Your Circle Of Competence and Why Sober Homes Are So Lucrative
If you read this blog periodically, you know that we are big believers in the quote, “there are riches in the niches.” Where this gets a little more fun is when you begin to “sub-niche.” What I mean by this is picking out an industry that you want to get into, where you know there is money being made, and something that (hopefully) you understand. Warren Buffett refers to this as your circle of competence. Periodically, you need to expand your circle of competence or as he likes to say “venture out to the perimeter.” Get ready to learn a crap ton about sober homes.
My Real Estate Journey
When I first got started after reading Robert Kiyosaki’s “Rich Dad Poor Dad” I said to myself, I want to do that! I wanted to be in the real estate game, and so I went out and bought a condo for $58,000. Although I overpaid to the tune of probably $15,000 (which I didn’t know at the time) it was an invaluable lesson. And thus my journey began.
Little by little I began expanding my circle of competence within the real estate industry. On a side note, this first deal cost me about $2,200 to get into – and the reason I bring that up is that ANYBODY in the great United States Of America can come up with $2,200. Anybody. Hell, even a Cartonero in Argentina can come up with $2,200. Look that word up if you don’t know it.
The Circle of Competence
When the journey began it was real estate and primarily single family properties, and little by little I started learning more. My second deal was an owner finance transaction where an older lady acted as the bank and, in real estate parlance, “carried the paper” for me. It took me a long while to learn how valuable and lucrative that particular niche is….and actually is really the main niche that Kiyosaki probably played in when he was starting his real estate journey. So that is another example of a “sub-niche” within the real estate industry and how you can make money within the real estate industry.
Sober Homes and How to Make Money With Them
So after accumulating some real estate, I began being approached by a wide variety of people that wanted to lease my properties. When screening them (remember, you better do that if you don’t want to lose your shirt in the real estate game) I would come across people that wanted to rent my homes and use them as group homes.
Some of these operators were going to run them as personal care homes for the elderly, some were going to run them as sober homes for recovering alcoholics, some were going to run these group homes for folks with disabilities and other operators were going to run these group homes for folks that were mentally and physically impaired.
This is what I mean by sub-niche. Essentially, there are hundreds of little niches within the group home space, and all of these entrepreneurs were building up little cash-cow businesses for $500 – $1,500 out of pocket!
Expand Thy Circle
I began expanding my circle of competence by interviewing these people who had applied to rent my properties and asked them questions about the day-to-day operations of these particular group homes. I vividly remember one man that had 8 sober homes. His particular niche was recovering alcoholics. He referred to these homes as “recovery homes” and within his particular sober home or recovery home niche, his sub-niche in that sector was affordable recovery homes.
What he had found in the sober home business was that there were hundreds of high-end sober homes. Places like Passages Malibu, Riviera Recovery, Cliffside Malibu, Alo House Recovery Centers and much more that were making a fortune each and every month by charging customers anywhere from $5,000 – $50,000 per month.
However, most of these homes were set up with multiple partners as many of the homes were based in multi-million real estate parcels. His story was one of resourcefulness. When he began, he did not have immediate access to big-money partners, so he decided to sub-niche within the sober home business and made money in the sober home industry by focusing on the affordable side of things.
The Riches in The Sober Home Business
Doing this allowed him to retain 100% ownership of his business as he did not have any partners in his sober home and recovery home business. His business model was to rent properties (and eventually purchase them) in middle-class neighborhoods and essentially just rent the rooms out. He figured there were only so many “trust-fund” kids whose parents would shell out $5,000 – $50,000 per month and ventured that there were many more “regular folks” that had a limited budget but could afford $550 – $1,500 per month for a sober home or recovery home.
His guess had apparently proved correct as his beds stayed full nearly year round and he cash-flowed each property to the tune of roughly $2,000 – $2,500 per month all with managers in place. His managers would hold nightly AA meetings or gather everybody up and take them to the local AA chapter for meetings. No licensing was needed due to the Fair Housing Act which essentially protects this class of people. We explain how this works in the membership.
Additionally, he kept his overhead super low as he never provided food for his clients! The last I heard, he had transitioned from renting his sober homes to purchasing them where he was able to “double-dip” and also gain the eventual appreciation and debt paydown of the property. This is what your circle of competence and expanding your circle of competence is all about!
Is a Sober House Worth It?
Now for the next question….Do you think this industry is a worthwhile industry for you to look into? Do you think it warrants expanding your “circle of competence” like Warren Buffet and his partner Charlie Munger suggest? I would venture to say YES! Why? Here are a few reasons:
1. There is an unlimited demand for sober homes and recovery homes throughout the Unites States. Just take a look at the number of people recovering from addiction.
2. There is a huge opportunity for you to help people with your sober home business and you can learn how
3. You can gain the appreciation and the value of the real estate through debt paydown and gain on sale if you decide to buy your homes
4. Warren Buffet is in the group home and personal care home business! Not sober homes per se, but he is in the Supportive Living business where he provides meals, housekeeping and medication to low-income residents! Click here to even read the link! So if Warren Buffet is in this business, wouldn’t you agree that if you can get started for a few thousand dollars that you should at least look into how to start your group home or sober home as well?
5. Thousands of entrepreneurs like yourself are making a comfortable living by owning sober homes and group homes in their community. You don’t have to be in this business to get exceedingly wealthy, you can simply get a few homes up and going and live a very comfortable six-figure lifestyle.
6. Do you have visions of grandeur and are you interested in building a hundred million dollar fortune?
You can do that too! Just take a look at these guys, D&S Residential that services nearly 2000 people throughout Tennessee, Texas and Kentucky! The last I heard, the entrepreneur behind this business had sold it off for nearly $90,000,000! Yes, his group home business was sold for almost one hundred million dollars. Want to know something even more crazy? This is small time compared to many of the other “big-boys” in the industry….There are billion dollar group home companies throughout the world. So whether your goal is simply a comfortable $100,000 per year lifestyle or you are looking to get “private airplane” rich – the group home business can provide you with that opportunity!
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 clicking here or going to www.grouphomeriches.com and entering your email below.
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