BiggerPockets Podcast 075 with John Fedro Transcript
Link to show: BP Podcast 075: Mobile Home Investing and Getting Started With John Fedro
Josh: This is the BiggerPockets podcast show 75.
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Josh: What’s going on everybody? This is Josh Dorkin, host of the BiggerPockets podcast here with my fabulous cohost, Mister Brandon Turner. Something’s wrong with me.
Brandon: Something’s wrong with you? There’s a lot of things wrong with you.
Josh: The whole ho-host thing.
Brandon: Yeah, you and your pronunciations are, you know—
Brandon: Oh, is that what the word is?
Josh: That is the word, yeah.
Brandon: Whatever. Well, today is number 75. It’s a good episode.
Josh: It is. We’re excited. There’s lots of goodies to come ahead, and we’re certainly pumped about it. How’s your summer going so far, Brandon?
Brandon: Summer? You forget, I live in Washington. Our summer doesn’t start until, like, August 3rd and ends, like, August 5th.
Josh: Aw, everybody let’s put a big “aww” for, Brandon.
Brandon: Yeah, aww, but it’s been good. We’ve been getting a little bit of sunshine, but today, for those Hunger Games fans out there, today is the Quarter Quell of the BiggerPockets podcast.
Brandon: So, I know we got a lot of those teeny-bopper Hunger Games fans.
Josh: Nice. Well, we’re very excited, and today we’ve got, as we’ve said, we’ve got a really great show. Before we jump into that let’s get to today’s—
Josh & Brandon: Quick Tip
Josh: Alright, today’s Quick Tip is: we have an Events and Happenings forum on BiggerPockets, and for those of you guys who are looking for alternatives to real estate clubs that might already exist in our area, or might want to learn about real estate clubs in your area, or any other kinds of events that are happening check out the Events and Happenings forum. We’ll put a link in the show notes at BiggerPockets.com/Show75. There you can find out about local meet-ups, about any other kind of programming that is happening local to you, and if there isn’t anything that’s cool that’s happening, and everything in your area is an upsell pitch-fest, or whatever and you kind of want to do your own thing you can use that to plan your own event as well, and let folks know to come out and join you. So, check out the Events and Happenings forum on BiggerPockets.
Brandon: Quick Tip.
Josh: There it is. Alright, so on today’s show we’ve got a real estate investor from the Austen, Texas area Mister John Fedro. John has built a pretty cool niche in the real estate world focusing 100% on buying, renting, and re-selling mobile homes, and soon mobile home communities. He’s built a pretty good business, and life for himself and John’s going to go into some pretty cool details in the field of mobile homes. Now, that said, don’t just click off here guys because we’re going to talk about a whole lot more. We’re not only going to talk about mobiles. The second half of the show we really go into depth on a lot of cool things that any real estate investor can learn from so if you’re sitting there thinking, “oh, well if this is just about mobile homes what do I care?” you still want to pay attention because John’s doing a lot of great things, and has some seriously good insight into how to build a successful real estate business regardless of the niche that you’re in. So, pay attention.
Brandon: Yeah. Pretty much anything he talks about today can be applied to, whether you’re doing mobile homes, or whether you’re doing wholesaling, or flipping, rentals, I mean, mobile homes kind of touch on all those things so definitely, definitely check out the show. I think you guys will like it a lot.
Josh: Awesome. Well, with that why don’t we jump in. Really quickly, if you haven’t already left us any kind of feedback, ratings, reviews, things like that on iTunes we definitely appreciate all of that feedback. That helps us out, helps us to get the show out, and, once again, if you want more information about anything that we talk about, or if you just want to ask questions to John about the show: BiggerPockets.com/Show75. With that why don’t we bring him on? And, by the way, there’s going to be some tension guys. You’ll find out in a second. John Fedro, welcome to the show, man! Good to have you.
John: Hey, glad to be here! Thank you so much for inviting me.
Brandon: Awesome. We’re glad to have you.
John: For the third time. Excellent.
Josh: Well, actually, now that you bring it up, this was the second time, wasn’t it?
John: This was the—you know, my schedule is so here and there. I apologize. How long ago was that? Over a year?
Josh: That was, like, a year ago. Yeah, I’ve been holding onto it a little bit, yeah.
John: Cause BiggerPockets, they keep emailing you, and hounding you, “get John Fedro on this podcast!”
Josh: Not quite.
John: Is that not the case?
Josh: Not really what’s been happening.
John: When we have a lull we can put John Fedro in.
Josh: Anyway, well, so John was going to do the show last year, and it kind of fell apart, and I’m not going to place the blame on anybody, but John, but you know, it was John’s fault so now that he’s here I won’t give him any grief about it.
John: Except for the five other times, though. We can edit this, right? So, it doesn’t look—
Josh: No, this is all staying, dude.
John: One take.
Josh: Alright, man, so welcome to the show. I’m giving you grief, but for those of you who don’t know John was a long time contributor of BiggerPockets on the blog. He had been writing for us years, and years, and years ago, he was also a speaker at the BiggerPockets summit that we had a couple years ago, and John knows his stuff, and we’re definitely excited to have him on the show finally.
So, let’s kick this thing off. Ror those people who don’t know you, John Fedro, how did you get into this real estate game?
John: So convincing. Thank you for the introduction.
Josh: Yeah, I’m happy to do it, man.
John: You getting over a cold? What’s going on? It was almost 13 years ago, and the short version is I knew that I didn’t want to work for someone else. I was just doing one half-ass job after the other. I wasn’t a very good employee, and I knew that there was something better for me. I was in two Multi-Level Marketing businesses that never went anywhere, picked up my roommate’s—he had a late night infomercial type of book that was on his bookshelf. I picked up that, I read through it two times in one weekend, and just thought, “I can do this,” I had no idea what they were talking about. I didn’t even know what a deed was to a home, but I knew that I could do it, or I wanted to at least give it a try. I believed in myself, and that was the starting point. That was the catalyst to get me out there, start taking action, and, yeah, I guess that’s the tipping point of when I got into this business. When I even learned that real estate was a business.
Brandon: So, you read this book, and then what came first? What was your first action step? I mean, did you immediately go out and buy a property, or did you do some research? I mean, what happened next?
John: Great. So, yeah, I was 19 or 20 at the time, I think I was just about turning 20. I looked 15—
Josh: Still do.
John: I had very little money, a couple thousand dollars—thank you, sir. I know. When I go in to get liquor or beer, and they don’t card me anymore I really get upset about that. So, I had very little experience, very little capital, very little training, had this book. Went out, did everything this book said to do; I knocked on doors, I wrote letters, I put out signs, I did everything that they told me to do. I went through my $3,000 life savings very quickly at the time. Had nothing to show for it. Went to meetings, went to groups, just through no fault of effort being out there every single day. I either could not find a deal, or could not put a deal together. Back then when you are very green it’s kind of tough to tell what the problem is. Long story short: I was looking for the same deals that everyone else was looking for. I certainly didn’t want to invest in manufactured housing, or mobile homes. I had never lived in one myself.
So, two months after I got started with nothing to show for it, I mean, out there daily, again, knocking on doors being very outside my comfort zone, stretching myself, making offers, could not get a deal. My first deal, first and second deal happened simultaneously almost, one was for a mobile home inside of a part, and the other was for a mobile home attached to private land, and they both happened, like I said, around the same time very quickly.
Brandon: So, you talked about they were both mobile homes. Maybe we can step back before we get into the actual deals. Why did that all of a sudden occur to you? Why did you think, I mean, mobile homes are not something that most investors jump to. I mean, my parents told me from the time I was born, you know, “never buy a mobile home. It goes down in value. It will never go up in value,” and that’s just like the lesson that was engrained in me. So, why did it ever occur to you that, “I should go and buy a mobile home”?
John: It didn’t. In fact, I was so green I didn’t even know to ask if this was a mobile home or not. I should have—
Josh: The wheels didn’t give it away, right?
John: Something’s different here… I’m not sure what it is. Well, the seller at the time, and this is for the one in the park, she was only asking $8,000 for it, and at the time, obviously, that was a super deal for a traditional home so I immediately got off my chair, I went out to see it, and I started getting closer to the property, and I turned inside of a mobile home park and that’s when I realized, “oh, this is a mobile home,” so still having no idea what I was doing, just being very scared, very young, I was just thinking, “how the heck am I going to help this seller? This is an adult where she is in a situation where she needs to sell, I don’t know what the heck I’m doing,” and to go into the first and second deal I was driving to this park, I was inside the park, I was about 30 seconds away from this mobile home, and just this overwhelming wave of nausea came over me. Like, “what the hell am I doing? What am I doing here? I’m so young? How am I going to help this person?” I didn’t look good; my car was beat up at the time. So, just this wave of nausea came over me, and I have to pull over about 30 seconds from the home, and I got sick right on the side of the road, and at that moment I was thinking, “what the hell do I do? Do I go home with my tail between my legs? Do I continue to help this seller? I know that she’s somewhat motivated, she sounds like she needs help, she’s a good person, what do I do?”
