All Forum Posts by: Jim Johnson

Timothy,

The sort answer is- it depends on the market and the quality and size of the home. We have people that pay $450 a month on mobile home leases for singlewides and more for doublewides. But- that is selectively true. It really depends on the metro area, current space rents and you sort of base your rent / space rent total off the amount a 2 or 3 bedroom apartment might rent for int he area. 

Lets set up an example- 2010 Single wide, 16 x 66, 3 bedroom 2 bath in very good condition.

For instance, in Denver where space rents are like $750 per month, the prices you can get for home leases are quite small. Call it maybe $350 a month.

Now in Dallas where space rents are more like $450 or $500 for a park with the same amenities, that same home might fetch $450 - $550.

You need to really now your market because in some really small town in Nebraska where space rents are like $250, but the average income is much lower, that same home might be back to fetching $350. 

Your question is a good one, but one really needs lots of market data to answer it. There can even be some variance int he same metro areas so you really need to drill it down to a particular park. !0 mile separating 2 parks can be $100 a month in space rents and another $100 or more in a home lease payment. Wrong homes in the wrong parks will not lease or sell, and the right homes in the right parks will sell or lease prior to you fixing them up. 

I am not sure if your issue is not really one of demographics. 

Your town has 6,500 current residents- but that number was closer to 7,400 ten years ago. 

So the first issue is- you in a population declining market- which does not do well for holding real estate prices.

Second- over 36% live below the poverty line. They simply do not make enough to satisfy your 3x rent rule- so off the bat your now only dealing with 65% of the population. 

Next- you do not take people who have had misdemeanor or felony's for the last - 2 - 10 years. This was a bit confusing to read- but probably scares many away.

In your area your market is probably the lower 50% of the income earners. Anyone on SSI or public assistance will not receive enough to qualify... and you already take out the bottom 36%. So in your whole town you probably looking at about 1000 potential renters, and they are the top 15% of the 50% you can draw from. 

I would say- if your going to attract that client- you better have really good product, a really clean property etc.... you competing for everyone that can afford a 3 bedroom apartment in one of the nicer complexes in town. 

Do you relax your requirements- well that is one option. Or you raise the bar on the homes to attract that top part of your target market. 

My calculations do not take into account the percent of the population that have committed crimes- so that 1000 person number is probably lower but I am not sure how to quantify by how much. 

Also- if about 15% of the population moves every year- of that 1000 people- maybe only 150 or 200 will be looking in any given year. That is about 20ish new people looking each month...

@Brandon Cravens You will want to start a separate entity to deal with the homes. We have ownership in one LLC, call it- Houston mhp, LLC... Then we create one like- Houston mhp homes, LLC. The company that does business with 21st will incur some liability, and you probably want that separate from the park.

Well- first the complexity of the deal should really dictate the speed in which you would close.

I think the fastest deal I closed was probably 8 days- Friday under contract- Friday the following week closing. 

That was a very straight forward property. There was a ton of upside and I was able to really see the issues off the bat during the first walk-through. Remember- I have a lot of years of experience in writing contracts, due diligence, home rehabs and in understanding infrastructure. So I can really grasp the full scope of work and how to manage it very quickly. 

To make a deal great it must pass on all levels. Location, condition, economics, accessibility, future assessment. 

Do not do a deal because you can- do it because it is right. Make a list of all the problems and if your comfortable with everything- pull the trigger. A goal should not be how many deals someone will do in a year- a goal should be only to do great deals. One bad deal can take years to get out from under.

So Chase that is a good question and it really depends on so many things. Maybe the property was closed just a few years ago and the seller can provide you with a Phase 1 they just had completed. Maybe you have enough history you do not need one, like it was farm land, and then became a MHP. You might have an abstract that shows enough history your comfortable purchasing without a Phase 1 in place. Maybe it is a park in the middle of a city, in the middle of residentual land and it was all farmland prior to being zoned into single or multi family. You might forgo things like- sewer inspections if you are buying a park that was built with PVC lines, or even if you go the other direction and it is all Orangeburg and you know the park is a deal because it is failing. Maybe you have contact with the plumber that has done 100% of the work on the park since it was new, and you know through that person the park does not have sewer issues. If the deal is master meter electric and your play is to put in power poles and individually meter the park, you can forgo electric inspections. You might be confident enough in your valuation skills to forgo an appraisal. To be clear- I walked away from a 100% owner financed deal- zero down- 20 CAP because of walk-through inspection issues. And there are deals that would be 2 CAPS I would put under contract and buy without blinking an eye.

