All Forum Posts by: Jonathan Towell

There are many ways, some better than others. Brandon Turner from BP wrote a book on it.

My go-to is to look for seller financing or lease with purchase option. Find a frustrated investor who is ready to exit the business and offer to take alleviate the pain by taking on the property.

I wish you the best!

Hi Ronnie,

The seller shouldn't care when you place the tenant. All the seller cares about is getting paid. So, how long do you have to find a tenant? As long as your own cash position can suffer the losses.

I hope that helps.

Before you put in an offer, you need to get the last 12-36 months Profit & Loss statements from the sellers.

Once you have a contract and can start due diligence, you'll want to see the previous 6 months of actual utility bills and compare them to what is reported in the P&Ls.

I hope that helps.

@Amber Gonion raises THE critical question.

It looks like you are on the right path.

1. Your model shows maximized NOI after year 1. Cap rates are very compressed right now. If you truly can maximize NOI in a year or so, why not go ahead and sell?

2. Like you said, you'll want to have a solid capex plan based on inspections. But, ongoing capex at 6-9% is probably a good number to pencil in. If the property is older, it could be more.

3. If utilities aren't currently paid by tenants, it might be hard to bill them out AND raise rent all at once. The transition may take two lease turnover cycles.

4. I might pencil in 3% on both.

5. As always, property management is key. You'll probably pay around 10% for professional property management. If you give away a unit, you'll be dropping about $500/mo in rent. But, who will be managing the property? I've never had an onsite, untrained manager. But, the idea doesn't sound great to me. That said a professional management company is never a 100% safe bet.

Nice work!

$30/hr doesn't see too bad if he is part-time or on call only. If he is working a steady 20-40 hours, that might be a little high.

18 units is tricky. It is enough where you'll have a steady flow of work orders, but not enough to hire someone full time. 60 units is the rule-of-thumb I've heard for a full-time maintenance guy/gal.

So, my only advice would be to expect to pay a little extra per hour. If the hourly rate bugs you, be ready to scale up as fast as possible to 60+ units.

I hope that helps!

I highly recommend "The Mobile Home Park Investing Podcast" by Kevin Bupp and Charles DeHart. I've listened to every episode and we are now prospecting for mobile homes, ready to jump when we find a good one. Their podcast talks through all the questions you're raising.

For your park in question... I wouldn't be afraid of hard work. However, I'd want to get paid for it. The goal is to buy at a fair value (or a deal), then drive the rent up while lowering expenses.

Fortunately, those things go hand-in-hand with evicting troublemakers. As you remove the meth heads, you'll be able to attract better tenants at higher rents (in theory). 

If you could increase average rent by $50/pad and lower expenses by $25/pad, that will add $1,275 to Net Operating Income (NOI). At a 9.5% cap rate, that raises the value of the property by $161k. Of course, I just made those numbers up. The question you'll need to determine is what kind of value can be added and if it will be worth the trouble. Personally, I wouldn't mind dealing with some headache tenants and managing a property to add $160k to my net worth.

I hope that helps. I wish you the best.

Hi David,

I like both ideas. Either one is a positive step in the right direction.

Keep in mind the definition of a liability vs. an asset. A liability costs you money each month. An asset increases in value, preserves value, or puts cash in your pocket.

Obviously, renting is a liability. But, owning a home you live in is also a liability. It costs you money each month. It is just a less expensive liability than renting.

The quicker you can get to where you are buying assets rather than liabilities, the better. For more on this idea, see Rich Dad, Poor Dad by Robert Kiyosaki.

I hope that helps. I wish you the best.

I highly recommend "HOLD: How to Find, Buy, and Rent Houses for Wealth" by Steve Chader and Jennice Doty. 

At a glance, it looks like a good deal.

1. Does your tax expense account for a bump in value? The city will likely raise that value once they see it has sold.

2. I don't see anything in your maintenance budget.

3. I don't see anything in utilities. Maybe all utilities are sub-metered or bill back. But, you might want to make sure there are no common area utilities that you'll need to account for.

4. I don't see any expense or rent appreciation after year 1.

Just a few questions I had as I looked through it.