So, I went there, breath probably not smelling the best just like I was, and that was a great deal. I ended up purchasing that deal a short time later. I can go over the numbers or not, but it was wonderful.
Josh: Yeah, why don’t you jump in on that. So, it was $8,000 is what she was asking, correct?
John: Correct. So, she was asking $8,000, she started at over $20,000 at the time, but I had found her when she was asking about $8,000. I talked to her with some negotiation talked her down to $3,000, and that’s payable at, because remember at this point I had used up my $3,000 life savings that I had from working part time jobs here and there, but I had used up my full-time life savings to market to single-family homes, barely had any money. So, the deal that I had to structure with her was $3,000 payable as $300 a month for 10 months. So, I gave her $300 that day.
Now, what she needed the money for she didn’t really need the money to actually move and leave so that was fine with her. She took the money, and she left, and I was able to then sell the home for a substantial profit that I can talk about or not.
Josh: Yeah, no, very cool. So, let me ask you: you’re green, you’ve seen this property, it was listed at $20,000. How on earth did you talk her down to $3,000? I mean, that seems like a masterful move right there, and you’re pretty green so how did that happen? How did that go about?
John: Great question. This is almost akin to having too much money, or having too much credit at your disposal and then making a bad deal. When you have money you’re just going to throw money at a deal. I didn’t have money, I didn’t have credit at the time, so the deal that I could put together, and granted I wanted to get the deal for as inexpensive as I could. Basically, she’s not going to do anything if it doesn’t make financial sense to her, and vice versa, but ultimately that’s what I could do. That’s what I could afford, and thank goodness that I did because the mobile home is worth what it is depending on how you sell it. If you sell it for cash, or if you sell it for payments, if you just rent it out, but how I talked her down from, say, $8,000 which is what she was asking at the time down to that $3,000 mark it wasn’t a masterful negotiation it was just talking with her, and making her understand how I could help. Her other options that she had, what I was willing to do, what I wasn’t willing to do, the home needed a couple hundred dollars in plumbing work, but literally that was it. It’s a beautiful 4-bedroom, 2-bath with a big deck, central heat and air, all appliances included, it was gorgeous, and I’m so glad that I did make that deal. Maybe at that point some part of it was luck, or finding her because that really set the bar for me to understand this is what’s possible in this business. If I would have overpaid, which so many people have done, you know, green people have paid for mobile homes, then it would have taken me a year or more to get all my money back in which case I might not still be in this business.
Josh: So, you helped her out of her situation, you gave her a deal, you financed it out over 10 months, and then you went out and sold it for substantially more after fixing this thing up. What did you end up selling it for?
John: With very little fixing I sold it the first time for $27,000 and change. That was with payments with I think about $3,500 as a move in fee.
Josh: Really quick, are you renting this out, or had you actually sold the property?
John: Almost everything that I do now is, and back in the day even, was selling. I would collect payments, and the home would be sold day number 1. I’m not answering phone calls to do a clogged toilet, I’m not maintenance, they fix up their home, they own it, they’re just paying me.
Josh: You hold the note, okay.
Brandon: I want to dig into the numbers. Go over again, if you would real quick, you sold it for how much, and how much were the payments, and what did that look like? When you actually turned around to sell it.
John: Absolutely. So, the first time I sold it was for $27,000, I think it was $27,500, and it was $3,500 as a move-in fee, and then monthly payments of $750 per month, that includes lot rent which, I think at the time, $330 which included water. So, I was cash flowing $400+ on that particular home plus I had made all my money back with the move-in fee from that buyer. Again, this is a good-looking home.
The second time I sold it—now, for the first four or five years I was ridiculously green, I barely pre-screened anybody. Basically if you had money, if you had a pulse, I would let you into my property. Ridiculous! Just ludicrous, and I had 100%, everyone listening, 100% turnover rate. The people who I would sell homes to, go figure.
Josh: That’s not the 100% good turnover rate. That is the 100% bad turnover rate.
John: If you never want to sell anything, and you want to keep getting your mobile homes or properties back don’t qualify people, and put in risky people. So, that was the first time I sold it. After a couple of years, they called me, and said that they had to bail so they bailed. Second time I sold it for, and the second time I can’t remember… I’ll go over and look in my notes, but it was, like, $32,000, and they only stayed for a few months. The third time I sold it was the time the people actually stayed in there for the full 8-year term, and that was just under $30,000-$38,000 that I sold this home for, again, with payments, not cash, not bank funded.
Josh: You’re not collecting anything up front?
John: Oh, yeah, yeah. I always receive a move-in fee for sure.
Josh: Okay, so, like, the move-in fee is the upfront. It’s almost, like, it would be akin to the down payment on the home for a traditional house, yeah?
John: Correct, and depending on the condition of the home when I sell it that’s what I base my move-in fee off of.
Josh: Okay, so, because I know nothing about mobile homes, and I’m sure lots of people are sitting here thinking the same thing, right? Why do we care? What’s the big deal? But these are a means to an end, and they’re certainly, if you know what you’re doing, a profitable endeavor in real estate, but, again, I just want to clarify: when I go and I buy a property, say traditional financing cause it’s easy, I’ll put 20% down to the bank, and then I will make my monthly payments. In mobile homes that 20% down, whatever percent, your move-in fee, it’s the move-in fee, right? It’s the same thing as the down payment? Am I confusing that at all?
John: That last sentence you said is very accurate. When we go to resell the home that is what I call the down payment is the move-in fee, correct.
Brandon: Because you are acting as the bank, and so they put a down payment, you’re carrying the mortgage, you write up a note with them, I’m assuming you go through that same process, is it all the same as a regular house, then?
John: Great question. On land very similar. Typically I lease option for a year or two before I go ahead and switch over to owner-financing, and in a park, no, it’s different. With new laws that have come out earlier this year, and for the past few years, we do not write a mortgage. We are not the bank, but we do collect payments so it’s more of the terms of the sale than it is becoming the bank in regards to a mobile home in a park. On land very similar to single-family homes, does that make sense?
Josh: It does. Let me clarify on a park versus on land. On land would be: I own a lot, and you own the mobile home itself that sits on my lot, and in the mobile home park the home sits in the park, and you own the home in the park, and are paying lot rent to these guys to be able to keep it there, is that right?
John: That’s certainly a type, yes. Going back to your first example: any mobile home on land, or attached to land, or on private land is going to be when I, the investor, talk to a seller they own their land, they own the home, I want to buy both of those from them. That’s a mobile home on land. From there I can do the exit strategy that you had just mentioned where I can rent the land, but sell the home, but anyway. A mobile home on land you’re owning the land as well. In a park you never own the land.
Josh: Gotcha. So you are buying the land as well.
Brandon: So, well, let me dig in there a little bit, and I know we can probably get into this later, but might as well do it now. So, when you are buying in a park then you talked about a couple things; you mentioned the lease option, and I want to touch on that, for those people that don’t know what a lease option is, but let’s talk about you said you don’t—when you buy in a park you don’t usually actually buy, is that correct? You’re not acting as the bank so how does that actually structure now?
John: When you’re purchasing from a mobile home seller inside of a park you’re purchasing their home you’re never purchasing the land. If you do purchase that home on payments, then you would structure the deal accordingly depending on what you work out with the seller.
Josh: So, John, my understanding is it’s kind of similar to financing an automobile, is that right? I mean, it’s more like that than it is when you’re buying in a park than it is buying the home on land, is that fair?
John: In what respect? Mobile homes in parks in most states are personal property like a car?
Brandon: So you’ll do a bill of sale, then, is that correct?
John: In many states you’ll use a bill of sale, you’ll use a title. I’ve gotten a chance to call around all 50 states and their manufactured housing divisions learning what paperwork they use, what they don’t use, the procedure, the licensing, etcetera, etcetera. So, yeah, bill of sale very similar to a car, a title very similar to a car is what you’re going to find in many states, not all states. Yeah, and they’re pretty simple. Now, when you go into the question that you had about structuring notes, and structuring mortgages depending on the paperwork you’re using, depending on how you’re structuring those, again, we can get into that, but it’s going to be very specific so—
Josh: We’ll leave that to the lawyers.
John: Yeah, we could talk for a few hours on how to do that correctly.
Brandon: So, maybe we can step back a little bit and walk me through because I feel like I’m grasping 80% of how this all works. So, what I’m wondering is: how does a newbie who’s just getting started, how do they look at this whole mobile home thing? I mean, what are they doing? Today are they going to go find a cheap mobile home in a park, put it under contract, pay them monthly payments and then sell it with monthly payments? Is that all they’re doing? Or what can you kind of expand, in a real basic kind of beginner steps, what are we looking at?
John: Sure. So, if you’re going to go out there and purchase a mobile home, and mobile homes on land, mobile homes in parks, they’re two completely different animals, but if you’re starting out in this business I want to give you a 30,000-foot view, like, clarity of your area, of your market. Every different market is different. We have to know how you’re going to sell homes, you have to know what they can sell for monthly, what they can sell for with regards to your move-in fee, and you have to know how many buyers are out there. That’s the first thing.
