If you remember visiting your grandparents in a senior living facility, you probably have a lot of the same ideas about it that Brandon Schwab did. On a trip to Florida, Brandon accidentally stumbled on a quietly successful part of senior living: boutique senior homes. He shares how he sold off every rental in his portfolio to move into boutique senior living homes, what his numbers are, and how he balances the ethical implications in this business.
After realizing the huge amount of cash flow potential in smaller senior homes, Brandon set about finding the perfect home for his first investment property. He describes how he structured the deal, his average profit, and how he filled the house.
Because he didn’t want to be the owner/operator, Brandon had to partner up with someone. He shares why he chose an RN, what he looked for when hiring one, and how many hours he has an employee on site. He also shares what that includes, and how much he can charge per client.
The sweet spot for senior boutique homes are ranch homes, and he can usually fit 10-16 beds in a good-sized ranch home. By offering a caregiver ratio of 1:5, he does give up some of the profit, but he gives great care. And he still ends up with a profit margin of 38%.
Instead of chasing dollars, he has pivoted and become a purpose-driven business. He shares how experiencing end-of-life care changed the mission of his business, and how it’s shaped his employees.
If this idea intrigues you, Brandon’s actively looking for deals for 5,000+ square foot homes across the country. If you’ve got a deal for him, book a thirty-minute call with him on his website.
Watch and learn:
Listen and learn:
- What kind of home you’re looking for to open a boutique senior living home.
- Who you should partner with so that you’re not the owner/operator.
- The limitations for 2 story homes, and commercial regulations for these homes.
- The ethical considerations that Brandon’s had to think about.
- How Brandon still uses lease options for financing senior homes.
- Brandon breaks down his monthly numbers for us, holding nothing back.
Mentioned in this episode:
Download episode transcript in PDF format here…
Joe: Hey everybody, welcome. This is the Real Estate Investing Mastery podcast. Glad you’re here. Today is going to be a great episode. I have a good friend of mine that I’ve known for years and years. Last time I had him on this podcast was six years ago back in 2014 and he’s still rocking and rolling, still doing a lot of deals and so we’re going to talk about something really unique here on how to use lease options for boutique senior living. And I’m excited about this because Brandon has been doing lease options for a long, long time and he’s changed and tweaked his process to this over the years and now he’s doing something really cool that I don’t know anybody else doing right now and you’re gonna want to pay attention to this podcast. We’re going to be talking about how to use lease options for senior living homes, properties, and this is going to be really exciting.
Joe: But first a couple of announcements. Number one, if you want to learn more about how to do lease options, get my book. It’s free right here. Wholesaling Lease Options. It’s one of the fastest and easiest ways to make money in real estate today. If you’re doing any kind of marketing, you’re a wholesaler, you’re spending a lot of money on marketing, you’re throwing away all these leads that don’t have enough equity, you’re competing against hundreds and hundreds of other wholesalers in your market after the same few sellers out there with a lot of equity and a lot of motivation… What you guys doing with all those leads that you’re throwing away that don’t have any equity where the seller maybe isn’t ready right now to sell their property at 60-70 cents on the dollar? Why not do a lease option?
Joe: So, you can get this book for free just go to WLObook.com. WLObook.com. I spell out step-by-step the same exact strategies that I used to quit my job back in 2009 using this, and by the way, if you want to just, you’ve already read the book or you just want to skip the book and go right to my webinar, I have a webinar where I teach how to do lease options at SLOclass.com. SLO stands for simple lease options. So, if you go to SLOclass.com I’m going to teach you on that webinar three things. Number one, how to get more leads than you can handle for free. I’m gonna teach you number two, I’d give sellers whatever price they want using my simple lease options contract and I’m going to give it to you. I’m gonna actually show you how to get it in the webinar. I’m going to give you, give it to you for free.
Joe: And then the third thing, I’m going to show you how… I’m also going to give you a calculator by the way, to help you calculate your lease option offers. And then the third thing is I’m going to show you how to sell your lease option deals lightning fast without a buyers list. I’m going to show you the fastest, easiest, simplest ways to fill your properties with really well-qualified tenant buyers. Okay, so you can get that right now at SLOclass.com. Cool.
Joe: Alright guys, sure appreciate y’all being here. Some of you right now are watching this live on the YouTube and the Facebook. So if you are, please say hello, comment into Facebook or on YouTube right now and just say hello. Tell us where you are. Tell us where you’re from and do you have a question for Brandon as I bring him on here in a minute, type them in and I will post a question up here and we’ll ask Brandon the question. So, please just say hello. Tell us where you’re from and I’d really appreciate that.
