but they tend to not have the same skill sets. So it's more like an admin and then a field person. and the admin does all of the intakes and does all of the paperwork and does all of basically our outbound marketing, reaching out to clinics, reaching out to the department of corrections and letting people know that we have beds available and get us new vendors that will send us people. And then our field person runs around and checks on all of the houses, does random drug tests. you know, make sure the chore lists are being followed and people are mowing the lawns and doing everything that they're supposed to do. Loren Wernette: Got it. And just out of curiosity, how many homes can say one admin and one field person cover? Because I assume it's not a one to one ratio. Jim Boad: no, not at all. I've got 14 and they're both about part time. So some one person could run 20 homes pretty competently. And really now that I have some really good models and systems, and we've got a great CRM that that that another company has built out for us. And that that has changed our whole game. So I think I think my staff could probably run the two people if I had to, if I had to max them out, we'd probably be running 5050 to 60 homes. pretty easily before they're really maxed out. And of course, the biggest factor would be demographics. Like if my homes are an hour apart, that would be the hardest thing because to have to go check on that many homes where I'm at in one day, you can go check on my homes in a four hour timeframe. So. Loren Wernette: Got it. So you said that there's no licensing for this. Are there areas of cities or certain spots where like this is not going to fit well here? I mean, obviously you can't put them next to schools and things like that probably, but or is it just, Hey, this house meets the kind of criteria we're looking for. And then what kind of homes are you looking for for this? And what kind of build out do you need to do on those homes to get these ready for these groups? Jim Boad: Those are great questions. And really, the criteria is pretty basic. mean, almost any home works, but the key metrics are going to be your bedrooms. Like I try to help people just find four plus bedroom homes. So four bedrooms is kind of the minimum barrier of entry because everything works in that in those numbers, you can have a pretty good vacancy rate and still be cash flowing. You start getting into the three bedroom homes, your vacancy rate really shrinks. If you have two people missing, you kind of are just at a break even. And then You know, I've run some two bedroom ones because as I was converting my little duplexes and things into those that were like two ones, those ones are really, those are really tight to run. But four bedrooms, you're golden five bedrooms. You're really in the money spot. And anything above that is just all the gravy. And I don't really run that model. Like a lot of co-living places run where like go buy a house and chop up the dining room and get rid of the living room and just add more bedrooms. Because we run two people per bedroom. And there's two main reasons for that. The first and most important reason is the rate of recovery really increases when people are with someone, because there's a higher level of accountability. The majority of relapses I've had were people in solo rooms, because if your room's too small, like here it's 50 foot per person. So I have to have a hundred square feet. And if it's 99 square feet, I can only put one person in that room. And it just, happens. I've got some houses like that. And those are our move up rooms after you've been with us a while and really solidified your sobriety, we move you into those private rooms. But the other one is of course cashflow because in my area we get 850 a bed. So I get to bring in $1,700 a bedroom. So the math starts to really make sense on these. You get a five bedroom home and you've got 10 people in there. Boom, I'm at $8,500 a month in cashflow on that house. And then my area is a lower priced area. My median home price is $350,400. it's really easy to take one of these properly run sober living homes and replace anywhere between three and five regular residential rentals for what the cash flow is. Loren Wernette: Hmm, interesting. And then from a build-up, you're not chopping up living rooms and kitchens and stuff, but so essentially it's just a normal home. It's got a main shared living space, living room, kitchen. And then do you do anything special to the doors? Like you're to put exterior doors and locks or they don't get locks or it's just. Jim Boad: I don't do locks. What I do is I do like the gym style lockers in a common area. So like that way you're real big valuables and like any drugs, cause a lot of people are taking different drugs that they're prescribed and all drugs can be abused. So then that way they have to keep their medications and stuff locked and under key. But really the biggest way you would know if you came into one of my homes that it's a sober living home is I've got a little bit more furniture in the living room. So there'll be an extra couch or two that like a normal home wouldn't have. And then there's two beds in each bedroom. Other than that, they're just a regular single family home from the street. There's no difference. We have rules and guidelines and people have to have curfews and they have to mow the lawns and they have to keep everything picked up. So we tend to be one of the best neighbors. And just to be clear until people realize that they do push against this. Loren Wernette: Yeah, makes sense. So one of the things that always is a limiting factor for multifamily is parking. Is parking an issue that you run into with this? Jim Boad: Well, it surprisingly isn't because the majority of people coming into your home are literally rebuilding their lives. have, I'd say 60 to 70 % of the people I get come with a garbage bag full of their stuff over their shoulder. So they don't have a car. don't have furniture. They're, they're, they're, they're moving in there with almost nothing. You know, don't get me wrong. People will definitely accumulate. And that's where having solid rules and solid, solid guidelines that like, Hey, you have to approve any vehicle that you're going to bring on site. You know, can't work on cars here, you know, and you just have to limit how many cars