Then having clarity, not just of one park that’s next to your house, or one park that’s right down the street, but really understanding your entire market. What’s for sale? Who’s selling what? Is the park selling anything? Let me talk to every single seller. Let me talk to other investors. This doesn’t take a long time, about a week or so, to find, not just in your county, but in the surrounding area and the surrounding counties, you have to know what is for sale. It’s so easy to overpay for a mobile home. Every mobile home that I purchase, that I help folks that want to purchase mobile homes, we’re always buying them for—everything that we put out we make our money back within the first 6 months to 10 months max. If it’s over that that’s just not our model. I don’t want anybody buying a mobile home that’s listening to this, and then having to wait 3 or 4 years to get all their money back. That’s not how this business works. That’s not how buyers and sellers with operate. So understanding who the buyers and sellers are, what they want, and then knowing which properties you want to purchase on and move on, once you have that clarity in your market, I mean, there’s definitely a method to the madness, but I hope that that made sense to get clarity and then understand what they can sell for.
Josh: Can we dig on that? So, how do we value a mobile home? Let’s start there. I mean, what’s one of these things worth? I mean, is it valued similar to traditional property with comps, or is there another way to go about doing it?
John: A mobile home on land you can get comps to depending how the market is it may, or may not, be as valid. Depending on the home if it’s financeable that’s another, obviously, barrier as well.
So mobile homes on land you can look at comps and that’s more valid. Especially because there’s land that you’re going to be purchasing as well.
A mobile home in a park now, that is something completely different. Now, a mobile home in a park you can have two mobile homes that are identical side-by-side, and one seller needs to sell within this month, the other seller has savings, they have time, they don’t need to sell that fast, and you can purchase the home on the left from the motivated seller for a couple thousand dollars, and I say a couple thousand dollars because if it’s any more than that then I’m not going to pay for it, and you shouldn’t pay that either.
Now, if the seller wants more, if they can get full-price, if they can wait to find a buyer in the market with cash then they can do so, and they can sell it for more. So you’re not exactly just looking for the mobile home that is beautiful, and pretty, and ready to be sold, or fixed up a little bit and ready to be sold, you’re looking for a motivated seller.
So, how do you value a mobile home? In a park you have to know what they can resell for first. That’s a great way to find out: okay, what can I resell homes for? What will a three-bedroom sell for in my area? A two-bedroom sell for in my area? Does it need repairs? Does it not need repairs? Then when you purchase a mobile home from a seller, and this is me talking – you can purchase however you want to of course, but I don’t want it just to be where you’re doubling your money. That is ridiculous. If you’re in this market just to double your money you can do that very simply, but the returns that mobile home investors are making, especially when you’re holding payments, are substantially greater.
Brandon: So basically you’re looking at comps, correct? I mean, the same way you say, “well, that mobile home down there in the park on the other end sold for $19,000 and it was beautiful, this one is not beautiful,” is that what you’re doing to find the value?
John: Not at all because the—and this is something, to give you more clarity and to understand who we’re actually selling to, if you just want to make a business out of selling to conventional buyers who are going to go to a bank, or buyers with cash that are out in the market you’re going to be waiting a very long time to sell your mobile home because you’re competing with everybody else. Everybody wants cash, everybody wants a fast sale so if you’re selling like everybody else, and, yes, you can expect comps if a home very similar to yours sold in the park a week ago then possibly yours will sell for that same price if a buyer comes along that wants to purchase that model home on that street corner in that park with those amenities, but often times there aren’t those kind of buyers. Only if we’re in very hot spot areas do you have buyers just throwing cash at mobile homes.
John: So it doesn’t matter so much the comps because very few people sell mobile homes on a payment basis. So comps really don’t matter, it’s really that testing before you get into the market and understanding what buyers will pay.
Josh: Okay, so I’ve got two questions. Let’s talk about the payment basis, selling on a payment basis versus something else, and you had talked about finding the motivated guys, and I want to get into that. So, again, you’re talking about selling on a payment basis so that’s just referring to what we had discussed earlier where you’re kind of the bank, right?
Josh: Okay. So, on the motivateds what are we doing? I’m assuming we’re not doing mailings like we would, or yellow letters to absentee owners here, there’s a whole different process to find motivateds. Is it word of mouth in the mobile space? What are we doing?
John: Great question. So, a lot of people when they come into this business they think that it’s very similar to single-family homes where you can find a deal, talk to the seller, and you know if it’s going to be a deal, you make the offer and then if they don’t take it you leave.
So, with mobile homes in park we’re doing a plethora of advertising. It’s not just one method that is going to find you the deal, and also you can’t—well, you can do whatever you want, but in order to cherry pick the very best deals that you want and invest in the homes that you know are going to make you your money back in a few months and then everything on top of that is profit. By the way, when we’re selling in parks typically anywhere from 5-10 years is what we’re receiving those monthly payments when we resell.
So, the question that you had was finding those types of motivated sellers. We can’t predict where lightning is going to strike, but we can have many, many lightning rods in our area.
Josh: That’s pretty tweetable, by the way.
John: Oooh, I like that. Give me some credit for it. The wait has been worth it.
John: Eh, it’s debatable. I don’t want you being an expert, again, just in your county. You have to know because these are mobile homes, because we have to purchase them below market where you’re making a considerable profit, and we have to find that seller that is motivated we’re not just looking in your county, but we’re looking in the surrounding counties as well.
So you have to cast a big net. Make many, many, many offers because some sellers will sell to other people, and if sellers can sell to other people before they have to leave great, I want them to. Every seller should get just what they want, make the money that they want. It’s their home, they should get what they want. If they can’t then they can go ahead and accept our offer, and our offers are typically very good. We let them know how we can help, how they can also sell, but long story short is to not just know your area, but to know the surrounding areas and make offers to every single seller. Have that bird’s eye view, know what’s for sale, and make offers to every single person.
Josh: Do park managers help? I mean, can you get in, buy some chocolate cake for the park manager, and get the inside scoop on who’s ready to get the heck out, or what?
John: You have such a sweet tooth, Josh.
Josh: I’m a sweet guy, yeah.
John: By the way I got those brownies! Thank you so much. Last year.
Josh: Oh, the brownies that I sent you last year? You’re thanking me now in June?? Wow. Awesome, man. Awesome, I appreciate it. Better late than never. My pleasure. They were good, weren’t they?
John: Oh! They were so good. I thought you may have gotten them for me almost as a punishment cause I didn’t get off the couch, I just ate them and ate them one night. One whole night.
Josh: I’m sorry then cause, yeah, that’s not good. No, but, seriously to the question about sweet-toothing, so the speak, the park managers.
John: I’ve done that in the past. Other folks who I’ve worked with have done the same things. Yes, to answer your question: yes. Park managers sometimes they are the gate keepers to the park. Other times they think that they own the park, and run the park, and basically they’re just people. They wake up on the right side, and the wrong side of the bed every day. They know what’s for sale in their park. They can go ahead and feed you deals, give you credibility, or they can take that away and they can make your life a nightmare. Does chocolate cake and donuts in the morning work sometimes? Absolutely. However, just even having them know you. Meeting them once and then wondering, “well, why? I wonder why they didn’t give them any deals,” well, it doesn’t happen the first time. They have to know that you’re in the market, they have to know that you’re a person who’s going to do what they say you’re going to do and it’s not just a fly-by-night, and they may have gotten burned by an investor in the past.
So, something I like to do is, whenever I do receive a lead from a park manager, is to ask them, “how can I say thank you to you? What would make you feel appreciated? You’ve give me this lead, thank you,” and then I let them say, and sometimes it’s a fee, sometimes it’s a gift card somewhere. At minimum it’s me giving them a gift card after the fact.
Josh: A little pay-o-la.
John: A little pay-o—oh! Okay. At first I thought you said paoti.
Josh: Oh, no.
John: I guess it depends on—
Josh: Oh, jeez. No, no, no.
John: Is that legal there too?
Josh: Yeah, in Colorado? I don’t know. Aren’t you coming up here?
John: Yeah, in two weeks maybe.
Brandon: So what else, besides park managers, you know, in casting that big net I’m assuming, I mean, are you doing direct mail at all? Does that work in mobile homes? Do you send out letters? Do you put up a sign in the mobile home park? How does that work?
John: Not in the park. Park managers don’t like that, but as far as signs go, “We Buy Homes,” “We Buy Mobile Homes,” whenever you leave a park you can make a left or a right typically, and then you’ll come to a stop sign or a traffic light; put your signs there don’t put them on the property, park managers don’t like that. Parks have bulletin boards; you can hang typically an ad right there if you ask permission. I don’t do direct mailings inside parks, I do direct mailings to mobile homes on land, neighborhoods with land, streets with just mobile homes and small patches of land.
Brandon: Why don’t you do them in parks? Why don’t you direct mail in parks? Will the park manager go and remove them all from the mailboxes?
Josh: That’s a federal crime.