Joe: One more thing. Subscribe to the podcast if you like the show or if you want to be notified every time a new episode comes out and we come out with about two or three episodes a week. Subscribe to the podcast, either in iTunes or now it’s Apple podcasts, Google play, Spotify, Stitcher. We’re all out there. Please subscribe to the podcast and we’d really appreciate it. Okay, so I’m going to bring on Brandon. Hey Brandon, how are you man? Are you there?
Brandon: So, I am here man. How are you?
Joe: Excellent. Thanks for being here. Appreciate it.
Brandon: Thank you for having me.
Joe: We’ve known each other for a long time, right? I think we’ve known each other since 2013, 2012, 2013?
Brandon: Yeah, like 2013 I did our first deal using the lease options back in 2010 I got going and doing it and then I began doing back to back lease options in 2012 through 2019. And from 2010 through 2012 I did about 20 to about 30 deals per year. From 12 to 14 I built a portfolio of about 23 homes. So I’m using all of these and I think our past podcast was just as I was able to kind of exit that particular business, but all of that ideas, I definitely was able to carry over to everything I am up to doing today.
Joe: Yeah, this was 2014, I think is when we did that podcast. You were using a lot of bird dogs. Do you remember that?
Brandon: Yeah, I had over 500 bird dogs. Yeah. So, I got really good at finding the end buyer who would go into these homes. I was typically targeting people that owned their own business and after I got that person down pat, then I would… So, I’d pump it out to our bird dog team and they would go find that house. And it was pretty easy to find that property, particularly when I didn’t have to compete against anybody to go get it because these houses, I was paying the asking price and I was able to get them to, to carry back financing for 10 to 15 years.
Joe: Wow. Nice. And you were able to find buyers. Did you stay in a lot of these properties? Were you staying in the middle?
Brandon: I was. So, the first two years I was comfortable doing the active income and then I was earning $200,000 to $300,000 per year and then by 2012 our boy was at the point where he was entering baseball and I had to find time that I didn’t have the keep on doing all of those deals. So, I began, I was in between deals from 2012 through 2014 I built 23 homes in about two years.
Joe: You built like new construction?
Brandon: No, no, no. I got into deals with the option to buy. I put a person in there and I created passive income of about $5,400 each month by upping it about $200 to $300 per house. So I had 23 of them and I would get the up front cash down payment of $10K to $20,000; plus I was getting cashflow. But I got very good at being able to target homes that a person’s been in a 30 year fixed for 12 to 13 years and then I would get a term of about 10 years was our typical deal. So, I was able to benefit from that principal. The principal pay down for that 10 year period and I got that difference and I would put people in our homes that had the option to buy but their credit each month was only $200 to $300 so that gap in between got bigger and bigger as I was able to get past year 15 cause I was paying down principal by upwards of 80% of every payment.
Joe: So, you would, you would set the option price to be whatever the loan balance was in eight to 10 years?
Brandon: Yeah. And at that time, those people could not put their house up for sale, pay an agent to put it up for sale and to close if they didn’t have to come out with cash out of their pockets. So I was able to give them their asking price, which was the balance owed. But I was very good at getting 10 years plus.
Joe: So, even though they were already so far along in their mortgage, they still didn’t have enough equity to sell it back then.
Brandon: So I would target people that would have 85 that they, as far as equity, they’d have, you know, 10% was kind of the average target market.
Brandon: And then a thing that was great is, is so like, so as you offered earlier, I would find a tenant buyer and then I had a bird dog team of 500 people who would go out to to find that. And a thing that I did to kind of expedite it as I did 12 billboards for six months and I got over 4,000 phone calls on six months. And on the billboard was a bright color billboard background and I think it said “Stop paying rent; rent to own” and a phone number. I had 4,000 phone calls. So it was insane.
Brandon: So I had the buyers coming in over the top. It was crazy. And a thing that was great is I had a team of bird dogs who was out there able to get them. So I had 500 of them and I would pump out, Hey, I’m looking for a three bedroom, two bath home in this particular area code and go. And then these folks would take off and they’re getting $500 to $1,000 per deal, but it was teaching them how to go find these properties under a, with the target buyer. So I kinda did it backwards where I think folks typically find the property first, then they go and try and find a buyer. I was doing it kind of the opposite.
Joe: Yeah. Did you have your real estate license at the time?
Brandon: I did not. I was early on, I went through, I figured out how to flip paper. I did not have our license. I thought I was doing things to creative that I wouldn’t ever be able to pass the board because I was doing things that were the complete opposite of everything. They were kinda teaching agents.