you do have because you can run out of parking if everyone ended up getting a car, but I don't have a single house that that's been an issue with in four years. Loren Wernette: Talk to me about the rules that you have in place. I gotta imagine that's gotta be pretty important and probably some trial and error along the way about what rules to put in place, what ones actually follow, what ones to remove over time. So tell me about talking about that. Jim Boad: Absolutely. And it's, one of the hardest things when you're doing anything, trial and error. That's why, like, I really have packaged everything up nice and tight and neat for people. So, you know, exactly what to do and what not to do. And, you know, the, the rules are pretty basic. The main way we run our homes is we set the guidelines and we allow them to follow those guidelines or fail. And if they start to fail, then we implement like chore lists. So. you know, here are the chores that need to be done. How you guys break them up is up to you, unless you make me tell you how to do them. And if you make me tell them how to do them, then room number one, you guys are doing this. Room number two, you guys are doing this. And then you just break it down and give everybody specific tasks and you can rotate those tasks. But the most important rules are the recovery style rules. Like, you know, the first week, the first two weeks people live with us, their curfew is 7 p.m. They have to be in the house at 7 p.m. They have to go to a set amount of meetings every week. regardless. normally when you come out of a rehab center, you have a set amount of meetings and things you have to go to and sometimes it's very intense. Sometimes it can be three, four meetings a day, five days a week. So they normally fulfill that obligation their first month or two after they've been out because they're obligated to get the funding that they're going to be getting, which we'll get into that in a minute how these are funded, which is an amazing, an amazing thing. But for them to keep their funding, they have to report back to their to their whoever is in charge of them. at their facility. So the rules are awesome, but it's also beyond just the rules, it's a culture. It's knowing how to bring people into your house that want to fit that culture because you only want people that actively want to be working their recovery program. And there are people that absolutely don't want to work their recovery program. They went to recovery because they had to, whatever reason. they normally tell you that when you get them in a good interview process and ask them the specific questions. So. Loren Wernette: Got it. So there is a screening process to bringing these in. It's not just, went to the correction facility and they said, here's your batch of four, we need beds. Jim Boad: Correct. You know, there are people that do that, but those are people that normally, because there are slumlords in this business as well. There are people that let people do drugs and they don't do any drug testing and they don't care. They just collect that check every month and that's all they care about. So if you don't actually care about helping the people, then yeah. But when you do screen, you know, like they're certain, because we do take people from the Department of Corrections, they fit perfectly in sober living homes because they have to follow all the same rules. But like we don't take high level sex offenders. We don't take arsonists because your insurance company will drop you if you take somebody that likes to light houses on fire. So I don't imagine that. Loren Wernette: Right. Jim Boad: And then certain levels of like, you know, violent crimes. Like we don't take insanely violent criminals. Like I'll take somebody who got charged with manslaughter or murder because they were high and they got in a car wreck with someone in the car with them and killed that person. it's different than somebody who like choked three people out in the hotel room. So. Loren Wernette: Great, got it. All right, that's interesting. So I guess this probably gets into the payment piece, but you have all these rules in place. How do you enforce them? Jim Boad: The beautiful thing about this is we still have teeth to enforce this. give people, if somebody, if I go in and they do a drug test and somebody is positive for a drug test, they're out of that house in 15 minutes. And if they don't wanna leave the house, I actually can call the police and the police will come trespass them from my house. Because they're never actually a tenant, they're in a program. And this is such an important program that if they ever take these teeth away, sober living homes will never work. you have to be able to remove people from the house quickly. And as of now, we still have that. So my hopes are that not too many bad operators get in this and take advantage of it and then make rules shift against it to where now we have to give them tenant rights because if they have tenant rights, these will be useless homes, because then it'll just give people a place to come and do drugs comfortably. So. Loren Wernette: Right. So you make it sound like there's active talks of legislation to remove some of these rights. Jim Boad: There isn't active talks on it. It's just like anything though. think most people don't know about this and it's kind of my mission in life to educate people on this because we need them so badly. And like anything when something starts happening and it gets abused, they tend to put more guardrails on it. And I just hope that as we progress, because right now there's case law on this in lots of ways of like cities that try to allow people to not do this in their city because We are protected under ADA, under American with Disabilities Act, because drug addiction is now classified as a disability. That's how we're allowed to get around, because like my town, if you have more than five people unrelated, you can't have more than five people in a home that are unrelated. But I'm allowed to do that, and other people are allowed to do that because we meet that ADA guideline. And there's a lot of case law that has won with this. like over in Illinois, That one of their cities just had to pay eight hundred thousand dollars to an operator because they were trying to push them out and tell them we don't recognize Drug addiction is that