Each deal stands on its own. History, location, the play your making on the park and your experience level all play into your comfort level in pulling that trigger... 

So- would I buy without all of the inspections in place- yes. Have I bought without all the inspections in place- yes. 

Do I advocate 'you' buy without all of the possible inspections in place- no. 

But if the question is- when would I- Jim- forgo some of the possible inspections- well- the list is out there for sure and has been acted on, or, not acted on depending on how you look at things. 

If the deal is seller financed your probably only constrained by your longest inspection lead time and completion. Probably a Phase 1. If you really pushed, and had someone that could do the phase 1 quick, I would say 15 - 20 days.

Strictly on the financing side, it only takes a few days to produce the owner financing papers. You do not 'need' an appraisal, or Phase 1, or even title work. I am not saying you should not have these things, but in an owner financed deal you would not be 'required' to have them. Many inspection type reports are required by the Title Insurance Company and the Lenders. 

So Mike M said to do things right- but 'right' is not the same for every deal and everyone. The property will dictate much of what you want prior to closing. The more experience you have in the age of properties, and the things that might be issues- probably the faster you can close a deal comfortable on your side as the buyer. 

Remember, many in this business either do our own due diligence or have staff that does it for us. We have sort of a template of what gets done and we can even overlap the processes for the right deal if closing quick is important. If the preliminary offsite checks go well, and for the most part we probably know this in the first day or two, we can do the onsite and offsite parts concurrently.  For someone doing their first deal, or even someone that is experienced but wants to really take their time and do the inspections linear the process will take much longer. When we are  trying to push dates quick, we have already called our Phase 1 people and other inspectors for items we do not do ourselves prior to even getting the contract submitted. We are nailing these people down on times so we know how to write the dates into the contract. 

If speed is important things can move very quickly... if it is not- take your time, be careful and you will be less likely to miss something and be... surprised... down the road. Quick closings are a bit stressful to say the least. They also require a lot of time and money out the door quickly, and it might be wasted if that Phase 1 comes back with issues and the deal crashes. You will have money into all the rest of the things needed to close- and you will only get experience out of the deal... There is more money and time at risk in a deal that must close quick. 

Justin, I operate a park in Canon City. Your welcome to a copy of our lease and rules and regs. I am not sure where your park is, as different state have different rules you must follow for lease violations etc. Feel free to reach out and I will nudge you the right direction.

I think groups that meet are great, I know there are some that meet in California and Texas. 

A mastermind group from my perspective is more formal, and the leader is an expert and would assist in ideas on finding a property, contracting for it etc. I suspect there could also be a specific consulting aspect for direct assistance on the contract phase, due diligence, negotiation and operations aspects as well. 

I have done some of this consulting but I think there is something to be said for doing it as a group. Sometimes groups can have more synergy than an individual as the members tend to encourage and push each other a bit. 

That said, I do like the idea of local meetups specific to MHP investing.

I think something that is missing from this investing space is coaching and mastermind groups. In many industries these exist. I had a lot of real estate investing under my belt, but still utilized a partner for my first deal. It worked great but not everyone is a good partner person. A good mastermind group- with several people that have a call in every few weeks to discuss issues with the facilitator, and then they meet up several times a year to do work in person would be a solid improvement to this segment of the business. Education is great, and you have all the tools, but having someone walk you through the process would help many in this space. Just a thought...

Ryan, If the park is in Kansas I would go to banks that generally do farm and ranch. Banks are a bit diverse in their portfolio and we have found the farm and ranch bankers sort of 'get' the loans on land that makes money concept. They also deal with lots of small business owners. You might branch out into the smaller towns to find banks that are a bit smaller, as they can be easier to deal with. The loan officer is the son of the guy that founded the bank sort of stuff. 

Also- we have had luck with lenders that represent credit unions. They 'float' your loan to several different credit unions and once enough agree to fund a share of the loan, your done. We have done primary and refi through the credit union represented lender.