Joe: Yeah. I know some agents right now that are doing this same thing where they find the buyers first and then find a lease option home for them and they do it as an agent with regular listing agreements. They make offers with realtors contracts and stuff like that. Doing really, really well. If I was a realtor, I was doing traditional realtor stuff, I would only be marketing for buyers. I love that strategy. It gets a little tricky, you know, when you’re an investor and you’re finding a buyer first and then you got to go find a property for them.
Joe: That’s kind of technically brokering and I don’t actually encourage that anymore, but it’s, you know, it is an easy way to do deals and if you want to get your license and do that. There’s a lot of opportunity for that and hardly anybody’s doing it. I’ve always taught find the buyers first, right. Because they’re the, they’re the ones with the money. The sellers aren’t the ones with the money. They have equity, but the buyers are our real customers. Would you agree with that?
Joe: Alright. So, you are also packaging lease option deals, weren’t you, and selling them to investors? Talk about that a little bit.
Brandon: Yeah, so towards the end of 2014 so I was packaging up these deals where, and that’s a point that I was teaching a cashflow group for over two years at that point and I had investors who were looking to take their active income and convert into passive income and these are very different packages because they had really good cash returns. So, we were packaging them up five properties to 10 properties. I ended up selling all 23 of our properties that I had people in them. We got out of the business at July of 2014 and we packaged them up and had people kind of take them over because they gave them the passive income.
Brandon: I found that kind of everyone was after passive income because the conversion of active income into passive income gives you the time to go do other things. And I found out quickly that as I was able to wholesale 20 to 30 deals per year, that it’s, you’re always constantly doing those deals and if you don’t keep doing the deals, you don’t keep getting paid. And the idea of kind of packaging them up, it was giving the investors the package passive incomes cause it, because if you had five of them that are throwing off $300 each per month, that’s $1,500. That’s passive income that for folks that are doctors, dentists, I mean that could give you an extra day off each week.
Joe: That can pay for your club, golf membership.
Brandon: So, yeah, I did end up getting out of packaging after the 2014 Dodd Frank came out. I just, at the time I just wasn’t positive of how that was going to go and I just didn’t feel comfortable to kind of keep on building.
Joe: So good. Alright. So, what are you doing these days now? Talk about your transition into senior living.
Brandon: Yeah. So, when I had those 23 homes back in, so it was June of 2014 and that was about the time I talked with you, I had a tenant that was a, I had a tenant buyer that was in a property in Cary, Illinois. And this gal put $10,000 down. I’d go there each month to get paid and I saw a couple dogs at the house and her kid and that’s fine and all. But then the gal quit paying me. And I have a hard time to collect from people that I know that there are kids in the house. I don’t know, I just felt that if they couldn’t pay us, they would be potentially just not paying or putting food on the table for the kids or the kids that didn’t get to go do different things.
Brandon: So, I was easier on folks that had kids and that was actually part of our overall downfall is this gal got back on me almost $8,000 before we had to actually evict her. And what happened is when I went into this house, now this was June of 2014 her kid clogged all three toilets. Now there was toys in there. So, our plumbing bill was pretty expensive. It was a $2,800 plumbing bill. Now Fortune Builders doesn’t tell you that part. Okay? They tell you everything’s good just buy 20-30 homes and own them for 30 years. They don’t tell you the part, like when the toys get in there and to a point where it’s going to clog and backup the finished basement with crap.
Brandon: They don’t tell you that literally, which is kind of funny. So, I’m there doing this you eviction, having a kind of an eye to eye picture of like, what am I doing? Okay, is this the end all do all? So, I get home from doing a couple of trips to the local dump to just empty out this house. Right. It was about four trips. So, I’m able to go home that day and I’ve got a boy at the time who was maybe five years old and he wanted to play catch. Okay. And kids are kids, right? And they are persistent. Okay. And I explained to him, I said, Jeffery, today’s not a good day. I was like icky. It was gross. I was like, I just actually want to have a drink, don’t talk to anybody like the whole day. But Jeffrey wasn’t gonna have that.
Brandon: So, he just kept going dad, dad, dad, dad, dad. And to a point that I kind of answered back and, and so I kind of barked and I was like, dude, I can’t play catch today. But it was at that time that it hit me that I’m like, who did the hell did I just become, I got into this business thinking that I was going to have time and I was going to be there for him, but I couldn’t put catch with my own son. Man. That’s the point where it hit me like here, okay, hit me hard. I’m just like, what the hell am I doing? So, that was June. So, fast forward to July of 2014, we were visiting our in-laws and Kelly’s dad plays the piano 328 times per year for 35 bucks each at the old folks home.