level of a disability and they lost and had to pay 800 K to that operator. So So so Loren Wernette: Interesting. Jim Boad: to answer that question, no one's specifically talking about it It is a concern that I have just because I know how it goes when when things get popular and when people abuse it Loren Wernette: Right. It's a little bit, yeah, I can see where you're going from that, but I also see there's just generally there's a sway in our country to kind of try to help more people. And so I think there's kind of pushing on both sides there. Jim Boad: It is because I do get into discussions with people. My company is called Shelton Housing First and I have people that run under a different thought process of Housing First where they wanna argue with me that you're not true Housing First because you have requirements, they can't do drugs. And it's like, well, of course I have requirements because you shouldn't be able to do drugs and get any of the social programs that we have until you get off of drugs. So it's- There is a group of people that don't feel like it's acceptable that you require people to not do drugs. Loren Wernette: Yeah, I understand. So walk me through. I want to take this from a patient. I'm going to call patient. I don't know that's the right term or not for now. They're leaving some program. Walk me through what they do to get into your program, what it looks like once they're in your home, and then what the exit path is for them out of it and the timeline associated. Jim Boad: Absolutely. So the way that this works is we get the majority of our people through an inpatient drug clinic or from the Department of Corrections. And they both were basically the same. About two weeks before somebody is going to get discharged from the inpatient drug clinic, they start calling around to find a sober living home. we're normally, we're on the list of all of the ones around us. So we're one of those phone calls. So we'll get a call that, hey, I'm Jeff Johnson. I'm getting out of treatment on May 15th. you do you have space? And then yes, we do. We send them over an intake form, then we schedule up an interview with them. And then if all of that goes well, then we send them over our contract and they sign our contract. And then normally that inpatient drug clinic will either have some sort of funding for them or will guide them to a place that will have funding for them. So we'll get anywhere between three and six months worth of funding for most people when they're coming to us initially. And then, Loren Wernette: know, when you say, when you say funding, is that just for the bed? Or is that living expenses as well? Jim Boad: That is just for the bed. pay us, they just pay us our fee. And then we only provide a place to live and utilities. We do give a fully furnished home. So they come and they have a bed and they have couches and they have silverware dishes. But again, this isn't a high-end Airbnb. We're not spending $30,000 to stage this home up. We're spending about five grand to get an average four to five bedroom home completely set up with beds and mattresses and couches and chairs. We get lots of donations and that's a whole different topic, but you can get insane amounts of donations for this. But then the processes, they come in, we know what their funding is, we put them into our database. So we kind of keep on them. They have tasks that they have to do to maintain their funding. And then as their funding is running out, we talk with them, we give them other options for more funding. I've had people that have lived with me for over three years that have been fully funded because they keep working the process in the system to keep them funded. And we have people that go to self-funding, hey, I've got a job, I'm doing good. Cause then ultimately we do become affordable housing for them. Cause where else do you go and get, know, 600 to a thousand dollars a month for rent with all utilities and internet and everything included. And it's a sober environment that keeps you on track with what you need to keep on track with. So, and then my average, most people are with us between three and six months. Anything under three months really, I don't feel like people are prepared to really go back out and just jump back into where they were. And anything after six months, we have a really, really good rate of recovery. Loren Wernette: What percentage of your patients end up in the same city that they came from, or do they use this as an opportunity to move cities and get a fresh start? Jim Boad: absolutely a lot absolutely use this as a fresh start because one of the things that we do is we market really far. have people that come from over 300 miles away to come to my houses because exactly that if they if they just get released where they're at they're gonna go right back to where they were doing exactly what they were doing. So I do get a lot of people from out of town which is a great thing and it is one of the things that you have to learn how to deal with your community on because then they feel like you're importing You're importing drug addicts into our area and it's like, no, I'm importing somebody who wants to stay sober into our area, who wants a job, who wants to contribute. So I need you to embrace them and not cast them out because this is what they need. And we need more people that want to do good. Loren Wernette: Yeah, environment is so important. I mean, for all things, right? If you want to get better in life, hang out with better people. And if you're tied down because you live in a community and people are negative, you move away, you're going to have a whole different start. So I think that's super important. I can imagine if I was a drug act and I was in the same city as all my dealers and everything, it would be very, very easy to relapse. Jim Boad: Absolutely. And a lot of times it's family even. mean, you you come from an alcoholic family, you come from a, you know, you have a mom who does drugs. So how do you, how do you get away from it? Even going home? Because definitely the one of the biggest rates is when we have people that want to go visit their family, they go visit their family and they come back and like, I smoked meth, I was in the living room with uncle Louie and he hit a meth pipe and handed it to me and I hit it and realized what I did. And it's just like, it's