Socially Conscious Real Estate Investing

Many of us trying to pursue a more ethical approach to investing sometimes find ourselves questioning whether investing itself is ethical. One investing strategy in particular that frequently prompts a heated discussion in the Socially Conscious FIRE (Financial Independence Retire Early) Facebook group is real estate. Some people in the group view housing as a human right. That makes it reprehensible for example that someone would gain financially as a landlord, while the person(s) who is paying the rent and actually covering the costs of the property gains no equity in the property. I continue to learn and grow in my thinking about socially conscious real estate investing thanks to the refreshing discussions that unfold in this group.

I’m not attempting in this post to explore the ethics of real estate investing. I do though want to  highlight one real estate investing approach that when done from a socially conscious perspective I find very compelling – investing in sober living homes. As we’ve read here before, addicts struggle to rebuild their lives and finances when they are overcoming addiction. Sober living homes are residences that provide a drug and alcohol free environment for people typically after someone has completed a drug or alcohol rehabilitation treatment program. Managing a property of this type is not as simple as traditional landlording, but those who want to make the world a better place through their investing portfolio may want to consider this option. So now I’m going to let Jessica Pine, a frequent reader of this blog, share her experience owning and managing a sober living home.

Can you tell us a little bit about yourself?

I’m a mom working full time in the tech field, am married and we are about 3 years from coast FI (financial independence). I grew up on the East Coast and started moving West after I graduated. I’ve lived in five states and had the international travel bug for most of my 20 and 30s. Nowadays, I find myself doing lots of smaller family trips and feeling thankful I live in an area surrounded by amazing nature to explore.

What had your financial life and relationship to money looked like before you began to pursue financial independence?

I was raised quite literally in the middle of a family business. We lived part of the year at a campground that my family managed, so I was very fortunate that money and finances (both good and bad) were normal topics of conversation. We were frugal by nature to make every dollar stretch for the business and I was raised to value the DIY mentality on everything from running the summer craft program to caring for the campgrounds sewer system! Loans and credit cards were seen as bad ideas in my family until I was in college.

When did you first learn or start thinking about financial independence? 

In college, I had two experiences that revealed my super power: comfort with moderation. The first was that I could eat just one potato chip, and the second was that if I really wanted to go out, I would pretty much always walk (to not pay for the bus or train). Both of those things regularly shocked my friends, and I started on a journey to seek out like minded people where I could explain why I didn’t spend money the same ways as “normal.” It took about 10 years, the invention of Facebook, and the rise of blogging for me to find an online community where it all clicked and I saw that lots of the small choices I made actually linked together to a bigger more meaningful picture.

How are you personally pursuing a socially conscious path to financial independence?

Slow investing. I’m now trying to be very thoughtful about each investment the same way I was about each dollar saved. 

What compelled you to consider sober living homes as a way to pursue socially responsible real estate investing?

I had a close friend die of their addiction. There weren’t (and still aren’t) adequate resources or support systems in place in our society. A friend had suggested sober living homes to me. My husband is also in healthcare and was familiar with the model, which was very helpful in vetting the programs and approaches as we started to narrow our investing goals.

What in your mind differentiates socially conscious real estate investing and ethical landlording from a more traditional approach?

I think this can be a very loaded topic. My ethics are very likely not the same as your ethics, and the part that gets missed in many of these conversations is that having different ethics and priorities is actually ok. Having conversations to understand, and not necessarily agree, is really important. I personally consider myself ethical on the basis of transparency with our tenants, the jurisdictions we answer to, and the non-profit that runs the program. Beyond that it is pretty up for interpretation by whomever reads this on how they view ethics of landlording. On a personal level, I wanted to find a way to serve a marginalized group (recovering addicts, often with a record), that was further limited by program availability. Ethical landlording to me is seeing the true community housing need and working to address it as directly and transparently as possible.

Does investing in sober living homes take a lot more effort? How do you pursue socially conscious real estate investing while maintaining balance, boundaries, and profitability?

I’ll answer in two parts: First regarding balance, boundaries & profitability; boundaries are very important, and because tenants come and go more frequently, the boundaries sometimes need to be reset. Balance is keeping in mind what tenants are going through, but also keeping them (and us) accountable, which is actually a very necessary part of recovery. On profitability we see this as a long term investment. We very purposely selected a home, location and investment that we could support with or without profit. The support of the program was the main goal. Having an underlying asset was the second goal to tap into if needed. And third is the monthly cash flow, which has actually been mostly positive. The houses are furnished and tenants rent by the bed, so it’s affordable to tenants and there is a long term lease for a set rent, but the actual houses funds and income vary month to month. The houses manage and then keep any extra funds to add to their reserves and/or choose to fund things like a shared gaming system, holiday meals, we have one house that planted a big veggie garden, etc. 

Second on the amount of effort needed: it depends on the program, location and the willingness of the surrounding community to be supportive. With a sober living home, neighbors can get “protective” of their neighborhoods- so finding the right location and addressing the inevitable ebbs and flows of neighbor trust/distrust is the only thing that is different. Beyond that, the tenants themselves are pretty incredible- they are on a journey challenging themselves to be better every single day. I think that’s something few of us can say we do.

I imagine you have seen up close and personally how your socially conscious real estate investing efforts have positively benefited a number of lives. Would you like to share a story or two about how you saw people positively benefit while renting from you?

We had a tenant once that the neighbors constantly called the cops on, for no reason. It was blatant discrimination over and over again. That tenant knew it, and knew their worth, and worked hard to be more well known in the neighborhood. A few months ago they were nominated, and then elected, as a member for the neighborhood board. These are people wanting a way back into the fold after a tumultuous time in their life, and being able to establish a home that they can use as a foundation for their recovery is really powerful.

How would you advise someone, who is interested in following in your footsteps, but has no experience whatsoever investing in real estate, get started?

My biggest piece of advice is normalized in other types of investing, but less so in real estate: make sure you can truly support a loss. I don’t think real estate is something to mess around with, as it’s someone’s home. I personally feel very strongly about avoiding the requirement for properties to support my regular expenses/lifestyle through monthly cash flow. I will hopefully make money one day by having bought an affordable home in a stable location, and maintained it long term. We of course hope to generate cash flow along the way, but the key is that if we don’t, it’s not going to significantly impact our finances, and we can still continue providing this housing. We did this slowly and very thoughtfully. We aren’t going to have fifty doors, or even ten and that’s ok. We are very fortunate to be in this boat, and therefore we aim to pass it forward in shelter and long-term stability. Do not take shelter lightly, it’s a big responsibility and we need more people coming into the business and treating it as such.

Who else is feeling inspired by Jessica’s story? Or maybe you are already investing in real estate in ways that improve your tenant’s lives. If so, share a bit of your story in the comments below.

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