Brandon: When I figured out, Joe, that he tells the just same jokes every single time and everyone thinks it’s, it is just awesome. I’m like, Kelly, is there anything else I can do that I don’t have to go to this because it’s kind of painful and if you’ve ever been in the old folks home, sometimes they have an odor, you know that you really can’t get off of you for a couple of days and down in Tampa, they don’t build them like out, they build up 10 floors of just a horrible odor. And so I go there and I’m just like, I’ve heard these jokes 10 times. It’s becoming painful. So, we were down there in July and I was at the point where I’m like, Kelly, is there anything else I could do that I can get out of being able to go to this? Anything, I will do, anything you asked me to.
Brandon: And Kelly’s really good at this. Kelly gives me this look like if you don’t go, it’s kinda like or else so I was going right because you know or else isn’t good for us, right? So or else is bad. So we went and, but this time it was different cause we pull into a house and so I’m like, text your dad, where the hell are we at? Because I’m used to like, I’ve got an F 350, it’s like 22 feet. Parking that truck on a 10 floor building is always difficult. So, we pull into a house in a cul de sac and I’m like, what is this place? So, Kelly’s able to text her dad. We go in there and I kind of do one of these, right? Arms cross. I was kind of cocky, arrogant, confident that I had 23 homes. I had passive income of $5,400 per month. I thought I was hot shit. Right?
Brandon: And I crossed the arms cause I feel ignorant, Joe, that I didn’t know what the hell I was at. So, I go in here and her dad’s playing the piano, telling his jokes and I’m thinking like, what the hell is this place? Like I honestly felt dumb and back home I had an investment club of 110 people. I’m up there talking each month. I kind of felt I was an expert in our area. I’m here teaching people, but then I realized that I don’t have a clue what the hell this place is. I haven’t ever seen it before. So I go to the person in charge and I go, Hey, what do these people pay to be in here? $1500-$2,000? And oh my God, Joe, this Carol gave me a look like, eyes like furrowed in here and goes, huh? And kind of kept on walking.
Brandon: So, I’m like, Kelly, what the hell was that? So, I talked to Kelly’s dad, I get this girl’s number and I call her and I say, Hey, I was probably too high. Could you tell me what these people are paying each month because I’ve been thinking about this place just nonstop. And the girl goes, Brandon, I’m sorry I thought you were just joking cause they begin at $5,100 a month. There’s five people. And it was the completely different atmosphere than I’ve ever been because I’ve been in these institutional big box buildings with the odor and the place. Those places aren’t going to have people that don’t get really good care cause they’re all asking for extra help. And I go into this house and it doesn’t have the odor. It’s in a house and it’s completely different than anything I’ve ever heard of. So, once this girl tells me it’s $5,100 a month, just my head like explodes because I’m just like holy crap. That’s…
Joe: How big was the house?
Brandon: Joe, it was a five bed home, maybe 3000, probably 2,800 to 3000 square feet. It was a, it was a four bed home with three and a half baths in Tampa and we pull up to a house and we pulled our boat down to Tampa. Right? So, I have a 33 foot boat. So as we go home, I’m the only one that can drive the F 350 so as I’m driving home, which I’ve got two kids, I don’t know on you, but like our two kids, we hit every other exit, the whole trip home. So, a trip that would typically take you or I 22 hours is 28 hours.
Joe: Anybody listening, you’d want to learn a quick little tip. Only, just only give your kids water to drink cause they don’t like water so they won’t drink it, right? The worst thing you can do is give them soda or lemonade, right? Water’s good for them. But if you give them water to drink, they don’t have to go every five minutes. Tips.
Brandon: We had our kid going every hour. So, I’ve got 28 hours and I’m going through so on my head like, so if their gross income is $25,000, what could their expenses be? And I’m going through on my head and I was probably by Tennessee when I go, holy crap. And it was probably 2:00 AM because I think, and so I go, holy crap, that home with five beds is outperforming our 23 homes back home two times per month. And I said, holy crap. So I go back to Illinois and our county has 308,000 people. And so I…
Brandon: 308,000. With a population of 12.2% that are over 65 years of age. Right? So that’s almost 40,000 people, Joe, and I look on the Illinois directory for the AL homes and I don’t find any.
Joe: What is AL?
Brandon: AL is where they have to have, they had to have help with activities of daily living. So, they had to have help with either bathing, getting dressed, taking pills.
Joe: Assisted living.