that normalized. Like, It's like, now you gotta go back to treatment. So Loren Wernette: Right. Jim Boad: we do give second and third and fifth and hundredth chances with people as long as they handle things right. So just because someone relapsed doesn't mean that we won't allow them back in the home, but we do immediately remove them. So you can't actively be using and be in our home period. Loren Wernette: got it. And so now the exit out. So how long are generally people in? You said, you know, three to six months isn't generally enough, but what's the average time people are actually in the home? And then let's get into like, what's your occupancy? How much do you normally have for occupancy? How quick do beds get filled? Jim Boad: So the general, I'm still gonna stick with that three to six months and I know it's an odd number, but it's the best metric that I have because it's just really where they stand. you you have somebody who's there for a week and then you have somebody who's there for three years. like that kind of averages out into there from what all of my metrics tell me. And then, I'm sorry, I forgot the second question. Occupancy. Loren Wernette: occupancy. you have however many beds, what percentage Jim Boad: Yep. Loren Wernette: of those beds are full most of the time. Jim Boad: We stay full almost all the time and full means a couple of different things. We have a list, a waiting list always. Like we get phone calls every day with people trying to get into our homes. So like I said, people are calling us anywhere between two weeks to two months before they get out because certain people, when they're getting out of prison, they have to have 36 to 38 days where they have to register where they're at with the police and with things like that. So they try to start that about 60 days out. And once they register, if like, let's say I said, hey, I can't move you into that house, the process starts again. So Loren Wernette: Hmm. Jim Boad: it's really a big deal that you're able to do that. So we might not have a person in every bed, but we've always got every bed accounted for. So. Loren Wernette: and does accounted for mean paying? Jim Boad: Correct because what we do the majority of the time is We will take we will take deposits on on on the beds. So that way we'll hold them So we just prorated out per whatever day and where they're at. So if it's 45 days out it's just 45 times what our daily rate is and then and then the other thing that we will do is we call them flex beds, so let's say I have a bed that I'm holding for two months for somebody who's coming out of DLC well if all of my other beds are full, I will put somebody in that bed with the caveat that, hey, in 45 days, I'm going to move you to a different house or a different bed. might even be in the same house because we're kind of to the point where every month we lose people and we gain people. So there's always somebody being discharged, whether it's a good discharge or a bad one, because people, Loren Wernette: Mm-hmm. Jim Boad: know, the ultimate goal is to get people into their own place, you know, back to work and, back on their feet. So we, we, within a 30 day period, I will always have a bed open up, but that doesn't mean that I don't already have three people waiting to get into that. Loren Wernette: Got it. And are you pretty typical for most operators in this space where your beds are pretty much full all the time? I guess the underlying question is, what is the demand for this? And is the market currently meeting that demand or is there still a lot of opportunity for people to come in and leverage these dollars to create a good living? Jim Boad: Opportunity is still huge. The demand is insane. We have such a drug epidemic still I mean we still have 70 plus thousand people a year dying from overdoses I mean like the demand is insane and The the the amount of homes it's scarce if you just google in your area inpatient drug clinics You're probably gonna find 15 to 20 then try to find sober living homes You're gonna find probably three to five and there's there's no way that three to five are keeping up with the 15 to 20 clinics that are in your area. Because they're pumping out dozens of people a month where they can probably take in a few people a month. so it's definitely not met. And the biggest problem with this is the majority of people that have started in this business didn't start in this business as a business person. They started in this business because addiction has touched them somewhere in their life. So I know a lot of people that their first home was their own home. They were in drug addiction and in active treatment. They opened up their home as a first house and then were able to go rent or buy another one. But they don't know how to structure a business. don't know how to, because at the end of the day, you're helping people. But if you don't run this like a true business with a true bottom line, you'll end up not helping people because you gotta be in the black, not the red. most people, if you run these right, you will have that. But it takes effort. They don't just give me people. We still market to these inpatient clinics. We hit them up every week and say, hey, I've got three open beds coming up. Hey, I've got this. You know, we talk to the DOC and we let them know, hey, we're open to taking people from further areas. And you constantly keep growing. You only have 10 drug clinics within 10 miles of your home. Go out to 20, go out to 30, go out to 100 and, you know, get people from across the state come into your homes if need be. I feel like everyone has the ability to do it. But I think it's kind of like anything, you know, if you don't have the right models and systems, you're going to bottleneck really quick. Loren Wernette: So not the passive investing that we all think about when we think real estate right off the bat. Jim Boad: Well, I think that it depends on what end of this you want to be on. If you want to be the investor, there's great passive income in this because there's always an operator out there that doesn't have the same resources. So one of the big things I try to do is connect operators with investors because I have a guy who has 24 active sober living homes, doesn't own a single one of them. All of them are rented. And that's what he wants. doesn't want for him. It's a big