How Much Money Can Be Made Starting A Group Home
Is there any money to be made with group homes, transitional homes, sober homes, halfway houses or MHMR homes? Don’t let them fool you!
Let’s get into the high-level details — at a 30,000-foot level — of the financials behind running group homes (or any of the other names they can potentially go by)
Businesses come in all shapes and sizes. Whether it is a developer of land who purchases large tracts of land, entitles it and sells it off piece by piece; or an owner of a Thai restaurant who buys 1000 eggrolls and then sells them 1 at a time or whether it is a local bar that purchases beer by the kegs and then sells them by the individual glass — they all have one thing in common. All these business are buying in bulk and selling in smaller pieces. Renting out an apartment is the same thing. And the more apartment units you have in a building, the more rent you will take in.
The group home, assisted living, halfway house or transitional home business is the exact same from a generic standpoint. Let’s take a normal property, for example a 4 bed, 2 bath home. In a typical Texas neighborhood, this property will rent for anywhere from $1000 — $1350 per month. Unfortunately, most properties of this nature will cost between $115,000 — $155,000. Without a substantial down payment, this property will eventually be a money loser on a monthly basis before any potential appreciation or capital gain (we will get into how to evaluate properties in future articles). However, let’s assume that you decide to start up an assisted living company, group home company or something of that nature and rent out the property by the room? What if the rent you collect is $600 per month? BINGO — Hopefully you are getting the point. The property now brings in over $2400 per month.
This type of landlording is not new. In fact, many refer to it as the second oldest profession in the world! Now, take a minute and think about some of the world’s greatest fortunes that initially started from this simple concept. Let me give you a hint, you probably have stayed at one of their hotels…and you may have seen one of their great grand-daughters acting like they worked in the world’s oldest profession. Conrad Hilton started out with a small rooming house in San Antonio, New Mexico and perfected his craft from there and the family has since built it into one of the largest hotel chains in the world (with numerous spin-offs included food companies and others).
But Hilton is just one example of how a small boarding home, rooming home or transitional house can give you the seed money you need to continue scaling up. There are literally tens of thousands of group homes throughout the country…and they wouldn’t be around if they weren’t profitable. And then there are the larger players…companies that are owned by private equity. Do you think Steven Schwarzmen and Blackstone Group would have purchased Southern Cross, the largest care-home provider in Europe, of this was not a profitable industry? Remember, Private Equity’s job is to MAKE MONEY.
Although we are only touching on the high-level financial aspects of care homes, nursing homes, group homes and MHMR homes; it should be fairly clear and obvious that even the owner of a small group home with 6 residents can make a lot of money with minimal hours. I will let you do the math on 7 clients at $600 per month and a small $950 per month rent or mortgage payment.
Now you must also remember that a “group home” is simply a generic name. Within the “group home” industry are literally hundreds of difference “sub-niches”. Also, consider that “group homes” are simply a sub-niche of the real estate sector. That said, each “sub-niche” will have its different problems and solutions as well as differing amounts of work required to make the operation run. Student “group-home” living is going to be relatively passive, as will be elderly group home housing in the 50–65 age range; while housing violent ex-offenders in a group home would potentially be more lucrative but would require more staff and therefore management time. These are all things to take into consideration when determining how much money can be made operating a group home!
If you are looking for additional information on how to start a group home, halfway home, transitional living home, sober home, foster home, ICF/MR home, DADS Home or other type of care home for people with disabilities; check out our free course on starting your very own income-generating group home by going to www.grouphomeriches.com and clicking on the free wealth building course.