Brandon: Yes. And I get into this place where I go, there’s 38,000 people that are our target audience and they only have the option of these big box buildings. And I go, are you telling me that there is not anybody doing this in our entire county? So I came home, I got in front of our group of about 110 investors and I said, Hey, I’ve got 23 homes. Who’s interested? I’ve got tenants in all but who’s interested? Boom, I package off 22 of them within 30 days. And I said, I’m going to get into this. So I had about 500 grand and I said, I’m going to get into this. I’m going to figure out how to do the business. Now granted, I didn’t have any background doing healthcare at all. I just said, I’m going to figure out how to do this. So, I found a house that was on the MLS for 500 days. It was on the MLS for $500,000. Now I begged and pleaded to get this guy to carry back financing, but he was a financial planner that was just too cheap. So, I went and I said, I’m going to find a investor who’s going to buy this property for us and give me the option to buy back from them.
Brandon: So even if you don’t get a person to carry back financing, I was creative and very persistent that I found a person to buy it and cover part of our dollars to get this house open and then give me the option to buy. And a part that’s incredible is we put two offers into this guy. We put it in a offer for $250,000 cash or to carry back $500,000 over 10 years. And he chose the $250K cash, which is a good option. I didn’t have $250K cash plus dollars to get this house cleaned up. So, I brought on an outside investor that bought it. He was an apartment guy out of the Barrington area who bought it and he covered partial of our dollars to fix this house up. So, what did I do, Joe? I over rehabbed the heck out of our first property cause that is what everyone does when they are able to get into it is they put way too much money and…
Joe: That’s what you’re supposed to do.
Brandon: Oh yeah. Right. That’s part of the overall, the overall book to get in. Right? So we bought for 250 I had the option to buy, which was cost plus like 150,000 we invested $550,000 into a house that was 4,800 square feet. I added four and a half bathrooms and I converted an office into three extra bed. Wow. So I’m all in for $800,000 right.
Joe: What was this house worth normally like normally fixed up? What would it be worth?
Brandon: Fixed up? Probably a $500,000 house.
Joe: So you okay. It was now worth, well not worth, but you had about 850,000 into it.
Brandon: We had $800,000 into it, plus carry costs, you can probably say to 900,000.
Joe: You had a private investor bringing you this money.
Brandon: Yup. Okay. And a thing that’s cool is I put about 200,000 of that 550 in and he put 308,000 and I covered everything else.
Brandon: What happened, Joe, is it took me time to get this whole business figured out. But fast forward till I bought this house with this investor October 31st of 2014, we opened it just September of 15 and we filled it February of 2000 just 17. What I did that was different Joe, is I wasn’t the owner op, the owner operator. So I wasn’t going to be in there every day taking care of people doing all of that cause I didn’t have any background doing the RNP. So I had to partner up with a RN who had that background and I had to have 10 beds compared to five beds to cover that overhead cost. And I actually partnered up with a gal that was in the healthcare industry for 38 years. So I get in, I put 500 grand into this house. We’re all in for 800 plus thousand in February of 2017 we figure out how to build this house, and I’ve got 10 beds in there, averaging $5,200 per month.
Brandon: Now, when I got into this business, Joe, I was only looking to get a passive income target. I was 10 grand per month. So I get into this house and I put 10 people in there that about $5,200 per bed times 10 is 52,000 and then our gross expenses are 28 to $32,000 per month.
Joe: Does that include, does that include food?
Brandon: Yeah. Oh, that’s food carry costs. So a thing that I did is we were paying $7,000 per month for that house. So the only thing that I could think of that was that bright for this investor is go, I’ll pay it two times, whatever this house could go for. And at the time that house would rent to a typical family for about 3,500 bucks a month. So I said, I’ll give you twice that if you would pour all of these dollars in. Fast forward, we have this house fully occupied February of 2000 just 17 and we’re gross in 20 grand a month.
Brandon: And I go, Holy shit, you’re netting 20 grand a month. We are, yes, we are able to profit 20,000 per month before the owner dividends and before taxes. Okay, so fast forward to 2018 we had the house appraised from Cushman and Wakefield. Here’s the cool part, Joe, is they praised it off with the income approach compared to just the asset because it’s only $500,000 house. Even if I put 800 grand in, it’s still $500,000 house, but the appraiser comes and he’s scratching his head and he’s looking at it and he’s like, now keep in mind this was a $4,500 appraise. So these are commercial appraisers that get that piece. And he comes in and he discounts the cap rate because he had to use the highest and best possible use of this property. When the property is clear in 20 grand a month, you can’t give me a $500,000 of value.