responsibility to own homes and he doesn't want to deal with taxes. He doesn't want to deal with any of the things that come with being an owner, but he just actively runs 24 sober living homes. That's a lot of homes and especially to not own one of them. So, you know, it, it, what, and once, once an investor gets in with a good operator, especially if they're running the homes, right. Like I've got another lady I helped to the beginning of last year. She's on her fourth home with the same investor. He's actively finding homes just to buy so she can open up more of these. So it can still be a passive as long as you just want to be the investor and not the operator. But if you want to be the operator, one of these homes cash flow wise can replace anywhere between three and five regular rentals. Because I know for me, when I was big balling cash flowing on a rental property, I was making four or $500 a month in cash flow that I actually Loren Wernette: Yeah. Jim Boad: made. I've got homes that bring me in ten and twelve thousand dollars a month in top line cash flow and then I just got to pay my $3,000 mortgage and my $2,000 in utilities and everything else that I pay. So, I mean I can make four or five grand on a house, on one house. Loren Wernette: Got it. And I think that's where I was getting to next was what were the financials? You're picking up a house for three fifty, so you probably have a mortgage for around. And so if you're bringing in give or take, right? Jim Boad: Yeah. Loren Wernette: So then your expenses are a couple of grand additionally on top of that. So your net revenue is probably close to like six to $7,000 a house. Jim Boad: On average, it's pretty close to that because like my area I get 850 a bed I put two beds per room so I get $1,700 per room, Loren Wernette: Sure. Jim Boad: you know, so my five-bedroom homes I'm bringing in $8,500 a month off that property and You know, so it's and then you know, I have bigger houses. I have 10 bedroom houses, too So it's I've got a little small apartment complex that I have like 20 some people in So it's it's really you know, and it's really relative If you're in places in California, you can get up to $1,500 a bed, but you're buying an $800,000 home. So it is all relative, but still, I mean, you're getting, even you're getting $1,000 a bed in an area like that, you're still cash flowing more than you would if you bought that home and rented it as a door as opposed to beds. So. Loren Wernette: Right. So let's say that somebody says, yeah, this is great. I've been buying long-term rentals or whatever. I want to get into it. Where would they get started to go down the path? Do they need to find the house first? Do they need to find the connections with the Department of Corrections or the new treatment facilities? What's the first step? Jim Boad: Connections is a hundred percent going to be your first steps because you know the cut the two things you really want to make sure is one that the demands in your area and it normally is and then two you really do want to do some some check in with your city and make sure that before you pop your doors open you've You've educated them because normally that's the biggest issue I had a guy in Texas who has a fourplex and he just he didn't talk to the city like I told him to he just popped it up and did it and the neighbors called and complained because it's what Neighbors do and and the city came out and told him all you got to shut this down I sent him a bunch of stuff and a bunch of the different case laws He ended up presenting that to him and about two weeks later. He got a letter saying we're very sorry for the confusion Good luck on your home So it's but it's a lot easier to do that on the front end before you're disturbing your tenants and before you're telling people we might all have to move Loren Wernette: What is it about the operation that the neighbors identified that said something's going on here? It's just people coming and going or? Jim Boad: It's that, mean, you know, figured, I'll just use my five bedroom home. When you recognize that 10 people live in that house, you do see it. And I mean, there are things too, like I do designated smoking areas and things like that, because you'd be shocked that the majority of the people that live in my home smoke. So it's, you know, you have six guys sitting on a back patio smoking cigarettes, people notice it and see it. And then they ask questions, what do you got going on over here? we're a sober living home. And then people say they have a flop house and they have this and they're going to bring all the bad elements to the neighborhood and not in my backyard. So it happens. But once you educate them and especially if you actually run quality homes, because they're not all equal, there are really bad homes where people are fighting out in the streets at 2 a.m. But that's bad operations. That's not a bad, that's not that it's a bad business model. It's just you've got a bad operator. Same with a regular residential renter. You put some 25 year olds in there next to the college and they're having keggers every night, they're bad neighbors. So it doesn't mean Loren Wernette: Yeah. Jim Boad: that because it's a rental property that it's a bad thing to have in your neighborhood. It just means you got bad neighbors right now. Loren Wernette: Got it. Are there any like specific area or neighborhood types that you're just like, yeah, probably don't put a home. Jim Boad: I stay away from HOAs. They're a battle you just don't want. You can do it. You absolutely can because the reality is is if they don't let you, they're discriminating because you're invoking ADA. But why go uphill? Plus the other big thing you really want to do is you do want to do what I've always done with my rental properties anyway, was I want to keep them centralized around everything. I don't want them to be rural. Because if you're too rural, the majority of your people don't have cars and they do have obligations. They have to go to AA meetings, they have to go back to their inpatient drug clinic and do drug tests there sometimes and go to classes and get prescriptions. So you wanna keep around bus lines, you wanna keep as around services as you can. All of my homes are almost walking distance to everything. So that is really important. Loren Wernette: So a five bedroom home, less than a