newbie trying to get started in MHP investing. I have been reading and learning as much as I can via books, forums, podcast, etc but I am stuck on the one thing that is stopping me from getting started - Financing
I'll be honest - I don't have the downpayment, I only have a HELOC that I could use in the range of $200k - $250k.
My goal is to generate income of 2-3k/mo.
What advice would you give to start ? should I limit my goal to a MHP valued at that range or use the HELOC as down and capital investment monies?
First, congrats on joining BP nation. You'll undoubtedly receive phenomenal insight through the forums... You're starting with more than many who have become successful in this niche. My suggestion would be to seek an off-market deal and pursue seller financing. Below are some of the podcasts our team has created to help folks get started in the niche:
- Episode #1 of the Mobile Home Park Investing Podcast
- Episode #110 of the Real Estate Investing for Cash Flow Podcast
- Cash Flow Friday Tip #13 of the Real Estate Investing for Cash Flow Podcast
@Debra Nolan , I agree with Brian's advice. As for your second question, here are some thoughts:
I want economy of scale! The more units the better.
I want the most leverage I can get! If I could I would buy a $2,500,000 park with $250,000. Buying a $250,000 doesn't give me any leverage.
How to get both of these things?
1) Master lease agreement (lease to own). Not as easy to accomplish, especially if you don't have the past experience a seller may want to see.
2) Seller financing. The links Brian provided will be helpful. You need to develop strong relationships with owners. Don't start by asking for seller financing from the start. You'll need a strategy on how and when to approach the subject
3) Seller carrying a small note. I currently have a park under contract where the seller will carry a note for 15% of the purchase price. I also have a bank that is looking for 80% LTV and is willing to consider the seller's note in my favor. Therefore I only need to put 5% down. In your case, if you could replicate this you could buy a $5M park, IN THEORY. I say in theory, because at some point the lender is going to say NO WAY! Figure out what a lender will allow you to do.
Again, don't start your conversations with the seller by asking them to carry a note. Again, you'll need an excellent relationship with the seller.
4) Bank financing. Look for the local bank that will give you the highest LTV terms.
There are other approaches out there, but this is more or less my map.
Identifying the right property and seller is key!
Finally, you are the only person that can determine the level of risk you can take. If you leverage too much and things go bad then you could lose everything!
Keep us posted.
@Debra Nolan You may want to start out with a small deal before you get into a big one. See if you like the business and make your connections early. If you decide to get into a bigger deal, you may want to bring in a partner to lessen the risk. Good luck!
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