John: Now that’s something that you can do that I have experimented with when I’ve gotten permission is to have somebody go and put flyers on everybody’s door and that’s a great way to market as well. If the park manager allows that then by all means direct mailing or physically putting something on a mailbox inside a park or their door would be ideal. Mobile homes inside parks typically you can’t get those addresses on the county records. You’ll only get an address for the entire mobile home community, and then inside the community they’re just broken into lots so it’s typically not going to be 123 J Street.
Josh: Ah, interesting.
John: It’ll be Lot 5 of this Which you could do, I mean, obviously they’re receiving mail so you could just mail to every single lot, however I don’t out of respect and it getting back to the park manager which, I have to think it really would, I don’t want to. I’ve disrespected a park manager by doing that, and I won’t do it again.
Josh: “You’re dead to me!”
Brandon: And furthermore it would make sense. Generally you don’t hear about real estate investors going and direct mailing a whole entire community. They go and pick out the motivated ones in that community, and so it would make sense not to. I mean, I know some people do every door direct mail from the post office, but typically that’s not what I hear people doing because that’s a lot of money to mail to 1,000 people who are all happy home owners. There’s no point in mailing to them.
Josh: I’ll tell you what: I used to live in a condo building and it seems fairly similar. This condo building there were two agents that represented pretty much they owned the place, right? So, there were 200 something units, 300 maybe, in the entire property, and almost everybody sold through these guys because it kind of became their turf, right? They were in with the board, and they went to every meeting and they shook people’s hands, and suddenly everybody knew, “okay, if I’m going to do it this is the person I’m going to deal with,” and it seems like that’s probably a better way as well. Just show up to community events potentially as well, let people get to know you, as an alternative to get people to know and trust you as well.
John: Absolutely. Two things there. The first one being: your first, anybody that really makes the decision, “okay, this is something I really want to consider,” realize that your first three months in this business nobody knows you who are, nobody knows how you can help park managers, sellers, owners of mobile homes so you obviously have to take time in the beginning, I would say massive action, to get you caught up to where you’re a “household name”. Now the second thing: Brandon, you were mentioning that people don’t like sometimes to mail out to 1,000 homeowners not knowing if they even want to sell, or if they are selling. They could be a happy home owner.
Mobile home owners in the future mobile home owners will eventually one day most likely want to sell. We know, or I’m telling you, that mobile homes when they go to resell they are going to be somewhat difficult to sell only because you’re selling to a smaller percent of the population, and then of that percent who does want a used mobile home on that particular size of land now they have to get qualified, they have to have money, the home has to be approved by the bank as well so if you mail to a thousand mobile home owners you are going to receive more interest than typically if you were going to mail to 1,000 single-family home owners as well because we know over time that mobile home owner eventually they will want to sell. Eventually if they can’t sell they’ll be a motivated seller. So, again, just knowing your buyers and sellers. That’s very important.
Josh: That makes sense.
Brandon: Yeah, that does make sense. People are going to be a lot more motivated who live in a mobile home just for the fact that it’s a mobile home and they want to eventually move out of that so that makes perfect sense. What about if somebody calls then on a deal? Let’s kind of walk through that process. They, you know, for whatever reason they see one of your marketing campaigns, something, they call you and they say, “I’ve got a mobile home,” what do you do? I mean, walk me through that process. I call you and I say, “hey, John, I’ve got this ugly mobile home and I don’t know what to do with it, I don’t like it,” what do you say?
John: Sure, oh sure. So, there’s three things that I do on the very first phone call: I qualify the home, find out about the home, what is it? For people listening your first, second, third deal, the first few aim for the path of least resistance. People like 3 bedrooms. People like pretty homes instead of ones they like to repair. People like family parks. Well, people like senior parks as well, but a majority of people because there’s a bigger demographic like family parks. So, with that said I’m going to qualify the home, and hopefully it’s going to be a 2 or 3 bedroom. Hopefully it’s going to be a family park. Hopefully the park is going to be an average or low lot rent. If that passes, and the home is nice and I want to look at it further I’ll then talk about the seller. Why are you looking to sell? And then I’ll qualify the seller.
So, I qualified the home, now I qualify the seller. Why are you looking to move? What would you like? When would you need to move? What else is for sale in the area? The park? What other offers have you gotten? And talk to them on a conversational basis. Then I’ll go ahead and make offers over the phone on what I’ve purchased before based on what they’ve told me about their home, and then if they agree, if we’re in the same ballpark, I’ll set an appointment.
Brandon: Okay, so then you’re not wasting your time going out to look at every property.
John: I don’t want to waste anybody’s time, mine or theirs.
Josh: You know, it’s pretty much exactly what you should be doing when you talk to a motivated seller on a traditional property.
Brandon: Yeah, I mean, this game is all the same, like, there’s obviously differences, but I think those three step things are perfect for anybody who’s just looking to talk to motivated sellers.
Josh: Yup. So, for anyone listening, definitely pay attention, and those are some good, good notes to put down. What about—so that was the first step was you’re going to qualify them. Then what happens?
John: So after I’ve qualified them and we’ve set an appointment, go out to that appointment, depending on what they’ve said I’m going to go that day or go in the next day or two at most, check on the home. Typically I don’t make an offer while I’m there. I typically let the sellers know that I work with partners, or other investors, I have to make decisions with them so take pictures, explain how our business works while I’m there, build more rapport with them while I’m there. Walk through the home, test every inch of it and then leave and about 24 hours later call them with 2 to 3 offers.
Brandon: 2 to 3? Explain that.
Josh: Yeah, yeah, please.
John: Sure. I like to give sellers options on how we can purchase their home. Also I’ll explain to them in our first phone call there’s a lot of bullets in our belt: we’re paying cash for mobile homes, we’re making payments to the seller, we can do trades, depending on what the seller wants and what they need, and a bunch of other variables, again, we can give them cash, payments, or a combination of both. So, my three offers are: cash, payments, and typically another payment option as well.
With that said they’re very spread out. The first offer is usually very conservative it’s cash, cash is very black and white so our first offer is something to the effect of $1,000-$4,000 cash and then we get very close, or we can meet their asking price if we give them payments. So I want them to understand; okay, they are making a cash offer, but they can get very close to my asking price if I can accept payments and here’s the kicker: I want to hear from them over that phone call when I give them the offers, what did you think? What did you think about offer #1? What did you think about offer #2? #3? Typically they’re not loving any of the offers because, again, I’m an investor, I have to make money. I want to solve their problems, but we’re not going to do anything if we don’t meet eye to eye so then from that point then we’re coming up with a win-win offer. I gave you my offers that would be winning, then they come back with, “well, we can’t do that, but here’s something that we can do,” and ultimately if we’re too far apart, we’re too far apart, but often times we can make a deal, and if not then that seller can always call us back. A temporary no can definitely turn into a yes down the road.
Brandon: Yeah. Just coming from a marketing standpoint. Obviously, I do a lot of marketing at BiggerPockets, I do a lot of marketing in my real estate business. One thing that when I read marketing blogs everyone talks about is that idea of three things. I think that’s genius that you do that because it really works well. There’s just something about the human psyche that responds well to three options. Like, if you’re going to go buy, I don’t know, whatever it is, there’s always three options for what you’re going to buy, and I actually turned this around on a flip I did last year. I sold it last January, and I put this flip for sale for $110,000 and then in the property when they came and looked at it there was a piece of paper there that said: $110,000 for the house, or $115,000 and I’ll add a ductless heat pump, or $120,000 and I’ll throw in granite countertops, and so what that does to people is: normally they go into a house and they say, “okay, this one’s $110,000 compared to the one down the street that’s $108,000, or whatever,” so they’re comparing one to another so instead they compare, “well, this one’s $110,000 versus these other two packages,” so it takes out the neighbor, takes out the other factors that are out there and makes them focus only on your own. So, that’s just a tip that I want to throw out there to people: yeah, make multiple offers to people with multiple options and it can really work well. So, anyway. Thought I’d throw that out there.
Let me actually move on to a topic that’s—red flags. On a property you go out and look at one, and what do you normally look at in a mobile home and you’re like, “oh, no way I will not touch that mobile home,” or is that ever the case?
John: Oh, absolutely! Yeah, I’ve written an article on the site that definitely talks about that. There are a few things that I’ve realized that you may be surprised about that are—most things in a mobile home can be fixed, and most things price cures everything when, if we need to resell it, we can lower that move-in fee, we can lower the monthly payments, keep the price of the home the same, but we can make it attractive to the end user. There are some things, and I would even go farther than red flags, because red flags are just sort of a warning, I think, but say an absolute skull and crossbones—
Brandon: Like a stop sign.
John: Yeah, like a stop sign. Would be the notoriously small bedroom on a mobile home. Typically on a single wide if it has three rooms you’ll find one of those bedrooms is just notoriously small. It’s not a bedroom, I mean, it is a bedroom, but most people if you go into this home and you see this bedroom you’ll say, “this isn’t a bedroom”. Also if it’s functionally obsolete, if the ceiling is too short, if it’s—well, senior parks are definitely alright. Even a one-star park is alright, there’s a buyer for that. If there’s chronic problems throughout the home, I will not invest in it. Other people who I’ve worked with do, they like to do repairs. I don’t like to do that many repairs. There’s plenty of deals out there, and I don’t touch one if it’s just got chronic roof issues throughout the home, chronic floor issues, there’s holes in the floor throughout, I don’t touch that, but the small bedroom that’s a huge red flag. Smells, well, smells can be cleaned up usually so really just the small bedroom.