block from the bus station with a get grocery store within three blocks in relatively urban area, not in an HOA. Jim Boad: Urban for where you're at, like I said, I don't actually live in Seattle. My town has 11,000 people in it. So, you know, it's a smaller town. Yep. Loren Wernette: Urban or suburban, yeah. Jim Boad: Yeah. So it's a smaller town and, you know, I stay full and run this many homes. They're all in my little town. So it's definitely doable. I know it sounds like a lot of criteria, but you can stretch those as well. Like when the needs there, if it's further out and that's all you can give, then you can be further out. It's just in an ideal world, that's what you would want. Loren Wernette: I feel like the biggest challenge would be just finding the right home in the right area. Well, operationally would be there's some challenge too. I think there'd be a steep. My take would be there would be a very steep learning curve from an operational standpoint. But the first challenge is finding a home because you look at the market like it's condensed tons of three twos on the market, which you said are kind of marginal, but you can start getting into the four bedroom, five bedroom houses. You're talking about nicer areas and bigger houses. They're going to be bigger dollar amounts. And a lot of those are going to be in a choice. Jim Boad: Quite possibly. And like I said, you don't have to, you can't, can do them in an HOA. It's just, I always prefer the path of least resistance. And operationally, I think like anything, if you don't have the right help, yes, there will be a steep learning curve if you just jump into this and try to do it. And that's absolutely why I created a program that helps people because I can almost alleviate that learning curve for people. Most of my people are up in 30 to 60 days full and running. And when you have, a pre-done contract and you know all of the rules and you know all of the things to look for and you know who to call and what to say. and like, you know, just like doing your interview process when you're figuring out an interview process, what questions do I ask somebody that, that lets me know that they're not going to be a good fit for my home. So I think like anything, if you're just trying to figure it all out alone, yes, it's, it's, there's a lot there. It's going to take you 12 to 18 months to get it figured out. But if you get good help, you can do it in 60, you know, 60, 90 days. Loren Wernette: Got it. So. Yeah, I think the point is that you start and take action, right? You Jim Boad: Yes. Loren Wernette: know, I'm a I'm a big action taker. And the reason why I've gone from no rental properties in twenty one to, you know, having a lending business by twenty six in twenty six. So what is the very first action? And, you know, I think the thing that people get wrong about action is it's this huge thing, right? I have to buy a house. What is the very first action someone should take? in order to start going down this path. Jim Boad: The very first thing I tell everyone to do is they need to get on Google and go inpatient drug clinics near me and they need to start calling. And it's the easiest and most overlooked and most challenging thing for most people to do because if you're not in sales, you don't like picking up that phone and smiling and dialing, but it tells you everything you need to know. And that is your marketing. That is your lead generation because That's where your people are gonna come from. Everybody wants to get stuck on, I'm gonna put this beautiful website up and I'm gonna do all these flyers. None of that matters. I'm gonna tell you right now, I haven't gotten a single person from a flyer or my website yet. Now you need a website because it gives authority and everybody who sends you these leads, what's your website? But like you need a GoDaddyAero one page website with a lead capture form on it's really all you need that says what you do. You need to call these inpatient drug clinics and... Make sure you're getting a hold of the people that are in charge of housing and see what their need is. Because it also helps you dictate, do I want to open a men's house or a women's house? maybe, hey, we have no need for this at all, which you won't hear. I haven't heard it yet anywhere in the country that I've helped people do this, that, we're good. We got 37 sober living homes in our area and we've only got two clinics in our area. There's an abundance of stuff to help you get off of drugs. There's just not abundance to help you stay off of drugs. Loren Wernette: Got it. Is the are those clinics general? Is that their general premise on your sober living is that there's a big need or are they like sober living homes? Jim Boad: No, they're normally very excited to talk to you. Like, Loren Wernette: Okay. Jim Boad: great, I'll get you a hold of Susan. She's the one in charge of this. But the biggest thing that people don't take into account is they're excited, but these people are overworked and underpaid. So they're not gonna be diligent about calling you back. They're not gonna be, they're doing so much and their caseloads are huge. You have to stay on them. And that's where I think a lot of people fall off. They call three or four clinics and either no one talks to them or Everyone's excited, but no one calls me back. And that's where pop buys, I mean, you know, just we were Ryan Bufini people back when we were realtors. So like, I don't have a problem with the pop buying coffee cards. I will ethically bribe everybody I can. Like, do you like Starbucks? Loren Wernette: Yeah Jim Boad: So, you know, gotta work it. you know, that's where I think a lot of people just, they just think I'm gonna call one time and they're gonna send me 20 people. No, you've gotta earn it. You've gotta show them you're a good operator. Because they care too, they don't want to put people right back into a crappy Loren Wernette: Right. Jim Boad: house where they're gonna get back on drugs. Loren Wernette: So so let's let's go take that step back. So I'm a new operator, meaning I don't have a house yet, but I'm calling these people say, hey, I'm thinking about starting a sober living home. Who do I talk to about this? You get to the housing person. What do you say that to build that confidence? Because they're going to say, OK, well, how many homes you have? You don't have