Brandon: Right? Yeah. So he uses the income approach and these properties typically trade for a 10% cap rate. But like he was trying to protect his butt that he didn’t want to give me a 10% cap rate cause he’s going to put, it’s a house but it’s earning 20 grand per month. So he discounts the cap rate to a 13.5% cap rate and it appraises for $1.8 million. Wow. And I go, Holy cow, it worked. Wow. It worked. So I’ve got equity and people keep calling Joe because a thing that happened is we took a gal in that house that her daughter cut hair. And what you find is people that cut hair, what do they do all day long, Joe? They talk. Okay, this girl told everybody. So I’m like being overrun with people calling. So then I opened up home two. And then home three. Fast forward to today, I’ve got a portfolio by quarter two of this year, I’ll have almost 80 beds open with an average bed of about $5,000 per month.
Brandon: And a part that’s crazy is out of those homes, I got the owner to carry back financing on five of them and I only paid cash for…
Joe: So how many homes is 80 beds ?
Brandon: Six homes? Six homes? Yup. Our average bed per home would be 15 beds per home. So I’ve got three homes at 10 and I got three homes with two 16 beds each. Okay. So our boutique aversion, Joe, is that 10 to 16 beds is kind of our area of expertise.
Joe: People share bedrooms then?
Brandon: They do. Yeah. Yeah. In fact, our bedrooms with two people in it, we discount their rent down to $5,000 per month. The private bedrooms are paying $200 per day, so they’re paying an extra thousand dollars per month. So what I find was was kind of interesting, Joe, is I thought everybody would prefer their own private bedroom, right?
Brandon: What I found is their kids preferred a double bedroom, so two beds per room paying $5,000 per month because that gave them an extra $12,000 per year that could keep them in there because a thing that people can only count on is what their parents are going to have left for dollars. They don’t know if their parents are going to be here for two months, two years, 10 years. So they have to be as creative as possible to extend those dollars as far up.
Joe: Okay. This is amazing. I’m looking here on Redfin. Okay. And I’m looking for ranches. I’m assuming you can’t do two stories, right?
Brandon: Yeah, correct.
Joe: Ranches that are four plus bedrooms, 3000 square feet or bigger.
Brandon: So here’s kind of how that breakdown goes, Joe. If you want a five bed home, which is perfect for the owner operator, a person with a healthcare background and LPN, a RN person who’s been in the healthcare field for 10, 20, 30 years, you could do a 3000 5-bed home.
Brandon: If you have two homes, you’ll probably clear three to $400,000 per year. If you are, if you aren’t going to be the owner operator, I would tell you a 10 bed home is kind of the entry point because your overhead cost is too high if you aren’t going to be in there every day kind of doing everything. So for a 10 bed home, I would tell you you’re looking for about 450 to 500 square feet per person. So you’d be looking for like a 4,500 to a 5,000 square foot ranch, but also take into account that you can convert a two and a half car garage into about an additional 500 square feet that you aren’t going to use anyways. So 5,000 is kind of going to be your target. I do have a handful of properties that are oddball properties. Joe, you’ve got these properties in your area.
Brandon: Just older dollar. A person built this crazy big house. Our biggest house is 18,000 square feet. That was on the MLS for 2.4 million, dropped to 1.5 and I bought it for 750,000 cash. Wow. But that house is going to be, it was a ranch. That house is a couple floor property, so I do have a $200,000 budget for the elevator and that house is going to be done by the end of April.
Joe: So elevator would be about a $200,000 addition.
Brandon: You can get it for 135 but this particular house had concrete that’s 14 inches thick and we just had a ton of extra costs.
Joe: What about those things that take you up the stairs? Are those good enough?
Brandon: You can’t do that in a commercial building. I thought that at first, but then after I was like, you know, I’m going to have eight beds upstairs. I thought of even doing two of those going up at the same time.
Brandon: But there comes a point where you’ve got to answer ethically. Would I feel comfortable putting our parents in there? And after you ask yourself that question, because our code in our area is actually pretty easy to open up these homes to a point where I think it’s actually too easy. Whenever you’re converting a home that is existing in our area, you need 10% of the house would be ADA compliant. So you need an ADA access point to get into it’s for disabilities, right? Yup. And then an ADA bathroom per floor. Joe between the two of us that kinda think there’s bullshit. I don’t, I just can’t ethically like be okay with that. So I did in our first property, so I put 550,000 cause I did three ADA access points and I had three ADA bathrooms. So I didn’t have to, I chose to because I felt that was the best thing to do ethically, that I could go home in the evening and feel good that I did everything I can to help give the best quality for these folks that are in our homes.