If I don’t like the park manager, or their application process is ridiculously thorough I won’t invest there either so really those are the deal killers: A too-strict park, and then a small bedroom
Josh: That’s interesting, and, again, going back to the idea of buying a condo, or something in an HOA, sounds kinda similar. You know, I mean, I would never buy an investment property in an HOA just because you’ve got these, you know, it’s hard enough dealing with the buyers, the sellers, dealing with all the folks you deal with normally as an investor, but dealing with a board or park managers complicates things. So for what you’re doing finding the managers that are easy to work with whose rules are fairly easy to deal with seems like a good method.
Brandon: That said, I want to call you out on something here, Josh, real quick. So here’s my thought: you obviously had a very bad experience with a condo association, but looking back, first of all I’m curious, how much research did you do into the condo association before you did it, and then how many books, forums, podcasts, whatever did you research to try to overcome those problems? You know, cause this is before, probably, your investment days.
Josh: Oh, sure. Absolutely.
Brandon: So a lot of newbies say, “I will never do X, Y, Z because I’ve had a bad experience,” but—
Josh: I would still never do it. Not only for my own personal experience, but I’ve got a lot of friends who’ve owned properties, owned investment properties in HOAs. Mine stems from, I will tell you: I lived in a building, the HOA—what tends to happen in HOAs, and this is a gross generalization, but we’re going to run with it anyway, you know, everybody in the world we all have some need, some desire to have power, right? The world is all about power we’re all kind of trying to get our piece of pie, and, you know, most people in general have no power. The only power they may have is over their power or something else. Well, what happens is folks go get into these HOAs and suddenly they have a little bit of authority, and little bit of power and they like to wield that power and I will put it to you to ask people you know who have bought property in HOAs if this rings true because I know it has for almost everybody I’ve spoken to. So, what happens is: you get these HOAs where people get power-hungry and they start making rules that are kind of tedious and difficult and suddenly you’re dealing with stuff.
So, in my experience, listen, I dealt with an HOA who was run by a tight clique of people who threw people out of the building that they didn’t like. I dealt with an HOA that refused to buy earthquake insurance in Southern California, you know, and I’ve got an investment in this property and I’m sitting here without earthquake insurance and I say, “well, that’s crazy! Let’s do something about it. Let’s rally the troops,” and suddenly I’m playing politics, and I’m an owner. I don’t have the time or energy to play politics, and I think most owners, and most investors don’t want to deal with that either.
You know, in places like New York City where they have co-ops you can’t even sell your property. I mean, selling your property you need permission and approval to who you can sell that property to so when I say I would never buy in an HOA I mean it, and I mean it because there’s difficulties that come with an HOA. It’s an extra layer that you as an investor don’t need to worry about, shouldn’t have to worry about. It’s hard enough to go out and find good deals, get the deals handled, you know, if you’re a land lord deal with your tenants, but to worry about all this other stuff: is this board going to throw up extra assessments? Is the board going to throw in extra fees? Things like that, or are they going to change the rules and do something crazy, which happens all the time, is that going to happen? So that’s my reason, and I appreciate you flipping the question on it, and if I didn’t answer it then ask some more.
Brandon: It makes sense. I just wanted to make sure, you know, a lot of people just turn things down because they had a bad experience, but I like to say—kinda like this: my brother in law had a terrible experience land lording. He was fixing toilets at 2 AM, “I will never be a land lord because I don’t want to be fixing toilets at 2 AM”.
Josh: Oh, no, no, no.
Brandon: Yeah. I always challenge that and say, “you know, the logic is incorrect there. Saying I won’t do it because I don’t want to do toilets, well, I don’t do toilets at 2 AM and I’m a land lord,” so anyway, that’s my point.
Josh: No, and besides the fact I had a bad experience with John Fedro, you know, not making it to the podcast the first time we tried to do it and he’s back so, you know.
John: That just shows how big of a person you are, Josh.
Josh: It does.
Brandon: That’s funny.
John: That’s the same, well, that’s the same stigma that I get, Brandon, that you were talking about with mobile homes. Everybody turns their noses up at these. I’ve heard countless times, “oh, I would never do that,” because they’re mobile homes. Because they depreciate. Because you can’t get your money back. Because the people who live inside of them are, well, all sorts of things that aren’t true at all.
Josh: And my point is not about is it true or is it not. Brandon asked me. My answer is: I don’t want that headache. You know, for me I’ve dealt with that headache, I’ve talked to enough people who have also dealt with that headache, I’ve seen it happen. I have friends who have the perfect home, they love their home, they love where they live, and they’re like, “I have to run for the board,” “what do you mean you have to run for the board,” “well, this board is so crazy, so chaotic, they’re doing all sorts of things. They’re making rules that I can’t do this, and they have to dictate the color that I paint my house and, you know, that my grass not be ¾” but be ½” or shorter,” and it’s like, “c’mon, do you need that?” I don’t want to deal with it. So I’m not saying investors shouldn’t necessarily buy it with an HOA. I say I won’t buy in HOA because of A, B, and C, and if you’re thinking about it as a new investor be warned and know ahead of time that these are possibilities that can come up, and what it does is it does create a niche, right? There’s guys who love condos. People who will deal with them because, you know, they don’t care and it’s not a headache to them, and that’s fine.
Brandon: And that’s kind of what John’s saying too, right? Mobile homes there’s a lot of people that don’t want them which just means more for you. Essentially that’s what it turns into.
Josh: Yup. How’d this become about me?
Brandon: I don’t know. Alright, so—
Josh: Come on now.
Brandon: Before we wrap this up I want to go into some non-mobile home related questions.
Josh: Actually, hold on, I’m going to cut you off because I have one last mobile home question which is a pretty important one.
Brandon: Okay, go ahead.
Josh: So on mobiles there’s something called Lonnie deals, right? Lonnie deals are these deals based, I think they were created—they’re called Lonnie deals because of Lonnie Scruggs. Lonnie was this mobile home guy, he’s recently passed away, and I don’t know if he coined the term, or the term was coined around him, but what is a Lonnie deal? Because people who are investing in mobile homes probably have heard this and may or may not know what exactly they are.
John: Sure. To my understanding, and I’ve never done a Lonnie deal exactly, but to my understanding Lonnie deals are you’re purchasing homes anywhere from $2,000 to $4,000, you’re selling them for double about $6,000 to $8,000, and that’s the general—that’s a mobile home in a park. They could need work, they could not need work. Our two methods are similar, but that’s my understanding of a Lonnie deal. Purchasing a very, typically very out of date, mobile home, again, typically $2,000-$4,000 quickly selling it and holding payments for just about $6,000-$7,000 not much. Maybe if you’re buying it for $5,000 and selling it for $10,000, but that just, yeah, that’s a Lonnie deal in a nutshell.
I mean, that’s just he’s taught thousands and thousands. I think he’s the grandfather of mobile home investing, and that was the status quo for 10-20 years of what you were doing with mobile homes. Things have changed. Affordable housing nowadays have changed. Lonnie deals leave a lot of money on the table. They don’t take into account for new laws that have changed. The homes that I feel that those deals, again, I’m just looking at the nicer homes I guess, but there’s money to be made. I mean, mobile homes you can do Lonnie deals, or something that I do, or your own path, but there’s certainly money to be made in this industry.
Josh: Yeah, and as Brandon and I like to say: there’s lots of different strategies you can follow in any given niche. So what you do, John, is definitely your own strategy and I’m sure there’s lots of other people who do it, but it’s not the only path, and certainly we encourage people, you know, if you’re interested in mobiles to kind of look at the various ways that you can go about doing it and as long as you’re doing it legal, and you’re doing well by yourself go for it.
Brandon: Cool, cool.
John: Absolutely. There’s a lot of sellers out there that do need help. Oftentimes I’m one of the first investors, buyers that are there. Yeah, there’s a lot of sellers out there that need help, and I think real estate investing that’s what this business comes down to. We’re only here in business because we create value. We create value with the sellers, with the buyers.
Josh: Despite what the media says, right?
John: Despite oh my goodness. Oh, yeah, the media. I just, the article I wrote this week started off by saying that I recently told somebody that I was a real estate investor and just the look that she gave me was one of disgust, and it was my first time meeting her! We exchanged pleasantries, you know, “what do you do?” and as soon as I said real estate investor she just—
Josh: Are you sure it wasn’t the unkempt hair and the tshirt?
John: I don’t know what he’s talking about.
Josh: Or the vomit breath from—
John: I keep that as a reminder.
John: In a little jar on the dashboard.
John: I just never brushed my teeth since.
