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Top 10 Drug Rehab Real Estate Insights
to Follow

Posted on Aug 15, 2017 by Jim Peake

Top 10 Drug Rehab Real Estate Insights to Follow - Addiction-Rep

There’s no question about it: Owning a drug rehab can be a very lucrative business, if you know what you’re doing. If I could make 10 bucks for each time I heard an investor say, “Oh I’ve bought and sold millions of dollars worth of real estate before, what’s the difference in buying drug rehab real estate?” I’d be able to retire.

But I’m still here, which is a good thing for you and anyone thinking about getting into our industry. I can guarantee you this: If you are going to do drug rehab and want to do it well, you have got to work with experts in the drug rehab real estate space because your wallet and reputation will thank you for it later.

The Top 10 Drug Rehab Real Estate Things You Need to Know, but Were Afraid to Ask

Before you read on, you may want to sit down. This could be a bumpy ride. I spoke at great length with a 40-year veteran seasoned in real estate and behavioral health care facilities development who specializes in drug rehab real estate. He shared some of his expertise for me to replicate here.

Bookmark this article, print it out and keep it in your car. But whatever you do, don’t leave home without it when looking for drug rehab property.

  1. To Buy or Lease?

As with any business, your goals may not equate to the reality. Will you get the admits you need, when you need them? Will your growth plan happen on your time, or God’s time? There are no guarantees.

That’s why we advise you to enter into a property under a lease agreement with an option to buy, providing you with a way out, if needed, or a buy in if you’re doing well.

  1. Know the Zoning

Make sure the property you are looking at allows for drug rehab and/or sober living use. If it needs a zoning variance, find another property. You don’t need the aggravation and the endless nights kissing the butts of local government officials, as this could take 18 to 24 months or more.

  1. Location, Location, Location

Because many people seeking treatment require a fresh start during the detox and recovery process, traveling to a different location away from home is highly desirable. To maximize the appeal of your drug rehab, make sure it’s located within a 35-minute drive to a major transportation artery (freeway or airport) in a densely populated area.

  1. Size Matters

There’s a sweet spot in drug rehab real estate that has everything to do with the amount of beds in your business model. If you want to support a detox facility properly, keep in mind that you’ll be turning beds, on average, every five days. Find a space ideal for a total of 25 to 45 beds, period.

Remember that you are responsible for the maintenance and operational costs associated with all the square footage under your roof, whether it is occupied or vacant, so be careful not to bite off more than you can chew. Take note of the allotted number of parking spaces available. Depending on your business and staff size, parking spaces could be an issue.

  1. Curb Appeal

First impressions are everything – as a rehab patient and as an investor. The curb appeal of a property is instrumental in matching expectations with reality. Therefore, the property should be warm and inviting, not institutional.

Exterior colors matter. Textures matter. Landscaping should be well-maintained and over the top, appealing to the senses. Overall property condition is important too, as it plays a role in deferred maintenance costs.

  1. Define Your Market Niche

The actual process of drug rehab treatment and recovery has many hats, as there is no one-size-fits-all. Drug rehab detox is not the same as addiction treatment aftercare, so the property needs for each are just different. Before you start looking at real estate, define your business model first.

  1. Right Design or Investment Gone Wrong

Once you’ve defined your business model, getting a grasp on what’s needed within the doors of the property is everything. True, the look and feel of each room will affect the emotional response of your patients, staff and the next investor looking to purchase your business, but the interior design is so much more than that. The design and layout of your drug rehab can create a cause and effect in the patient experience.

To maximize patients’ comfort and responsiveness to the treatment you offer, be mindful of these items:

  • Layout and flow from room to room and/or building to building
  • Functionality (accessibility and business needs; detox, inpatient, IOP, PHP, aftercare)
  • Security and safety requirements (cameras with 24/7 direct connect to nurses’ station,
    auto-lock doors, windows, sprinklers, smoke detectors)
  • Occupancy ratios (single vs. double)
  • Bathrooms (individual, single-shared or suite-shared)
  • Kitchen needs (fully commercial grade)
  • Building code compliance (violations?)

Now if you’re savvy (and who isn’t in drug rehab), you’re probably going to be looking for a real estate deal. Well here’s the real deal…

“Hire an architect who specializes in drug rehab property.
If not, you’re shooting yourself in the foot.
In fact, it could cost you 75 percent more
for the same property when it’s all said and done.”

You might also think that securing a distressed property can give you more bang for your buck. Not exactly. It’s far easier to lease or purchase an existing drug rehab rather than trying to reinvent the wheel.

  1. Work the Numbers, Then Repeat

Understand the costs related to the price per square foot, cost per patient AND what insurance companies are willing to pay as a daily reimbursement fee. It could mean the difference between solid gold and going belly up. Each state differs on insurance providers. Do your homework and find out who they are and what they cover.

  1. Own the Law

Understand that what stands today can change tomorrow. Keep current on specific state requirements for drug rehab real estate-related operations and best practices. As of August 2017 on a federal level, it looks like the Affordable Care Act will remain for some time, which provides for insurance-paid treatment. Make a conscious decision in who your patient/client base will be, whether you’re using the government-funded treatment model or private pay.

  1. Support Your What Ifs

Even if you follow this list, numbers 1-9 above, the unexpected can happen.

Can an industry or health care regulation shift, halting your admissions or driving more of them? Absolutely. So when you think you’re ready to sign on the dotted line and lease or purchase a piece of drug rehab real estate, make sure it allows for flexibility and scalability. What does that mean?

Let’s say you’re turning admits hand over foot (one can only hope). In fact, so much so that you really need to expand. The last thing you want to do is relocate the facility.

Make sure the property allows for an increase in size (check zoning). If you are leasing property and there is an adjoining space or additional building on the same property, ask how long that lease is in effect or find out who owns it, what they purchased it for, when and what type of business it is. This could provide the perfect place to fulfill your expansion needs.

Or, conversely, if you decide to sell the business, is this located in a highly desirable area? Does it have the right improvements to make it an easily marketable property for the next owner?

Before You Can Help Patients, You Need to Help Yourself

There’s a lot to think about before venturing into the best industry out there or making improvements to what you already have in the works. But before you can help the people who need addiction treatment, you have to get help in choosing the right drug rehab real estate.


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