Joe: Right. Good. Let’s talk about then. What kind of care do you have to have in the property? Did you have to have a full time registered nurse?
Brandon: You don’t, but if you want to offer, great care, it’s a very good idea. What we do is we typically have caregivers that are in each property. I choose to have a caregiver to every five people. So in our 10 bed homes, I’ve got two caregivers that are there from just 7:00 AM until 10:00 PM. I call that during the peak hours cause that’s as every time that people are up to the time that they kind of go down to bed. That’s 15 hours per day. I’m going to have two caregivers. I have found that if you offer that caregiver a ratio of one to five you could give great care.
Brandon: If you’re in the typical institutional big box places, Joe, what do you think their average caregiver to per person is? Guess.
Joe: One to 15? One to 20?
Brandon: That’s the coast to coast average. So if you’re getting 10 to 12 bucks an hour, Joe, can you give great care to 15 to 20 people? Where do you think the odor comes from, Joe? Right? Now that’s a corporate attitude of how to take care of this is they cut down on the caregivers because that’s going to be your biggest cost. I’m a buck change in the industry by changing the caregiver to every five people because that is the only avenue to do it. You have to give up the opportunity of potential profits for taking great care of people. But I think I have found out how it can be done where you can do both ways.
Brandon: Offer awesome care and profit. Fantastic. Our profit margin 38% so I’m fine. I am not in it to earn dollar cause I told you our first house I hit our passive income goal times two so I’m doing this for a benefit of how to help the elderly because just my grandpa didn’t have that option. He was in a bigger 200 bed place and I recall going to see him Joe and we pulled the pull cord button and so I kind of thought if you pulled up pull cord button kind of it’s like you’re on an airplane. Right? They like come like booking over to help you. Five minutes goes by 10 minutes, 15, 20 minutes. By 20 minutes, Joe, I’m pissed. And so I’m only 25 at the time. I buried this one deep but like so, so I don’t know if I handled this one correctly but by 20 minutes like I’m livid pissed because just my grandpa, he couldn’t talk very well cause he had a stroke when he was 84 and his face turned bright cause he was, he felt embarrassed that he couldn’t do anything to help and that his oldest grandchild was there.
Brandon: So I wasn’t sure how to process that. And I went out to get these two caregivers and Joe I would be, I was not all that polite to them. I did get them to come. But like I had a, I had issues days after because like what if he didn’t get very good care after I was gone, Joe? They probably didn’t give them great care because I was such an ass to them and what I felt I had to be that person to get him care. So fast forward to today or fast forward to July of 14 like those feelings are coming back up. Like this is the difference. What is this place like? That’s how I felt dumb cause I haven’t ever heard them. So our business changed from chasing dollars to becoming a purpose driven business. And in fact a part that I’ll touch on Joe is we have actually changed it to a kingdom purpose business where we get to hear questions.
Brandon: When people are closer to the end, they begin asking questions, Joe, where they’re going to go after earth. At almost every other point in a person’s life, Joe, they don’t talk in that question. But in the end they ask those questions and if you don’t have the care team in place to hear that, that there’s a chance that that isn’t ever going to be answered. And that has an eternal effect on that person’s life. So I’m proud to say that our top KPI doesn’t have anything to do with earning cause I, it’s every person that passes in our home and our team talks about this. Every L 10 is we have had 100% of people that pass in our homes have been able to answer where they’re going to go after earth and how they are going to get there. Now that has purpose. Earning dollars is great, but if I can educate folks how I’m doing this and have that attitude of truly, truly caring, all these beds really aren’t beds.
Brandon: They are kingdom opportunities. Every single bed is an opportunity to hear those questions over and over. So that’s, yeah, and that’s purpose Joe. Like it isn’t just earning dollars. I mean here, Joe, our first pod of homes, so our first three homes, we’re at about 75% occupancy today. And by April I’ll be totally full. When those homes are totally full by April, we’ll be netting $55,000 per month. And that’s like even if you compare that to the bigger asset classes that are out there, Joe, the apartment buildings, which everybody in the besting businesses chasing apartment buildings like a dog in heat. Okay. They are all there. They’re bidding these things up and they’re all at your passive income, but they’re overlooking this asset class, which is incredible that it is outperforming apartment buildings from five times and people aren’t even, they aren’t even talking on it, which is incredible.
Joe: I’m just looking here on Redfin again and there’s not very many ranches that size, right?