Brandon: Wow. Alright, moving on! Alright going back to my, when Josh so rudely interrupted me with another mobile home question, alright: non-mobile home questions. Because obviously a lot of people listening to the show are not into mobile homes. They’re not doing that so I want to talk about a few things that might apply to everybody here.
First of all: let’s go back to what you talked about at the very beginning. You were deathly afraid, you know, you threw up because you were so afraid of that very first deal. It reminds me of back on one of our episodes with Danny Johnson, and I’ll link to that in the show notes at BiggerPockets.com/Show75, but he talked about when he got his first phone call he took the phone and he threw it across the room at his wife. He just didn’t know what to do. He just threw the phone at her like, “ah!! You take it!”
Josh: He got so scared, yeah.
Brandon: So, I mean, it’s a natural thing. I mean, I still get nervous when people call me. Like, I still get a little, like, “ugh, I don’t want to talk to them”. So how should a new investor overcome that fear of talking to motivated sellers or whoever in the business? How do you overcome that fear?
John: Two really good nuggets. The first one is: know your sellers. There’s three types of sellers that mobile home sellers fall into. The first type they’re very illogical, very irrational, maybe 8%-10% of sellers fall into this category, they’re pulling out their hair, they will sell their mobile home to anybody with a pulse. They want very little money, they might be getting evicted by the park, that’s a very small percentage, and their homes go very quickly.
The next group of people they do want your help; they can take more time to sell. The smallest group, the 10%, they need to sell in, like, two weeks to three weeks. The next group they need to sell in a month, two months, they have a little bit of time.
The third group, which is the majority, they have money, they have time, they have 4, 5, 6 months or more to sell so really understanding who you’re talking to is the first thing because if you talk to 3, or excuse me, 10 low-priority sellers which I call that biggest group the ones that have time, they have finances, they don’t need to sell, then understand that your job there is to educate them. Our job is to educate every single seller. Some want to work with us, some don’t.
So, that’s sort of the first thing to understand is once we take on that mindset of education versus it’s me versus the seller, now it’s you and a seller joining forces to then sell their headache, their unwanted home. So that’s my first thing I would say.
My second is: to have a partner. Have somebody that you’re the lower guy on the todem pole in your small investing business, company, partnership, whatever you want to say so you don’t have to know all the answers. If you don’t know something, “that’s a great question! Let me talk to my partner and next time we talk I’ll have an answer for you,” yeah, those are the two things. Educate sellers, and yeah.
Brandon: Those are great tips.
Josh: Yeah, and I think that also potentially applies to anybody, right? SO the education, I mean, that’s how people get deals, right? Somebody’s not going to sell to you because they think you’re a scum bag. Somebody’s going to sell to you because they think you’re going to help them with their problem, and you’re going to get the deal because you’re helping them solve the problem versus the guy who’s low balling them, maybe offering the exact same price that you’re offering, but their motivation is, “oh, I’m gonna get this cheap,” whereas your motivation, from their eyes, is, “I’m going to help you out of your tough situation,” and then the second thing it sounds like, even if you don’t have your partner, you’re kind of talking to your imaginary partner, is that true?
John: That’s correct.
Josh: Okay, just checking.
Brandon: Or your wife, your husband, whatever people can talk to.
John: My multiple personalities.
Josh: Well, yeah, that explains a few things. So speaking of your personalities let’s talk about building the brand and the reputation. So, how does somebody, whether it be mobile or any other niche in this industry, how do you go about building a good brand and reputation for yourself?
John: By massive action. If you’re starting off in any new niche or real estate investing umbrella you’re getting started, or you’re not getting started and you’re just switching niches. You know, everybody can have a better brand, and it doesn’t happen by, “oh, I talked to one person this week,” or, “I networked with this guy and I did this and that,” you know, you have to take this massive action.
You have to be on the top of minds of sellers, of people in this business. If you’re not mobile home investing, then there are other people your industry, such as realtors, such as other investors, dealers, brokers, I’m thinking park managers, obviously, for my industry.
John: Well, dealers, again, probably just for my industry. Mobile home investing.
Josh: Oh, okay, I thought you were—
Brandon: Drug dealers.
John: You’d be surprised!
Josh: That’s kind of why I brought it up.
John: So it’s to have massive action. If ever I’m giving advice to a newer person the first nine weeks, the first three months or so, you’re really doing a lot more than you’re going to be doing moving forward. People have to know who you are, you have to be continually following up with sellers, following up with park managers, following up with realtors, with other investors, reminding them of what you do. You don’t have to throw money at things. People have to know that you’re in this business, you do what you say you’re going to do.
Obviously five years from now if you’re still in this business people know who you are. You’ve done what you’ve said you’re going to do, but in the beginning we have to be following up with sellers every single day. 5 days a week I make 7 calls. I call 3 old sellers who I’ve already talked to, I call 3 new sellers who I’ve never talked to before, and I talk to 2 park managers to follow up with them. So that’s 7 people 5 days a week that’s how I, in addition to my other marketing, my other advertising, going to networking meetings, that’s who I’m talking to. That’s how I’m following up. I’m staying at the top of everybody’s minds. That’s how I have leads coming to me. Sometimes seemingly from I don’t know where. So that’s the best advice I can give, and there’s really no magic there. It’s persistence, it’s loving what you do and being loud about it.
Brandon: Yup. I think that’s great. You wrote an article a little while back about being a loud and proud real estate investor and getting out there and letting people know what you do. I thought that was excellent. Another article that you just wrote—
Josh: And we’ll link to that in the show notes.
Brandon: Yeah, we’ll link to it.
Josh: By the way, which are at BiggerPockets.com/Show75.
Brandon: Yup, yup. So another article, speaking of the articles you wrote, you wrote another one a couple weeks ago I thought was just terrific, I mean, really terrific, and it was The One Small Simple Step to Growing Your Network and Increasing Your Influence, and what you said in there was you challenged people. It was a really short article, it just said: I challenge you to go out to lunch this week. Call somebody that you admire and respect, and ask them out to lunch. Set a time, date, and location. So many people don’t do things like that. That is such an actionable step though, I mean, just do it. Stop talking about it, stop thinking about it, and so I just want to throw that challenge out to everyone listening as well is: this week go read that article and then go and call just one person you respect and admire in your area and take them out to lunch. I think it’s a terrific idea.
Josh: That’s great. It really is. Alright, for those people who are trying to figure out their niche do you have any advice? You were green, you fell into mobiles, now that you’ve been in the business for a while what could other new people do to better figure out what niche is going to work for them?
John: Sure. Actually I just made a video about this. I get this question quite often, “you know, John, I’m not sure what type of investor I should be,” and first I want to disagree with that question because the whole, “what type of niche do I focus in? What type of investor should I be?” it makes us think that real estate investing is this monolithic road that we go down. Once you’re on you’re in it until you fail, or you die, or win or lose, and that’s not how this business works. Just like living in life and your career niches that you decide to go into are going to be a product of your attributes, and perception and your wants at the time, your goals, and many different other things.
So, the first thing I would say, if you want a couple actionable steps, is to number one: spend a week or so understand a bunch of different niches. I know you, Brandon, have written 100 Ways to Make Money Real Estate Investing, love that article.
John: And, you know, understand those, and then from a bird’s eye view pick two or three that really excite you then take out those local investors who are an expert in those niches, and then understand the clarity, the footwork that you’re going to need to take moving forward. Maybe not every step, obviously, but the basic footwork moving forward. Then take massive action to become known in your area and find those deals.
So it’s when you take this action that you’re rubbing shoulders with sellers, with other investors, and at least you’re doing something, you’re gaining traction. Will you do a few deals, could you do a few deals? Yes. Will it be your ultimate ideal niche? Probably not. You’re going to find something else that you like, and maybe organically a multi-family seller might call you and you might say, “what the heck is this?” and you partner with someone who knows that and then you’re in that niche and you really love it.
So be active, continue to rub shoulders with people in this business and don’t be afraid to pull the trigger. Have clarity of what a deal is. If you’re scared about a deal or you don’t know if you should purchase, or there’s something wrong then you don’t have enough understanding so find someone that does, and then, yeah, put one foot in front of the other in front of the other in front of the other.
Brandon: Yeah, that’s great. You know, I’ve said this analogy before, but you know there’s that old TV show The Price is Right, and they play this game Plinko.
Brandon: Yeah, they drop this ball down this board that has a million pegs on it and you never know where it’s going to land on the bottom because it’s just bouncing around all these pegs. That’s kind of how I see a lot of real estate investing is you just hit these pegs constantly in your life and you just kind of go down into a certain thing that fits you and you never know if you don’t drop the ball. Like, you’ll never know if you don’t drop the Plinko coin, or whatever it is they drop, right? So you just get out there, start doing it, start hitting pegs, sometimes it hurts, sometimes it’s fun and you end up somewhere good.
John: Cool analogy.
Brandon: Yeah, thanks. Well, let’s talk about something you hit on earlier and I want to dive into it. Investing when you’re young, or when you look young. A lot of people listening to the podcast, you know, podcasts attract a lot of young listeners so what do people do when they look like they’re 15, they might be 25, 30, whatever, they look 15. How do you get over that?