any yet. I'm thinking about starting one, right? And so you've got this chicken and egg thing. Jim Boad: Well, I never promote people to lie. But what I do promote you to do is utilize the fact that you want to start a home in the area and you are starting a new home in this area. You're not telling them you have one. So I think the framing does matter. Like I said, you're getting into some manics with some of it. But like one of the things I definitely let people do is I let people lean into my experience when I'm working with them as well. That, know, I'm starting up a new home in the Medford area here. and what are you guys looking for? great, when are you gonna be ready? Well, we're about a month out before we're gonna be taking people, because you can get yourself into a rental or whatever it is within that timeframe if you need to. And even if you don't, you just don't accept anybody. But you can have a waiting list before you start. If you're calling your kind of tire kick, who wants to talk to a tire kicker? It's just like, if I'm calling you as a lender, well, I'm thinking of one day buying a house, but I want you to show me all my options and. You know, maybe in the next couple of years, I might think about it like, hey, I want to buy a house. Oh, I'm not ready because I didn't tell you I have a 500 FICO score and I have a negative bank account. But you know, but if I tell you I'm active and I'm hungry to buy a house, you're gonna at least want to talk to me. So those are the things I tell people I never want you to lie. I don't want you to call and say I've got nine of them and I've done this for 10 years. but but be confident in what you're doing and saying because that's what instills confidence in them. Loren Wernette: Got it. Jim Boad: And also the last caveat on that is get that energy up. I watch people calling, go, I'm calling because I'm sober living at home and I'm gonna want people to come. And they're like, what did you just say to me? They gotta wanna talk to you. Hey, I'm Jim. Yeah, it's basic sales. Loren Wernette: Right. Typical sales. BSA sales, sales, basic sales. So here's a question for you then. So if I'm a rental owner, like I've got long term rentals, I don't want to do sober living, like I don't want to be the operator. How do I find operators in my area that maybe will take my five bedroom house that I'm renting for 1500 a month? And I've had turnover and all these things. How do I find them? and know if they're good operators. Jim Boad: Yeah, I mean that is a great question. mean, you know, one of the best ways is there's still, there's a lot of groups out there for this type of stuff. So social media is a really good place to dig in for that. Like find sober living groups or group home groups and start posting in there that, hey, you know, I've got a five bedroom home coming up. Or you find connectors like me who work with people and train them. And then it's just like that. It's interviewing them because they're getting ready to open a business. So how many sober living homes have you done? Well, I haven't done any. Well, who's helping you through this initial process? Well, nobody is. I'm just going to figure it all out. is that somebody you want to take a chance on maybe? But hey, I've got two sober living homes going and... or I've got one going or I've got none going, but I've got this coaching program that's showing me models and systems and how to actually run one of these properly. So, and then it's just protecting yourself with enough, you know, enough deposits and enough things upfront that, if it doesn't work out for them in those first couple of months that no harm, no foul, you move them on. Cause it's not like they want to squat on it like a regular tenant. You know, they already live in their own home. If they fail at this business, they're most likely going to just slink away. Not like, haha, I've got the house and I'm gonna throw three people in here. Loren Wernette: Alright. Jim Boad: But the nice things as the landlord are, know, when somebody, when a proper operator comes into these homes, they're not calling you with all the trinkety little things. Hey, my drains clogged. You deal with, you have to deal with all that as the operator. You know, I would only call my landlord if, hey, the AC went out. Like, that's just, that shouldn't be on me. Yeah, Loren Wernette: Roof is leaking, yeah. Jim Boad: your roof is bad, you know. but not, a window got broken, I'm gonna replace the window. Like you just get a new window. Like I wouldn't be calling, I wouldn't even call you and tell you, you would just get a new window and that would be what happened. Unless we talked about it and you wanted to know those things. like, know, in the four plus years I've been doing this, nobody's punched holes in all my walls because it's a well-run business. There's someone there five plus days a week checking. So I mean, they never go more than 24 to 48 hours. without eyes on that property. There's a hole in your wall. You're fixing this, you know, or you're paying to have this fixed. So like, you know, I got a little off track on what your question was, but like, it's, it's, it's again, Loren Wernette: No, you're fine. Jim Boad: it's, just interviewing whoever's trying to rent that home from you. And they need to have good action steps and good answers to you. Loren Wernette: So let's turn it the other side. you're an operator trying to find a tip, you know, cause it sounds like a lot of this is rent. You're renting the property versus just straight buying it in a lot of cases, right? Or is it kind of 50, 50 makes you. So let's, Jim Boad: It's a mixed bag. It really depends. Smaller... go ahead. Loren Wernette: let's stay on the renting for now. So let's say I'm an operator looking for a renter. And so you find somebody that has a house that's desirable for you, but they're typical looking for a long-term renter. Do you have like, This is a lease agreement that will work for me. Let me give it to you and it's got the things that I need. It's gonna protect you better and protect me because a typical lease agreement is gonna say no subleasing, which just kind of falls into that. And there'll be some other things that probably aren't friendly to this type of model. Jim Boad: We do a master lease. So it's what a lot of nonprofits and things like that use that rent homes from