All Forum Posts by: Don Alder-LaRue

@Dan Schweit even out here in the Coachella Valley (Palm Springs area for those not familiar) it's difficult to find BRRRR properties. I look daily and have found perhaps 5 properties. It took looking through 6 cities to find those. They're not quite as rare as hen's teeth, but close. I've only looked at purchase prices under $250k thus far.

@Lindsey Iskierka  PM me and I will give you a referral.   

@Paul Boudreaux  First let me say that I am not affiliated with, or a member of, or any longer have anything to do with Lifestyles Real Estate Investors Group.  I used to be a real estate agent there from 2010 to 2012.

With that being said, if you need an investor quickly, call the office of Lifestyles (the office is on Westheimer by the 8 loop), and speak with one of the agents.  I think Bill still works there.  Try him, he's a good man (and if you do reach him, tell him "Buddy LaRue" sent  you.)  They're always looking for properties that will make sense for the investors.  Tell him your situation and he'll be more than happy to help. 

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@Arif Siddiqi  California now requires 3 college level courses to get a real estate license.  It used to only be one, I'm not sure when they changed that.   That doesn't sound like something you can do in a weekend.  I'd be wary of a scam.

I've done a lot of my continuing education, and brokers courses from DuaneGomer.com.  The price is reasonable, and you work at your own pace.  He also does continuing education classes at the local board once or twice a year for those who are in a rush to get it done (takes 2 days I believe, but I'm not sure.).   I'm quite happy with his company.

@Donovan Curry  Yes, I'd start with the Bigger pockets calculators.  That's what they're here for.  I was an accounting major 30 years ago, so I built my own.

@Lydia R. I don't know what hard money lender you've used, but I've never had one change rates or terms just because someone was new and I used a number of them in TX. Look them up online and you'll usually find they're: Stated income, stated asset, 70% of ARV, and 10% interest rate, maximum 1 year term.

@Donovan Curry  Always look at your numbers and returns.  That will always answer the question as if you should use a hard money loan or not.

Hard money loans should only be used when the potential purchase needs rehab/improvement.

Personally, I am happy to use a hard money loan if it will help me realize a MINIMUM of a 100% return on capital gain after all expenses (purchase, rehab, lender fees, carrying costs, and selling costs) which means I have effectively doubled my money.  If I'm looking at a buy and hold property, I still want to see the 100% return on capital gain (based on unrealized capital gain, so it doesn't include selling costs) AND a MINIMUM of a 10% cash-on-cash return, giving me at least $300/month in cash flow. 

I've lived in Houston, Dallas, and Austin (all in the last 15 years) and know that this is extremely difficult in the major cities of Texas right now.  Heck, it's not easy in most major cities across the nation (a lot of investors are looking at the mid-west for the best cash flow).

If you are considering doing flips (which can raise cash quickly if you follow the above) and then take the profits and invest in buy and hold properties, you may do better by looking at the secondary cities in the state.  Places like Waco and Corpus.  You'll find less competition and still make money.  These are also good areas now to consider buy and hold.  Since you're in Austin, I'd recommend looking at Waco.  It's closer and will be easier for you to scout out the homes, and keep an eye on the rehab/improvements while the contractors are working.

I cannot stress enough to always, Always, ALWAYS run your own numbers.  Every time you get a new estimate (from appraiser for after repair value, from a contractor for rehab/improvement, even from your insurance provider) enter the figures into your spreadsheet and make sure your numbers are good.  If you don't look out for yourself, no one else is going to look out for you.

If you'd like a hard money lender recommendation, who also can help you with the refinance into long term conventional financing (for the buy and hold strategy), try Gateway Funding.  I forget which city they are in (I think Houston).  I used to use them a LOT.  

Best wishes!

Don

6.  Your rents need to be in line with market rents for the area.  CoStar has rent surveys you can look at to determine what your rents should be.  You should also conduct your own rent survey.  Make sure the parks you are comparing to are comparable to your park.  If another community has a "park like setting with flowing fountains" and each unit has their own two car garage (yes these do exist) they will get more for rent than a smaller park with only a small greenbelt and each unit has a carport, or worse yet all street parking.

7.  Expenses will include maintenance (of infrastructure, club house, pool, sport court, etc), management fees, electricity (for street lighting, club house, pool pumps, etc), maybe gas (if you have a laundry room with gas fired hot water), your own sewer fees (for club house, office, laundry room)  legal fees and the ever present tax man.  Expenses are generally limited.

8.  Evictions can be more difficult in a mobile home community for a few reasons.  They are often low income housing, the residents own the home and evictions can force them to leave it behind.  They do  happen however.  

9.  This is something most people forget, depreciation.  Since smaller parks don't have big club houses etc., you don't get to depreciate much for tax purposes.  It's something to consider, but I wouldn't let it keep me from buying a park.

I hope that helps some.

