Building Wealth Through Strategic Group Home Investments with Jon Wells

In this episode of the DealQuest Podcast, I'm thrilled to welcome Jon Wells, a Colorado native with 25+ years in real estate sales and investing who's averaged $10 million in annual sales since 2010. Jon manages a $5 million personal portfolio featuring sobriety and mental health group homes earning 6%+ cap rates, and he's been involved in numerous syndications throughout his career. With real estate literally in his blood (his dad was a real estate developer, his grandfather a UK realtor/surveyor, and his uncle retired on real estate investments), Jon brings a unique perspective on finding profitable niches most investors overlook.

Jon's journey from fix-and-flip frustration to group home success offers valuable lessons for anyone building wealth through real estate. His story of what he calls "fix and flop" (when his flips didn't sell but became his best long-term holds) demonstrates how perceived failures often become our greatest opportunities. Whether you're exhausted by active management, seeking truly passive income streams, or looking for recession-resistant investment opportunities, this conversation reveals how specialized real estate niches can deliver both strong returns and social impact.

THE EVOLUTION FROM FIX-AND-FLIP TO STRATEGIC HOLDINGS

Jon spent years in the fix-and-flip game until it "drove me crazy" and "took over my life," as he told me. "My best deals were the ones that didn't sell," he explained, coining his term "fix and flop" for properties that failed to flip but turned into incredible long-term investments. This accidental discovery led him to a crucial realization: the properties he couldn't sell often had the highest long-term value potential.

The Denver market's shrinking margins made flipping increasingly difficult. Where investors once could buy at 50 cents on the dollar and sell for 25% profit, margins compressed to barely 10%. Without a GC's license, competing against builders with financial backing became nearly impossible. Sometimes the market teaches us to pivot before we're ready to listen.

DISCOVERING THE GROUP HOME GOLDMINE

After accumulating residential properties through his "fix and flop" experiences, Jon discovered group homes through a mentor who'd accumulated 1,000 beds since 2010. While Jon has "only" done 30-40 beds, he describes it as providing "a great living" and the best investment decision he's made since starting to buy investment real estate. The structure is beautifully simple: operators handle all the headaches while property owners collect rent and pay bills.

"It's as close to a triple net deal as you can do," Jon explained. The operators range from those running senior living facilities to mental health and sobriety properties, many funded by Medicaid and grant money. These aren't your typical Family Dollar tenants, but they're operators who, when properly vetted, provide stable, long-term income with minimal landlord responsibilities. The fair housing protections these facilities enjoy add another layer of security to the investment.

THE ART OF VETTING OPERATORS

Drawing on his experience from the 1990s helping people save properties from foreclosure, Jon applies rigorous financial analysis to potential operators. "I have to wear that hat when I interview an operator... I put on my mortgage broker hat and make sure that they're solvent, they know what they're doing, they've got some experience behind their belt." He particularly favors operators receiving grant money and Medicaid funding, noting there's "a lot of grant money out there" providing additional payment security.

The vetting process goes beyond basic financials. Jon looks for operators with proven track records, solid business plans, and ideally, those willing to accept purchase options. When operators have an option to buy, "they treat it like it's their own house, their own property." This alignment of interests creates the foundation for successful long-term partnerships. Properties range from six-bedroom homes to 100-bedroom facilities, with deals reaching up to $10 million.

DENVER'S UNIQUE MARKET DYNAMICS

Denver's real estate market presents interesting contradictions. While downtown areas emptied during COVID (Jon bought downtown properties "right during that same time"), the suburbs boomed. "We've already gone through the recession," he observed, noting how COVID created a "weird false recession" with downtown becoming expensive when things are going well, then becoming unaffordable during downturns. He's "hoping we're ready for some growth in the downtown area."

The city's historical pattern of being "last in, first out" of recessions (LIFO or FIFO as Jon puts it) may not hold this time due to affordability challenges where "people can't afford to live here." Yet limited supply continues to insulate the market somewhat. Builders have shifted from spec building to "just in time" construction - "if somebody wants one, they'll build one" - reducing potential oversupply issues. For investors willing to think creatively, opportunities exist in everything from pad-split conversions of large single-family homes to distressed office buildings ripe for transformation.

THE SYNDICATION EDUCATION

Jon's recent exploration of syndications offers sobering lessons about the importance of understanding what you invest in. After investing in a hard money fund, he hired Pascal Wagner as an advisor who bluntly said, "I wouldn't have touched that deal with a ten foot pole." The leverage, history, and assets under management all raised red flags Jon hadn't fully considered.