investors. Because when I was a landlord and I was just getting into this, I did some master leasing as well. And it worked out really well. I just knew that I could cashflow a lot more running than myself with my own team. Because one of my houses covers all of my expenses. And then my next 10 houses are all just gravy for me. So. It's utilizing that proper master lease and it's not quite a triple net, but it's kind of along those lines that like I'm taking care of everything, you know? So. Loren Wernette: except for the big CapEx stuff. Jim Boad: Yeah, yeah, but like but but again, I mean I'm not looking for you to do repairs I'm not looking for you to you know to come snake drains in the middle of the night. I'm Loren Wernette: Yeah. Jim Boad: gonna get those calls as the operator and Loren Wernette: But the point is you're trying to make it easy for the for the landlord because you want Jim Boad: Yes. Loren Wernette: them to have very few reasons to say no. Jim Boad: You want to let them know that I'm gonna be your best tenant you've ever had because you're never gonna have these issues. If I have one person in this house, I'm gonna pay you. If I have 10 people in this house, I'm gonna pay you. And just once they understand that and you show them that, you become their best tenant because you're paying them more, you pay a premium for it. operators, mean, investors have to understand that like, okay, cool, you're making six grand a month, I want half of it. No, because I'm dealing with everything but like I'm gonna pay you Loren Wernette: Right. Jim Boad: above market rent instead of you making $300 a month in cash flow I can give you six or eight like so, you know just depending on the deal in the house and area and you know, There's a lot of things but they definitely can get a higher return with a lot less headache because now they're not they're also now not paying a property manager So, you know, whatever whatever your percentage you're paying your property manager is and you're never getting calls from me. So Loren Wernette: Right. There's a saying that's like, don't count the money in someone else's pocket. Right. And I think that falls Jim Boad: Absolutely. Loren Wernette: into that. Like if you're making more money as the landlord and they're making really good money, like everybody's happy, but you start looking at how much money the operator is making, you're going to make yourself upset. And then it just poisons the relationship. Jim Boad: Absolutely. It does it because if you want to make that money, just become an operator. And the majority of people I work with are one they've never owned a rental property or they've got one or two. Because if you're a smaller, you know, if you're going to only run two or three of these, you can run them very easily and still keep your your your W two job. And I mean, really, three of these homes will put you into a six figure income. So like you get three of these up and running, you're leaving your W2 job most of the time to spend 15 hours a week running these homes and making more money than you were making. So, but those are kind of like the ideal people I work with. But like I said, they're all over the board. If you want to be the guy that has somebody that you rent 24 homes to and you get all of that wealth accumulation over the years as they operate out of your homes, heck yeah, that's a win-win too. Loren Wernette: Right. Awesome. Awesome. So I know you have a coaching program and a book. So why don't you tell people about that a little bit, where they can find it, how they can connect with you. If any of this kind of spoke to them. They want to learn more. Jim Boad: Absolutely. I'm on all of the socials and Group Home Accelerator is the name of my coaching program. And then just my name, JimBode.com is my website. So super simple. And then my book is Group Home Accelerator. It's on Amazon. really the way I my program is I run it through school. So anybody who's not familiar with school, it was a platform basically built to run programs and to teach people out of. And it's just an awesome community of action takers and people that are actively opening and scaling up group homes. So it's, it's really a fun, easy environment to connect with people. And it doesn't take you off track, like getting on Facebook or something like that. get on Facebook to Loren Wernette: Yeah. Jim Boad: do a training. The next thing I know I'm looking at widgets and visits, I'm, I've scheduled three appointments with a company in India to tell me about new AI's tools. So, so this Loren Wernette: Right? Jim Boad: just keeps it very strict. There's no. There's no pop ups or anything weird when you get into the school group. Loren Wernette: Awesome, awesome. It's been a really interesting conversation. I certainly learned a lot about this. I didn't know really much about it at all. It's very interesting. Is there anything that we didn't touch on or anything you want to leave the audience with kind of before we wrap? Jim Boad: You know, the biggest things you kind of hit on, it's about taking that imperfect action. If this is something you want to do, you need to just jump. Just get in there and mess some stuff up because that's how we all learn the best. And then the other thing is, if you only want to do this because you want a 10 X your income, just be an investor and find a great operator because this will not be a good business for you. If you don't care about the people. And you don't have to to be a good investor. But if you want to be a good operator, you got to care about the people. So that's the two things I'd leave people with. Loren Wernette: I think those are two great things to lead with because it'd be very easy to be tempted by the money and miss the other piece and make yourself, you know, I'm a very strong proponent of looking to be looking at where you want to be in 10 years and working towards that today versus starting down something just because of money now and then finding yourself miserable in 10 years. And so understanding what drives you and how you can adjust your life to make sure you're hitting that 10 year goal is incredibly important to success. Jim Boad: Couldn't agree more. Loren Wernette: Jim it's been an honor. Thank you for joining being on the podcast with us and to everyone else Thank you for your time and we will talk to you again next week