We got started in Real Estate Investing about a year ago when we realized that my husband had six years until he was retirement eligible. We started off with 2 SFR's that are doing well thanks to our friends at STOREHOUSE 3:10, but decided that in order to meet our ultimate goal we needed to scale up sooner rather later. We are now approximately 2.5 months into our first multifamily investment. We purchased a Manufactured Housing/Mobile Home Park in Indiana. It is in rough shape and needs a lot of TLC and organization. Here are the particulars:
Purchase Price: 220K
Down Payment: 30K
Seller Financing: 6% Interest Only, no payments first 6 months, 2 year term
21 existing LOTS and 1 SFH
7 Vacant Lots/3 TOH's/11 POH's
City Water/City Sewer
Value Add Strategy: Install Submeters and bill back for water/sewer, improve the curb appeal through landscaping, and road/gravel driveway repair, renovate vacant trailers and sell or Lease w/Option, Renovate SFH and increase rent, infill used trailers to fill vacant lots. Goal is to get occupancy to 80% in order to support a refinance.
Current Struggles: Initial contractor has not performed to our liking. Currently trying to find a way to off ramp contractor and find a replacement. Finding capital to bring in new homes and renovate the SFH (current condition is worse than we originally budgeted for). Enforcing new park rules and regulations which is partly due to not having a property manager yet, which is a struggle itself. In the process of evicting a tenant (inherited from the previous owner).
We appreciate any comments or feedback. We will keep everyone posted along the way.
Congratulations on taking a timely action and planning for retirement!
Here're a few of my suggestions:
1) In terms of your struggles, while you're searching for a new PM, have you thought of identifying a reliable tenant and asking them to take a temporary charge for a temporary price break. Talk to the prior owner if you have closed with them on good terms and see if they could recommend one of the tenants. If not, running background and credit checks on all tenants and going through the rent roll should give you a good picture as to who can help.
2) When it comes to financing the new homes and reno costs for SFH, think creatively in terms of the options:
a) borrow against your existing 401k (up to $50k)
b) do you have a enough equity in one of your existing properties to pull a HELOC out
3) private lenders or HML
4) bring a partner on board
If you would like to talk about any of these options, or need my help further, feel free to PM.
Thank you for responding, Alina. We did consider asking a tenant, but at this time there is no tenant that we would trust. Also, with Indiana, I believe a PM has to be a licensed real estate agent so we are trying to be cautious with that. We reached out to a local real estate agent and received a recommendation that we hope will work out!
As to the finances-we did just complete our first BRRR attempt yesterday. While we did not end up getting all of our money back, we did get most (gotta keep trying!). That will help us continue with the MHC rehab for now!
Thanks again for the tips!
Congrats on taking the first step and purchasing your first park!
It sounds like you've realized a lot of opportunity with this park, I looking forward to hearing the results once you get it turned around.
As far as the licensing requirement for the property manager in Indiana, the state does provide an exemption to the licensing requirement for a full-time, salaried employees of the owner or lessor the real estate in question. Not sure if you could use this exemption to use your advantage regarding employing a tenant to manage the park, but it may be worth some consideration if you can make it work.
Hope this helps!
Would you necessarily need to consider the person a PM or could it just be a grounds keeper? The park that I'm looking at purchasing just has a tenant that mows, plows, and would let me know of any issues. I'll open a local bank account and have them all deposit their rent automatically or pay online. Maybe just have the grounds keeper and then hire a realtor as needed for bigger things?? Good luck! :)
Just wanted to give a quick update.
1. Hired a local property manager to assist with showing units, rules/regulation enforcement, etc... This by far has been a worthwhile investment. Huge peace of mind having someone you trust who can put eyes on almost daily.
2. Have increased occupancy from ~23% to ~35% in the last 2 months. One more renovated unit to get filled then should be breaking even.
3. Sub metering in progress this should be a huge impact to NOI. We did offer a discount to the existing tenants to help ease the burden of a new expense but not sure how long to keep the discount (we waived the 70.00 per lot fixed sewer fee).
4. Have run into some issues with the previous owner not disclosing some state inspection discrepancies that were not corrected. Bottom line the state wants us to correct them but we feel this could be a breach of contract. More to follow as that develops.
Thanks for the support everyone. Will report back in a few months with an update.
Stephanie, nice work on pulling the trigger. I’m about 5.5 yrs out from retirement and am thinking along the same lines as you. Are you owning/managing from a distance? I’d love to pick your brain on those challenges and tips.
@Stefani Gillenwater congratulations on raising the occupancy! It seems you and your husband really found a diamond, albeit still dirty and rough around the edges currently. Do you happen to know the pro-forma numbers and/or the ARV on this park? I'm in the lending business and I may be able to help you figure out some options related to refinancing out of the interest-only 2-year term you have currently. If I'm not able to offer some help maybe I can put you in touch with a few people that may be able to help.
I look forward to future updates, and the best of luck to you and your husband!
Of course private message us or we can set up a time to talk. We have and continue to learn a lot with this property.
Let us put together the latest numbers and send em to you. Is a private message ok?
Please feel free to reach out anytime. I'm happy to answer any questions you and your husband may have. I look forward to hearing from you!
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing