Turn-key Halfway house rental?

[Jon Peterson]

Hey all-

I am looking at purchasing a SFH as a rental property. The current owner leases the property to a corrections company that works with early-release criminals and helps integrates them back into society. It is basically a halfway house. Monthly rent is roughly 1.2%, and all tenant management is handled via the corrections company. Management company also pays the rent each month. Looks like there would be some decent cash flow, and at a relatively passive basis. The house is also in an up-and-coming neighborhood, and is likely priced too low simply because of the nature of the house and due to the fact that its not in great shape cosmetically.

Does anyone have any experience with a deal like this? Any thoughts/suggestions/questions? Seems like an intriguing idea to me...any help is greatly appreciated!!

[Jon Peterson]

Originally posted by @Michael Workman:

Hey @Jon Peterson any more details on the outcome of this?

 Hey Michael-

I did pull the trigger on the deal, and so far, I am quite happy with the deal. I ended up getting it at just under 150k. There is a clause in the lease that increases the rent every year on Jan1, so now we are up to 1850$ in rent. Rent is direct deposit through their company. The area is a solid A neighborhood with lots of development happening near-by, and since the local market has gone up and since I bought right, I could turn around and sell if I wanted to and do pretty well. 

As for the day-to-day running of the house, it is almost 100% hands off for my sake. The Corrections company handles everything. At most, there are 3 occupants in the house, though there are many months when there are zero, and more often there are only 1 or 2. The Corrections company takes care of all wear-and-tear and maintenance. The average occupant is there less than a month, and they treat it sort of like a hotel...respectful, with very little use to many of the spaces of the home. There have been 6 month spans where I don't hear anything at all and will only go over once a month just to check on the place. 

The one caveat I will say that I have learned is that you need to check in on the place more-so than with a regular rental. In a regular rental, a tenant will tell you very quickly if something needs repair or immediate attention. At this place, the occupants keep to themselves, or the place can be vacant, so latent problems could snowball into worse things if you just "set it and forget it" and don't check in on the place.

Feel free to reach out if you have any more questions on the place.

Thanks!