John: You know, I don’t think I could have ever convinced myself when I got started, even the first 5 or 6 years cause I just didn’t change, I don’t think I hit puberty until I was about 27, and so there’s nothing I—because people would have told me, or people did tell me, my young friends who were successful at the time as well they said, “well, screw your age! Who cares? You’re there to help people!” and as much as I heard that it still didn’t sink in. Now looking back I really see that sellers, the right type of sellers mind you, sellers when they see how much you care they don’t care about how much you know within reason. So if you’re willing to help that seller, that seller is motivated to sell, you don’t need to know everything, but you do have to have the willingness to help, the willingness maybe to find someone who knows and then help that seller.
So you could wait. Ultimately, and that’s what I love about this business is that only time will tell. I don’t know what the percentage is now, many years ago I read that 95% plus of investors, that call themselves investors, never actually do deals so ultimately it’s going to be you to pull the trigger. After you pull over on the side of the road and get sick and are so nauseas you don’t know what to do that’s your moment. Are you going to run home with your tail between your legs, or just do it? Your age is a ridiculous thing to be worried about, and you can even say, “I’m the low person on the totem pole. I work with this company, I have partners, my job is to come out and take pictures, find out what the seller wants, and really get to know ya face to face,” so there’s always a way around any sort of hurdle that we have in front of us it’s just does the person have the motivation? That’s just indicative of a real estate investor. You’re always going to have hurdles so if it’s not the age thing it’s, “oh, I don’t have enough money, I don’t have enough time, this gets in the way, that gets in the way,” so yeah age is nothing but a number, just like Aaliyah says.
Josh: So I’m going to get grief if I don’t ask this question, and so I’ve got to ask it, and we’ve had—this is a debate, and maybe it’s a dangerous thing to raise here. It’s very similar to the discussion about you’re the owner of the property versus you’re the manager of the property when you’re a land lord. So, you know, do we lose a little bit of credibility here by saying, “you know, my partner’s this and that,” and not being wholly up front in that, you know, you are the guy. Are you parsing, or is it, you know, ultimately you’ve got a company, you work for the company, the company obviously is your company, but you’re an employee of that company or you’re a member of that company whatever it is and it’s all good. You know, I know that this becomes a huge debate, but has that ever crossed your mind or concerned you that you’re talking about these partners that may or may not exist?
John: Many times they do. Often times I do run my deals by some people. In the beginning I had one or two financial friends that did help me out. There is a gray area in real estate investing whether people want to admit it or not. This is a question that I don’t even think is—I would love to see the debate, the fact that there is even a debate about this is interesting. I have no trouble sleeping at night using the word “we” instead of using the word “I”. Now if I need my other “investor friend” to call up that seller, you know, cause rarely has somebody said to me, “well, put this person on the phone,” and if that’s the case I have had people that I would have call them, the partners that I was working with that would call so occasionally that’s been fine.
Josh: It’s not John Fedro’s other personality.
John: No. Yeah, Frank! No, yeah, is that really a debate?
Brandon: Well, it started, well it may not have started, but it blew up a year ago cause I wrote an article called How To Be a Land Lord: My Top Ten Tips For Success and # 10 was don’t be a land lord. When my tenants ask me, “do you own the property?” I say, “I manage the property,” I don’t say, “no, I don’t own it,” I just say, “I manage it,” so the question is: is that a sin of omission? By me not stepping out and telling them, “yes I own it and I manage it, I’m just wearing the manager hat,” and some people got really upset about that, and I understand why. I mean, like you said maybe it’s a gray area, but I don’t advocate lying ever, but is it wrong not to share all the details? Some people say yes, other people say no.
Josh: I just want to bring it up, I mean, it’s something that maybe top of mind for people. I know when I don’t ask our guests a question I get slammed by email by all these angry listeners who are like, “why didn’t you ask him that?? That’s something you should have asked,” so there you go, and not all of our listeners are angry, just the five of you.
John: “Why’d you go so easy on him??”
Josh: Yeah, you know. Alright, I’ve got one last question, before we get to the next section here and start wrapping this, if you could go back tell yourself one piece of advice when you were first starting out what would it be? Other than, you know, bring some mouthwash after vomiting on that first deal.
John: Well, I’m really happy with where I’m at now, and everything that I’ve learned and all the mistakes I’ve made, the countless, countless mistakes that I’ve made, I really feel that they did a service to where I’m at right now. So, what I would tell myself is what I would tell other people just getting started, but you asked the question of what I would tell myself and I would say, “John, don’t be afraid to keep stretching yourself. After my 25th or 30th deal in parks, on land, there was like this year where 2, well, 3—2 definitely, but then a 3rd one pretty sure, I could have gotten into purchasing an entire mobile home community before it was listed on the market, before the seller even wanted to sell and I was just, like, “no, I don’t want to purchase a park. I’m doing my own thing, I’m buying the homes,” and I was just so closed off on owning a park. So that’s what I would say is, “John, you know, don’t get pigeon-holed into your niche. Just because you love what you’re doing, and you’re making money and you’re good at it, don’t be afraid to expand”.
Josh: Gotcha, and I love how you talk about how many countless mistakes you’ve made and I just want to harp on that, not to call you out, but because pretty much any successful real estate investor would say the exact same thing if they were being honest with themselves, right? Ultimately you’re going to make mistakes. Don’t be afraid to make those mistakes. They’re unavoidable. It’s going to happen, and if you’re listening just be prepared and know that when they happen you’ll have to figure out what to do and where to turn and hopefully places like BiggerPockets can help you out or have some folks at the ready to assist.
I had one more question, so I kind of lied, before we get to our Fire Round which was; this was very theoretical, you know, this show we talked a lot about what you can and can’t, should and shouldn’t, and different approaches, but we really didn’t talk too much about you, and what you’ve done. We talked about that first deal, and so just, really quickly, do you have a favorite deal other than the first deal that you’ve done, or a really cool deal story? Or funny, or strange, or just something, some other deal that you’d like to share that could maybe help motivate and inspire? Or just gross us out?
John: Or just gross us out! Where do I begin? Don’t make me choose!
Josh: Oh, just pick one!
John: You know, it always blows me away that there’s no cookie-cutter deals, they’re all unique and different. I will give this example that I purchased a deal from a seller, she had two mobile homes. It was very creative, and I wrote an article on BiggerPockets discussing this where I purchased both of her mobile homes. I gave her, I think it was $4,000 out of pocket, and the rest of the money was I discounted her hospital note. She had these, I think it was $30,000 or $40,000 close to $40,000 in hospital debt, and I removed all of that by working with a credit removal company. Oh, no, it was credit debt, and then it was also hospital debt, and I removed the hospital debt by paying it off at 10% and then the credit card debt I got wiped away. So she was asking $60,000+ for both of those homes, one was on land, one was in a park. I went ahead and purchased it for $4,000 out of pocket, and then I cleared up all of that other debt. I did have to pay 10% for the hospital debt, but just purchased them completely creatively, and what I loved about that is I was getting this amazing deal and it was so just bizarre and abstract, but she was so thankful! I remember her being so thankful. I sold both of those properties to buyers that are on the other end of the spectrum. We’re buying from sellers that are emotional, that want to get rid of their homes, and then on the other side of that emotional spectrum you have buyers now that they don’t get qualified at a bank. Maybe they can get qualified at a bank, they do have jobs, they do have good income, they’re good low-risk people, and they want a home to own. We’re selling that home to them and they were just as thrilled as they could be. So that’s pretty indicative of every deal you have the happy buyers and sellers everything’s win-win, but I loved this particular deal because it was just one of the few that I put together with just a super-cool creative strategy that I was able to reduce that hospital debt.
Josh: That’s awesome.
Brandon: Yeah, I’ve never heard of anybody doing that before, that’s very cool.
John: Well, you know, it’s just about what she wanted. One of the things, and I think I’d learned it a few weeks back from this appointment, was ask them, “what are you going to do with that money? If I give you that money are you going to put it here on your kitchen table, like, what are you going to do with it? Put it in the bank?”
Josh: That’s a really great question.
Brandon: That’s a really good question.
Josh: Yeah, because that will help you get to the crux of what their issue is. My Uncle’s in the hospital, or I’ve got to pay the bills, or whatever it is, and by finding that out maybe you can come up with a creative solution, and clearly you did, so that was awesome. Well, let’s move on to—
It’s time for the Fire Round
Brandon: Alright, the Fire Round. These questions come straight out of the BiggerPockets forums. These are questions real people ask, and we’re going to ask you to answer them.
Number one: why are park owned mobile homes generally not desirable? That was a question in the forums.
John: Ooh. That’s a really good question. Now, it could be the forum where you’re going to be owning communities, and if that’s what this is in reference to most mobile home buyers, most mobile home park buyers, when they’re going to buy the entire communities, they’re not looking to purchase the mobile homes that convey with the property they typically want to sell those homes off. So most mobile home park buyers when they want to purchase a mobile home park they will go ahead and sell those homes and just collect on the land underneath the homes.
