Group home rental in Minnesota

[Ajay Sharma]

Planning on renting the current residence home to group home in Minnesota as we move into a new home. Pros/Cons? Thanks.

[James Hamling]

Quote from @Mitch Seiffert:

I have a single-family house in Minneapolis that I've been approached by a couple of parties interested in using it as a group home. Right now we're inquiring with our insurance provider to validate proper coverage, checking with our rental license if it covers uses like this, and working through what a lease would look like.  Any recommendations?  Is it common to charge more? What kind of lease provisions?  What pitfalls are their to watch out for?

I have leased to several of these. 

It's gone through a bit of a fad-craze so I'd say first thing to look out for is vet'ing the credentials of them, there business. Are they a start-up, do they have any operational, how do they do at it, etc etc.. 

Next is regulations, checking with city to assure it's legal to do. 

I don't check with city for them, I put it on them to get me confirmations of licensure and viability for it. So they they have to submit proof to me of there licensure for it, and that they know the licensure for it all. 

Rents, yes 100% I do adjust billing and it is above standard tenancy rates because they are doing it for business revenue. 

I do the lease as a lease with rights to sublet. So we are leasing to that business, with guaranteed signors for that business. 

I often require a different security deposit. Each situation is unique, if they need to make modifications to the property, for example adding wheelchair ramps etc., I look at worst case of what would it cost to roll-back all changes and add that in. 

I also don't do anything less than 3yr lease terms. 

If it's an entity I've worked with before we may jump directly to the 10yr lease but generally I start at 3yr, and at each review we consider term going forward. 10yr is ideal. 

All maintenance is also on them. SO lot's of language on this aspect. The only thing we cover is main components, HVAC, roof, siding etc.. They cover all appliances, flooring, all those use components that can and will experience wear and tear. 

I find it best if you approach it thinking it's more-so a commercial lease done in a residential asset. My leases end up looking a lot more like a NNN lease than a standard tenancy one.

The pitfall potentials are many, and most speak back to neglect in process. Not defining a certain aspect at start, assuming, these are the major pitfall potentials. Assume nothing, detail everything, and I do mean everything. 

And thoroughly vet the company and operators. Your making a bet on them, that they can operate there business well and thus, will be good tenants.