All Forum Posts by: Jesse Proett

Yes, I just thought I would show a real world example. This was the only SFH I owned, and kinda bought it to test the waters. I stick primarily to the multifamily side of things.

In 2018 I bought a turnkey rental house from Memphis. High cash flow and all that.

Purchase price $79,000 rented for $835

Money due at closing to acquire the deal was $23,374. This does not include the inspection cost I did prior to closing. Lets just say it was $100, I forget what it was.

So Im all in $23,474. Monthly mortgage was $485.81 and the rent after property management was $751.50. Now Im cash flowing $265.69. Not too bad.

A few months into it and the tenet fell into hard times and could not pay the rent. This went on until we had to evict them. The cashflow was about $1,100 the first year because of this.

With make ready costs and vacancy, the cash flow for the second year was about $1,450.

Ok, but now it is worth more and I agree to sell it for $85,000. Lender requires certain repairs that cost $2,250. My loan payoff is $58,446. Minus the 6% commission and I estimate getting $19,204 at closing.

Money into the deal $23,474. Money out after 2 years $21,704.

This is probably a great deal for someone that wants to hold on for a very long time.

Some things that worry me about mobile home parks:

Will you have multiple buyers when it’s time to sell?

If and when you sell, will it need to be owner financing?

Owner financing is great for when you buy an asset, but not so great deal for the seller. I would prefer to move my profits to the next property.

Can you get agency (Fannie Mae or Freddie Mac) non-recourse debt?

Bank loans would put my personal assets at risk in case of a default.

Can you cash out refinance?

This is a great way to extract equity, but I don’t see how you could do that with owner financing.

If these are already answered in the forums, I apologize in advance for not taking the time and searching the answers.

Paid off primary residence gives you some security, but may not make sense on paper. Maybe you could justify it on paper by saying it reduces expenses to increase your personal NOI since your home is really not an asset, it's a liability. I would personally sleep better at night with a paid off home. It's a personal preference. Some people I'm sure feel comfortable placing their primary residence at risk to leverage into more investments.

However, paying off rental properties makes you a bigger target for a lawsuit. You may not feel like a big target yet, but one day you might be. It’s nice to have the lender on your side in a legal fight. I would not be able to sleep at night with fully paid off rentals. Also, does not make sense on paper either.

If your home can s worth 100k and you still owe 80k, then you cannot get a Heloc. I’m in Texas as well. You can borrow up to 80% of your homes value minus whatever loans you have on it. It’s in the Texas constitution. You said you have 20% equity, so I assume you still have 80% on a mortgage. I hope this helps.