Brandon: There isn’t Joe, but they’re out there though. And if people are able to hear this call any, if you can just target those or as those deals come to you, don’t overlook them because as you pointed out earlier, which is it’s 110% on, there are deals that everybody’s passing on every day that would crush it for here. And these type of homes are out there and they’re typically owned by people that have owned them for 10, 20, 30 years plus. So they own them free and clear. They don’t owe any debt. And what’s great is I put them up for sale there. They are looking to get their price and they’ll give you terms if you just ask.
Joe: Well you know one of the, one of the really interesting things too is I for personal, for our personal residence we’ve targeted nicer homes. Cause at the time I couldn’t get a traditional mortgage. Number one cause it was a jumbo loan and number two I just didn’t have, because I’m self employed it’s a lot harder for people who are self employed to get mortgages and I had to have enough tax returns to show the income they wanted as a self employed business owner. Anyway. Yeah I was surprised how many sellers when I was talking to them and marketing were willing to consider creative financing like a lease option or owner financing because of the price range of their house. They just weren’t getting much interest in it and they didn’t need the money as much. They already had another property. They were already, you know, it is amazing how many sellers are willing to consider this kind of creative stuff.
Joe: Listen Brandon, we, we’ve, we’ve got to end this here because I’m late for another call. I want to do a part two. Would you consider that?
Brandon: Oh yeah, for sure.
Joe: Let’s do a part two and let’s talk about how you find these deals. I want to ask you some more questions cause we got some good questions here. How do you find the deals, you know, how do you kind of set it up where people can, I mean, what kind of, what are the licensing requirements, the permit requirements and stuff like that? And would that be all right with you?
Brandon: Oh yeah, for sure.
Joe: Good. Real quick though, how can people get ahold of you, Brandon? If they’re interested in partnering with you on some deals, maybe they have a deal. How can people reach you?
Brandon: So I will tell you, I am actively looking for deals. 5,000 plus homes.
Joe: 5,000 square feet or more.
Brandon: Throughout the country. We’re toying with the idea of venturing into creating some cookie cutter homes for RN. So, if anybody has any deals, so because of Joe being able to put me back on here. Thank you for that. So I would get anybody that’s on here time to talk with me on anything you want on this as a class you’re able to ask me questions. I’ve got the opportunity to book an appointment. I’ve got our calendar online. It is Brandon, B R A N D O N S C H W A B. That is Brandon, B R A N D O N S C H W A B.com. Go there, book a time to talk with me, tell me you talked or that you heard from Joe and I will give you 30 minutes to talk on anything. And then typically after that year, if you have any deal, please, please get it over. We pay some top dollars for any deals. If you can get them under contract or even if so even if you can’t get them under contract, I will help with them. Coast to coast.
Joe: Brandon Schwab, B R A N D O N S C H W A B.com and that’ll go, they’ll send people to a calendar link where they can schedule a call with you. Maybe they have a deal, maybe they have the money that they want to invest in this venture. Right?
Brandon: We have helped a ton of people convert active income to passive income by partnering in these asset classes and they think that’s great. It’s because these properties produce just massive passive income. We get to pay our investors very good. I mean, so if anybody’s interested but they don’t have the time. We are also, I’m looking for builder partners in fact, so I’m coming down by you tomorrow to talk in front of a faster house where I am. I’m looking for builder partners. So if you are a builder partner who is able to build the asset, but if you aren’t interested in act and being able to operate it, I would gladly operate. In fact, if I get the option to buy, I would be the anchor tenant so I don’t have to own everything like it’s getting over the ego piece that I have to own everything and I will gladly partner up with builders. There’s a federal program, Joe, that to build these things, it’s 10% down, 3.8% during build interest only and it auto perms to a 40 year per under 3%. So if a person’s got the ability to qualify for that, I will be the operator and I’ll partner with you. I’ve got blueprints, everything. So please book time to talk with me and hopefully we can help change the industry partnering together.
Joe: This is really good. Really good. All right, so we’ve got to cut it off here. We’ll do a part two. I want to talk about how you find these deals, how you do, how you structure the lease options. Some of the, let’s get into the details of how you build these things out. So very cool. Brandonschwab.com Brandon, S, C H w a, b.com. You can see right there on the screen or also you can go to our The Real Estate Investing Mastery podcast website at realestateinvestingmastery.com and get the show notes, get the transcriptions, all the notes and stuff that we talked about here as well. And we will do a part two here. Brandon, I’ve got to go. I’ll text you. We’ll schedule another time real soon here. Thank you so much for being here. I really appreciate it.
Brandon: Thank you, sir.
Joe: We’ll see you all later. Take care. Bye-bye.
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