Now, park owned homes for what I do, if you’re just buying the individual mobile homes, park owned mobile homes if they’re selling those homes I like them a lot. I don’t know why they’re not desirable. If a park is selling a home for $30,000 I’m not interested. $20,000 I’m not interested. If they’re selling it for a normal price, or $1,000-$3,000, $4,000, $5,000, $6,000 then I’m interested, but otherwise they’re, you know, I don’t have any problems with them. So, I think the question may have been with regards to a community if you’re buying an entire community, and then they’re sort of undesirable because most community buyers want the land, they don’t want to have to land lord the actual home on the land.
Brandon: Okay, yeah, that makes sense. I’m not sure which was the original intent either, but you answered that perfectly.
Josh: Nice. Hard money, is that a good resource for mobile home investors?
John: No. I mean, yes, you can use it, I’m not a big fan of every going to a bank and signing on personally, whether it be a bank or hard money lender, and if you’re going to purchase a mobile home remember that the exit strategy—if you’re gonna sell it with cash, if you’re gonna sell it with conventional financing, or FHA financing, hard money may work, but mobile homes in parks, you know, we’re buying them for just so inexpensive and we’re putting very little to moderate amounts of money into them before we sell them, but we’re making our money back in a year or less, 10 months or less, so yeah, I’m not a big fan. You’re asking the wrong guy cause I hate hard money, I hate bank loans, and I say don’t ever do that if you don’t need to. There’s plenty of other ways to purchase without.
Brandon: Cool. Alright, how about this question: how do I turn down a motivated seller that I just flat out cannot buy their property? Like, maybe they owe, I think the original thought was they owe, you know, they owe far more than it’s worth, or even if they sold it for $0 it would cost more to demo the thing, you know what I mean? If you just flat out cannot buy a property how do you turn down a motivated seller?
John: With the mindset that we talked about 10 or so minutes ago where you’re an educator, I want to let sellers know on the first phone call what type of buyers they can expect, what they can sell their home for, how they can sell, how we can help, and over the first phone call if there’s something that turns me off of this home, I don’t like it, I’m very clear and up front. Not only do I express why I wouldn’t be interested in that and why it doesn’t fit my criteria, my model for investing, but I want to help them. I want to at least point them in the right direction of solving their problem. I mean, they’re a person. They should, you know, I don’t want anything bad to come of them. If they can sell it I want them to sell it so I try to educate them how to do so even if I can’t do it, and I flat out tell them it’s because of X, Y and Z I’m just not interested.
Brandon: It was an interesting question because it happened to me a few weeks ago where I went and looked at a property where the lady wanted $15,000 for this ugly house. I mean, it was really, really just a terrible house. I went and looked at it, and there’s very few houses that are beyond repair, this one was far beyond repair, so she wanted $15,000. The lot itself was worth maybe $10,000, but it would cost maybe $15,000-$20,000 to demo it. So I had to tell her basically you have no options. That was a hard one for me, and I just basically said, “I can’t do anything with it, good luck, I hope you can,” but it’s a hard conversation to have when I just flat out tell somebody, “I can’t help you,” but, like you said, if you can give them options great.
John: You know, I may seem a little jaded because over the years I’ve talked to so many sellers that have been sold a manufactured home in a park, or on land even, but in a park. They paid retail price for it, they bought it from a dealer, $60,000-$70,000 that you’re buying a brand new manufactured home, you know, new, and then you go to resell it and you’re realizing that the market people only want to spend a couple thousand dollars. If they go to a bank the bank isn’t gonna, it’s not appraised for that type of money, buyers don’t have that type of money, they’re not looking to pay for the next 20 years on a manufactured home, most buyers. So I talk to so many good people that get fooled into buying brand new manufactured homes, and it’s unfortunate because I do have to be the bearer of realistic news, just like you did Brandon when you educated her and let her know that’s what the market is looking like. You just have to be the professional and let them know either way.
Josh: Nice. Alright, last question is: tools. Do you have any tools or anything like that to help you manage your investments? Your mobile home investments, or do you just kind of spreadsheet it? What do you do?
John: I’m old school. I do need, I actually am going to be purchasing my first entire mobile home community that has—
Josh: Ooh, mazel tov!
John: Thank you! And there’s 70+ lots there so I do need to step up my game into the 21st century with regards to management. I have property managers for most of my properties now. The properties I don’t I just use excel and that works great for me, and before that I just used a piece of paper in a notebook that I’m very fond of still. So, I’m kind of old school I haven’t gotten too much online yet, at least in regards to the management aspect of this.
Josh: Fair enough.
John: If you have any good suggestions I’d be open to your input.
Brandon: I’m always looking as well.
Josh: Well, you know.
Brandon: But what I was going to say is: I would love, I mean, you write every week on the BiggerPockets blog so hopefully we can follow your journey as you buy this mobile home park. I’d love to hear more about that cause that’s exciting. That’s very cool so congrats on that.
Brandon: Well, let us move on to the end of the show, the last section which we call the—
Brandon: The Famous Four. These questions we ask everyone so let’s see what you have to say. Number one: what is your favorite real estate book?
John: Favorite real estate book is, I’m a big fan of courses, I purchased a lot of courses, boot camps, blah, blah, blah over the years. As far as books go that I’m going to a store to buy? I’ve got to say How to Win Friends and Influence People. It’s not real estate, I know, but it definitely, definitely put the real estate mindset in me that I use and that’s of valuing people, caring about people, providing a value.
Brandon: Okay, that works. Well, that kind of might be the same one which is—
Josh: Which is your favorite business book?
Brandon: Yeah, what’s your favorite business book? Would you say that’s your favorite business book as well, or do you have another favorite business?
John: Let’s say that one. I like that one.
Josh: There you go. Nice. What do you do for fun, man?
John: I box. I just started boxing.
Josh: Maybe I should stop giving you a hard time, then.
Brandon: I think at the next BiggerPockets conference me and John Fedro here should have a boxing match.
Josh: By the way, Fedro, Brandon here is literally, like, says this every week to me, “I should box somebody, I should ninja fight somebody. I should, you know, backflip and beat up so-and-so”.
Brandon: But it has to be at the summit.
Josh: You’re a little bit aggressive there, Brandon.
John: I’m going to change the picture on my punching bag from Josh’s face over to Brandon’s face now to get used to it.
Josh: Oh, man, really? Really? So, I’ll take my dart board down of you too, John.
Brandon: Alright, boxing, cool. Anything else?
John: I swim a lot, and hang out with friends. I like to read a lot, and play piano as well.
Josh: You play piano?
John: I am learning how to play piano.
Josh: Go jump on the piano! Let’s hear it.
John: You know, it’s so far.
Josh: Oookay. Alright, time to go!
John: Maybe at the BiggerPocket’s next summit.
Brandon: Yeah, maybe you can lead us. Alright, final question: what do you think sets apart successful real estate investors from those who give up or fail?
John: Oh, without a doubt! The ones who give up and fail. That is the answer.
Josh: Captain Obvious, come on!
John: Was that not the—I’ve had plenty of opportunities where going to a job would have been the easier way to go. Well, okay, now that I’ve had the time to let that question sink in a little bit. I would say a good support structure of people you can go to. I’ve been fortunate to rub shoulders with some of the very, very experienced, active people in this business so it’s not just first getting started, but even after maybe one deal, or two deals you’re still sort of living on faith. You haven’t really proven to yourself that this can be done on a full-time basis, or on a basis as you would like it in your mind so really having that support group of active people. People that build you up that are doing this as well; that has certainly helped keep me in the business and I have never once really, really considered ever dropping out so I hope that that helped.
Brandon: Good answer. I like it.
Josh: Awesome, man. Well, listen, definitely covered a lot of material here. We certainly appreciate you hopping on the show finally, and so as we bid you farewell, where can people find out more about you?
John: You can find me at MobileHomeInvesting.net.
Josh: Cool. Awesome. Well, listen, thanks again. We do appreciate it, and for those people listening in: if you’ve got any questions for John you can ask them at BiggerPockets.com/Show75. Thanks again, John!
John: Thank you.
Josh: Alright everybody! That was our show with John I’m Going to Blow You Off Once or Twice Fedro, just kidding John, you know I love you otherwise I wouldn’t have had you back. Nah, John was great, and we really do appreciate all the insight that he shared with us and we do want to thank him for his time. You can also, of course, find him on BiggerPockets where he’s an active member.
Beyond that thanks again for listening! This is show 75 and hopefully you’ve enjoyed it, and the previous 74, and, as we always like to tell you, make sure if you’re not already active in our community that you join up today at BiggerPockets.com and check us out where you can meet a whole lot of other great people like John who are active in the world of real estate. Beyond that check us out on Facebook, LinkedIn, G+, and Pinterest. We’re on Pinterest. I don’t know quite what we do there, but we’re on there as well, but that’s it guys. Thanks so much for supporting us through 75 shows, we appreciate it, and I will very much look forward to talking to you again next week and hopefully we’ll make it all the way to 100. This is Josh Dorkin, signing off.
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