All Forum Posts by: Richard Allen

Are the mobile homes owned by the tenants or the park? Is the park water and sewer provided by public utilities or is it private well and septic?

"Mastering the Art of Commercial Real Estate Investing" by Doug Marshall. I've been enjoying this one recently. It's very well written. 

The information is still relevant. The basics of analyzing a multifamily property are the same no matter what point we are in the real estate cycle. 

One I also like is "The Complete Guide To Buying and Selling Apartment Buildings" by Steve Berges.

If you are serious about becoming a real estate investor, then I suggest you only put the amount into your 401k that is required to get the full matching. The matching is a great way to get extra income, but 401k and IRA accounts are not the best avenues for investing in real estate. Rental real estate provides great income tax deductions, for example, in the form of depreciation, which you cannot claim within 401k and IRA accounts. Also, when you sale a property owned by a 401k or IRA account you may owe taxes even though you are dealing with a tax sheltered account. Read up on Unrelated Business Income Tax (UBIT) and Unrelated Debt-Financed Income (UDFI) with regards to 401k and IRA. Better alternative tax shelter account for real estate investment is the Solo 401k (see also self-directed 401k, QRP, eQRP).

Fortunately, the money you put into the Roth IRA (your contributions) can be withdrawn for any reason without paying taxes or penalty, but the earnings cannot. So, for example, you could withdraw some or all of your contributions to invest in rental real estate, while leaving the earnings in the account.

However, if you are serious about intending to eventually purchase rental real estate, then I suggest you save money into an account that you can freely use when the time comes, such as a properly structured whole life policy, a savings or checking account, a money market account, or CD. With the whole life policy you won't have to pay taxes on interest earned. With the others you will have to pay taxes on interest earned, but your income bracket is currently low.

Below are some links to more information.

Solo 401k:

https://www.biggerpockets.com/forums/51/topics/404427-setting-up-a-eqrp-vs-sdira

Whole Life Policy:

https://www.biggerpockets.com/forums/432/topics/530823-infinite-banking-concept

https://infinitebanking.org/about/

https://cashflowbanking.com/faq/

https://wealthfactory.com/rockefellers/book/

I think John Oliver's bit is distasteful at the very least. I'm sure there are predatory MHP investors, but I don't believe Franke Rolfe is one of them. Frank offers up a tremendous amount of his personal time for free to help operators properly manage MHPs so those parks don't turn into dumps. From what I've seen he has created clean, safe, affordable housing communities for many people that were formally living in run down trailer parks.

Don't gloss over the fact that John Oliver also bashed Warren Buffet, who is THE most respected investor ever, and Clayton Homes, which produces very nice mobile homes. I think it's great that someone like Warren Buffet invested in providing high quality mobile homes and loans for low income earners to purchase those homes. It helps alleviate the affordable housing need in the USA.

If it weren't profitable for companies to produce and sell mobile homes, then companies would stop making them. If it weren't profitable for operators to own mobile home parks, then all the parks would eventually disappear. The current owners would die and then the land would be used for something that's profitable. Then those that love living in their MHP would have to find some other housing.

The media love to portray irresponsible adults as victims. If you get a loan to buy a car, then don't make the payments, the bank will eventually repossess your car. If you get a mortgage to buy a house, then don't make the payments, the bank will eventually foreclose on the house and you will get evicted. If you rent an apartment and don't pay the rent, you will eventually get evicted. If you don't pay your property taxes, the government will evict you! Why should it be different for loans on mobile homes or rents in mobile home parks?

MHP lot rents and mobile homes for rent are the least expensive housing you can find. Where else can you get 2 or 3 bedroom housing for so cheap?

@Franky Davis

I suggest you initially find a great CPA who is very knowledgeable in investment tax sheltors. You will want to concentrate on investments in which you get a significant tax break. Be careful of avenues that don't provide you a tax deduction.

Real estate has great tax advantages, but it's not the only tax shelter. For example, oil and gas is even better. 

https://www.investopedia.com/articles/07/oil-tax-b...

Another area is agriculture.

I've heard that Steve Newlin is a good accountant in Chattanooga, but I haven't met or worked with him personally.

I doubt your tenants in park owned homes will leave unless there is a cheaper, nearly equivalent option nearby. Even then, the option has to be cheap enough to make it worth the hassle of moving. If you are improving the look of the park, then that's incentive to stay.

Check on nearby rents plus utility costs. If you find that those other options are more expensive or nearly equivalent to what your tenants will end up paying for rent plus utilities, then you shouldn't have to worry.

Also, you should check this out if you haven't already. Water meters that report via the cellphone network: https://www.metronfarnier.com/sub-metering/

There are few blog posts on BiggerPockets covering this topic under the mobile homes category!

https://www.biggerpockets.com/renewsblog/add-homes...

https://www.biggerpockets.com/renewsblog/manufactu...

Another good resource is the Mobile Home Park Mastery podcast by Frank Rolfe.

The 59 lot park looks like it might be a decent price, but you need to find out what the expenses are, and if the water/sewer/trash is billed back to the tenants.

The 30 lot park looks suspicious because you wrote "water/sewer income". You can't expect to make a profit from water and sewer, so I wouldn't use that in the valuation.

You should base your valuation only on occupied lots at current lot rent, then you can add in the value of park owned homes and site built homes.

Mobile homes aren't worth much, so don't over value any park owned homes. Don't put too much weight on being able to fill the vacant lots either. It's possible, but could turn out to be harder than you expected.

As the previous post mentioned, you also should research the area and associated metro to be sure that median home prices are well above mobile home prices, two and three bedroom apartment rents are well above what the park charges, there is a good size population, the housing vacancy rates in the area are no more than the national average, the household income is decent, and the unemployment rate is around the national average or less.

Having a Wal-Mart within 5-10 miles is a good indication the area can support the park.