This experience reinforced a fundamental principle: "Continue to do the things that you do well and the things that you understand and work with people that you know." The flashy returns promised by syndications can be "mesmerizing," making you "like a squirrel... looking at one deal after the next after the next, and it's exhausting." His decision to pay off a mortgage and create owner-carry financing instead of chasing syndication returns shows the wisdom of choosing known, stable income over potentially higher but riskier returns, especially "as I approach retirement."

NAVIGATING THE NOISE IN REAL ESTATE INVESTING

With "all these flashy ads and numbers and returns that are coming across your screen constantly," how do sophisticated investors cut through the noise? Jon's approach is refreshingly straightforward: build relationships through networking, verify claims personally, and don't be afraid to ask uncomfortable questions. "How do I verify that you have 3,000 doors? What can I ask you that's not going to be offending?" might feel awkward, but it's essential due diligence.

The missed opportunity cost is real, but so is the cost of bad investments that make you "lose sleep." Jon emphasizes the importance of "getting to know them, going to networking groups... interacting with them so you can see what their experience level really is." Learning to say no to aggressive follow-ups while staying open to genuine opportunities through trusted networks is perhaps the most valuable skill any investor can develop. As he puts it, "Learning to say no is something" crucial when dealing with constant solicitations.

OFFICE SPACE: THE CONTRARIAN OPPORTUNITY

While most investors flee office properties, Jon sees opportunity in the distress. "If you have the cojones to get into office space, probably a good buy right now," he noted after attending a capital raising conference. The asset class "appears to be at the bottom" with industry projections of "double digit returns in office because you're going to get a massive discount." Some buildings sit 50% vacant with loans coming due and "none of the bankers want to have to become a property manager."

The transformation potential is significant, with properties "actually converting some of those into condos." This mirrors historical patterns I've seen repeatedly, from Wall Street in the 90s to Detroit's recent renaissance. The key is having the capital and patience to weather the transformation period. Jon believes bankers are "wising up to the reality" that they need to "provide some really incredible terms for anybody that's willing to get into that space."

LEMONADE STANDS AND REAL ESTATE LESSONS

Jon's entrepreneurial journey started at age 12, selling lemonade on the streets of Telluride with his dad (a real estate developer) and his partner's son. "We really couldn't even get customers to buy our lemonade," he laughed, eventually discounting it "down to like 50 cents or a quarter." But that early lesson in entrepreneurship, combined with generations of real estate professionals in his family, laid the foundation for his career.

His first official real estate deal? Selling a condo townhome to his girlfriend at the time after getting his license in the mid-90s. "Unfortunately the relationship didn't last, but got my sale in," he joked, though he assured me the relationship didn't fall apart because of the deal - "it was an awesome deal, relationship sucked, but the awesome deal." These early experiences taught him that success in real estate often comes from unexpected places and that even failed attempts can plant seeds for future opportunities.

THE REALITY OF PASSIVE INCOME

When I asked Jon about truly passive income (since many claim nothing is 100% passive), his answer was refreshingly honest: "My favorite passive income... that's just going to be note income and even owner carry income secured by real estate. You have literally no responsibilities other than just collecting a payment." Yes, there's default risk, but properly structured deals minimize even that concern.

His happiness formula centers on being "financially independent" through passive income - "when I have my bills paid, I've got money to go on vacation, and it's passive." This isn't just about retirement but about "building financial security during volatile times in the market." Without passive income coming in, "you could be a little bit vulnerable." Group homes offer that rare combination of strong returns, social impact, and genuine passivity that many real estate investments promise but few deliver.

THE POWER OF SPECIALIZED KNOWLEDGE

What struck me most about Jon's approach is how specialized knowledge in overlooked niches creates extraordinary opportunities. While everyone chases the latest multifamily syndication or fix-and-flip strategy, Jon quietly builds wealth in group homes serving mental health and sobriety populations - markets most investors don't even know exist. His willingness to serve populations others avoid creates both competitive advantage and social value.

This conversation reminded me that the best deals often hide in plain sight, in markets others consider too small, too specialized, or too complicated. Sometimes the path to financial freedom isn't about following the crowd into the hottest investment trend, but about finding the overlooked opportunities that match your values, expertise, and long-term goals. As Jon's journey shows, the investments that "drove you crazy" might just lead you to your most profitable niche.

Listen to the full episode of DealQuest Podcast with Jon Wells: Available on all major podcast platforms

FOR MORE ON JON WELLS:
https://www.linkedin.com/in/jonwellsrealtor/
https://abetterwayrealty.com/ 

FOR MORE ON COREY KUPFER
https://www.linkedin.com/in/coreykupfer/
https://www.coreykupfer.com/

Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

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