Summary: Supported living companies secure housing for their disabled clients, allowing them to live in the community independently. As a landlord, renting your properties to supported living can be quite lucrative and fulfilling. In this post, we discuss the supported living program and share our experiences working with supported living companies in the Seattle and Spokane markets.
The two duplexes that Kenji and I rent to supported living tenants have some of the highest cash-on-cash return of any of our properties. Plus, we get the value of knowing we are providing housing to people with disabilities, helping them live and be integrated into a community.
So what is supported living? And should you consider getting your investment properties into the program?
Read on to find out!
What is Supported Living?
Supported living communities are part of a nation-wide movement to transition people with disabilities out of institutions into independent community living with ongoing provided support.
Starting in the 1950s as part of the civil rights movement and taking root in the late 1970s, the idea behind supported living was to move people, and especially those with developmental disabilities, out of their institutions and back into their home communities, where they could lead more normalized lives. In 1978, the US government began setting aside funds for comprehensive services of independent supported living.
What Does it Look Like in Practice?
Supported living companies receive funding from the state. These companies, in turn, contract out with property owners to lease units for their clients. The clients, who have a range of mental and physical disabilities, then get to access available apartments, electing where and with whom they live. The supported living company provides care-takers, often 24 hours a day, in the apartment.
In our experience, supported living companies rent units for their clients and pay by the room. In the Seattle area, we’ve seen rates of $700-800 a room, and in Spokane, rates range from $350-400 per room per month. In addition, clients also cover their portion of utilities, landscaping, and upkeep of the property.
For example, one of our duplexes in Spokane is a 3 bed/2 bath on each side. Previously, we had been renting it for $950 a side and paying approximately $200 per month in utilities. When we transitioned the property to supported living, our rents became $1200 a side ($300 per bedroom) with no property management costs, utility costs, or vacancy. We’ll discuss some of these upsides below.
When there are maintenance issues, our supported living company sends their handyman to assess it first. If they find the issue was caused by one of their tenants, then they take care of it and work out payment with the tenant. If it is our responsibility to fix the issue, they’ll contact us, and we’ll send out our handyman, plumber, etc. to take care of it, in which case we’ll cover the expenses.
Could I Rent My Property to Supported Living?
What each supported living company is looking for may differ, so it’s best to check with the company you’re planning on contracting with to ensure you understand their requirements.
In our case, the companies we’ve spoken to have preferred single-story properties with more than one bathroom (if it’s more than 2 bedrooms). They have not required properties to be ADA compliant, as most of their clients are intellectually disabled, not wheel-chair bound. They also prefer properties that are somewhat close to amenities or at least public transit.
The maximum number of bedrooms per unit that our supported living companies will allow is 4 bedrooms. From a financial sense as an owner, units with 4 bedrooms have higher returns.
Supported living companies will want to walk your property and inspect it prior to accepting it into the program. The idea is that once it’s in the program, it will be there long term for the clients.
You do not need to have any special licenses to rent your property to supported living. You also do not need to provide any special care or equipment, though it could make your property more appealing to renters, so your supported living company may make certain requests. Though whether specific requests are made seems to depend entirely on the supported living company itself.
What Are the Upsides of Putting My Property Into Supported Living?
There are two real upsides of putting your property into supported living: 1.) financial 2.) emotional.
The financial benefits come a few different ways.
First, your property may command a higher price than what you can get from a long term renter because it’s rented by the room. This is especially true when you have three and four bedroom units, like you see above.
Second, you have much lower expenses. Your renters cover utilities and landscaping, even in a multi-family situation. This may be different than what your market allows in a normal long-term rental situation. You also have lower expenses because you act as the property manager. While this does represent a little more work on your part, if you have a handyman on staff, it’s doable especially since your returns are significantly more.
Finally, there is no vacancy. This is a huge one!!! After your supported living company contracts with you to lease your property, you start getting paid, even if there are no renters in place. It’s the supported living company’s job to then take clients to see different properties and to help them find a place that they want to live (and roommates with whom they want to live). If a client ever moves out, the supported living company also takes over payment of the room until another renter moves in.
The other upside of renting to a supported living company is knowing that you are providing a comfortable, quality home for people who then get to live in the community. This can be fulfilling especially if you take pride in having nice quality rentals.
What Are the Downsides?
The downsides of supported living may be specific to your company–so we can only speak to our experience here. That being said, we’ve discovered several downsides over the last couple of years.
One is unreliability. We’ve had difficulty getting a hold of our supported living companies on several occasions. We’ve also had situations where a company agreed to rent our place, but then didn’t reply to emails for several months, and then showed back up and started renting from that date forward (meaning we had three months of unpaid vacancy). We’ve also heard of people buying properties and building properties for supported living specifically and then finding out that they did not want to rent that property in the end.
All of this is to say: you must have a backup plan. We never suggest buying a property where the numbers will only work with supported living. They must work for long-term renters as well.
Another downside is the number of problems we’ve had with seemingly renter-caused issues that were then considered to be our responsibility. In one example, a pipe under a sink was broken, presumably from a renter shoving stuff under the sink, but the supported living company stated that the sink was broken before that due to faulty equipment. Our contractor, who ended up repairing it, said the pipe had clearly been sheared off by force. We’ve had several similar instances over the years. And we’ve heard of our friends having these situations occur with different supported living companies as well.
In all cases, we have accepted and paid for these repairs knowing that the value of having supported living in the place outweighs the potential costs. However, it’s worth realizing that things are not always going to be perfect.
Another potential downside is that your market rents may not increase as quickly as the area you are in. We haven’t increased rents on any of our clients yet, but I can foresee this may be a challenge.
How Can I Find Supported Living Providers in My Area?
A Google search should yield some supported living providers in your area. Getting to work with them, though, is another matter.
As you can imagine, the niche of contracting with supported living companies can be fairly lucrative. Therefore, some property owners corner the market and become preferred providers who specialize in providing housing only to supported living.
However, if you live in a metropolis, there are likely several supported living companies in your area, so you may have some luck if you reach out to lots of them. Finally, if you know someone who is already working with a supported living company, it might be a good way to get an introduction and a foot in the door.
Other Considerations
Besides supported living, there are other niche markets that allow you as an owner to rent by the room. Student housing, sober housing, and sex-offender housing all come to mind. Not to mention Section 8 housing. Like supported living, all of these niche-housing clients have their own set of preferences and requirements.
But if you step into renting in these areas, learn the specialized knowledge required, and make the necessary connections and relationships, they can be a great long-term plan to maximize rental income from your rental properties.
Just make sure you have a back-up plan! Remember, your rental’s numbers must work as a long-term rental too.