@Mauricio Quintana  There are a few things you want to look at when considering a mobile home community or RV parks.   Personally, I'm more geared toward mobile home communities.  You can get great cash flow from them, with less management.  Here are a few things to keep in mind.

1. Yes, CAP rate is often used to value a mobile home park, BUT after talking with a lot of the individual mobile home park owners they pay less attention to that than they do the GRM, Gross Rent Multiplier.

I keep a lot of irons in the fire and it helps me stay on top of things.  I'm a real estate agent, but I'm also a licensed mobile home salesperson (In California a real estate licensee can sell a mobile home if it has been previously sold and is over one year old, or they are working directly with a mobile home dealer.  They cannot list a brand new mobile home without a dealer being involved).  This way I can sell new mobile homes by setting them up in parks that have vacancies.  This forces me to keep in touch with mobile home park/community owners.  Most are very friendly and love to talk.  Its through this kind of networking that they find out about parks that are off market, but willing to be sold.

Back to my point...the park owners say that a mobile home park/community is only worth 10 times the gross annual rents.  If a park is on the market at 8 times the annual rents, it may be an excellent deal, but there may be major issues with the city, or major repairs to infrastructure.  This should signal the buyer to put everything under a microscope during due diligence.

2.  Location.  Yes, the area needs to support the mobile home park.  Vacancies don't do you any good (they do me good as I can fill them, but they don't do the park owner any good).  Since you're in Houston (I used to live in Richmond (between Sugar Land and Katy) BTW) you are near enough a major metro area so this should not be an issue if you are looking locally.  However, I am in Palm Springs.  Los Angeles is a 2 hour drive, so we are not a bedroom community.  However, we have a lot of snowbirds.  Some of he parks here are almost vacant of people in the summer, but the residents still own the homes and pay the park rent all year long.  Resort areas can be lucrative, and since snowbirds don't use infrastructure for a few months out of the year, there's less wear and tear.

3.  Age of the park.  It may look like all you have to do is own the land and let people pay you rent for putting their home on it, but there's more to it than just that.  You also own the infrastructure in the park.  It will be your responsibility to maintain the streets, sewer lines, gas lines, electricity lines, any clubhouse or laundry facilities offered, as well as any additional amenities such as a pool, or sport court.  Older parks generally have older infrastructure.  Electrical service may not meet todays needs, a park with 30 amp service will not support a newer manufactured home with central AC.  Really old parks may have clay sewer lines which are now leaking and can get you shut down by the municipality.

4.  Park owned homes.  It may sound wonderful to be able to rent 50 homes out for $1200/month (hypothetically of course) but now you have 50 roofs, 50 water heaters, 50 A/C units, etc to maintain.  This is the type of headache a park owner is trying to avoid.  There's a park near me with ALL park owned homes and he can't sell it even after trying for 6 years.  No one wants it. (BTW, that is not my listing, I'm not panning deals, I'm just making a point).  There may be a couple of park owned homes.  Preferably they are vacant.  If they are not ancient and can be spruced up quickly and easily (new flooring, paint, appliances) then you should sell them quickly.  Don't worry about making big profit on them, the goal is get the cash flow going instead.  But still, don't cut the price so low that it affects the values of the other homes in the park.  You want to keep your other residents happy with good values to the homes they own.

5.  Financing.  Remember that commercial loans are assumable.  Look to see if there's a loan on the property and how long it has been there.  You may be able to make the assumption of the loan part of your deal.

This is getting long.   I'll make the rest a separate post so it doesn't get pushed to the blog posts.

@Charlotte Dunford It may not disqualify the deal, but I'd be putting EVERYTHING involved in the deal under a microscope.  Municipalities don't yank occupancy permits for nothing.  Do you know WHY it was pulled?  You will definitely want to know that.

Not far from me, there is a MHP that the owner wants to sell.  The city has yanked the occupancy permit, so he is not able to collect rents legally from the residents in the park.  A few people still live in their homes.  The issue has to do with the age of the park.  

Like anything, time takes its toll on mobile home parks too.  People look at a vacant mobile home park (yes, they are out there) and they just see raw land with a road on it and some concrete slabs.  They do not take into consideration what's buried in the land that costs money.  The electricity lines, gas lines, water and sewer lines going to each pedestal does deteriorate over time.  For the property I know of, the main issue is the sewer line.  The park was built shortly after dirt was created, and the sewer lines are made of clay.  They are old and though they still work, the city says they leak and will affect the water supply.  Also, since the park is so old, electricity service to the pedestal is (I believe) only 30amp service, which wont' meet today's needs.  All of this would need to be upgraded to make it a viable park.  (FYI I am NOT the listing agent, I am not peddling my wares, I'm just using this as an example).

Do your due diligence on the property.  Know exactly what is going on, and why the operating/occupancy permit was yanked.  Some things are more easily corrected than others.