All Forum Posts by: Roger D Jones

Diandre,
No idea what your leverage is on those seven rentals is or if they are all levered into one another but as much as you need cash you need time.  Time for the economy to reset and interest rates to come down.  You can go to a CU or local bank but they want a wad a cash from you for skin in the game and your going to have a rough interest rate.  Same thing with any investor you get in bed with.

With time you can work some equity into those rentals and when interest rates come down you will be in a better spot to sell a couple SFHs.   Agreeing with @Dominic Mazzarella I would go to your uncle and ask him how much he needs monthly to sell with zero down and a 7 year call and balloon at the end.  You might have to give up some income from the rentals but it gets you ownership of the park and time to fund long term financing.  

Quote from @Janine Sharma:

Thank you! This is very helpful!

 Anytime... we have one accountant who focuses on our MHP and multifamily clients.  Any questions just ask.  I am no expert and just do what I am told.  

Try looking for lower priced mobile homes on private property that need to be moved.  Find parks in the area that have open spaces for mobiles then negotiate with the park owner for 6 to 12 months free space rent or for them to pay the moving costs.  Once you get the home in the park do your remodel at that point and flip it from there.  The park owner will want a bullet proof guarantee that the home will look great when completed and you will be on the hook for the space rent as negotiated until it sells. 

Just had a young entrepeneur do this in one of my parks.  Gave him 10 months free space rent and paid for all his utility hookups.  He is renting the unit and will carry a bit of debt for a couple years but once he is clear of that he will do very well for himself.

Park owners want their empty spaces filled.  Use that to your advantage.  Be sure to understand the financing options out there for mobile home buyers and if you opt to carry the contracts on the homes you sell you should do some research on Dodd-Frank regulations.  I know nothing about that stuff but hear it mentioned all the time.

Janine
I am next door to you in Washington and you can go either way. We have a few parks and we utilize both options. Much of it depends on what your needs in the park will be.  

If your manager is just 'keeping an eye' on things, collecting/reminding on a few rents here and there and some light cleanup while being compensated in free or reduced space rent then classifying them as 1099 subcontractor is great.  Their dollar compensation is their free/reduced rent.

If you have a lot of maintenance with landscaping or POHs then you hire them as an hourly employee.   For our larger park we have a 'Maintenance Manager' set up for up to 24 hours per week as needed with OT for after hours emergencies.  The IRS is very clear about the distinction between the two scenarios.  1099 subcontractors provide their own tools, set their own schedules are not directed by the hour.  Employees work for you and do as instructed with your oversight.  You can do it either way and reality is you will never be audited.  It is your park to run.

But there is a cautionary side to this tale- you should pick one of these two options.   Far too many parks just 'give' a resident in the park free space rent to keep an eye on things and do light maintenance with no 1099 reporting.  If that person were to get hurt somehow and then expect you to pay the medical bills or become disgruntled in some way it is just a phone call to DOR, OSHA or L&I.  Your park name has now landed on someone's government desk and you will eventually be forced to answer a lot of uncomfortable questions.  We also own an accounting/payroll firm and have a lot of MHPs, residential communities and apartment complexes as clients and have seen this happen a few times. 

Lastly and then I will stop rambling... and this is just my opinion.  I think it is pretty rare that people getting free space rent actually work enough to earn it.  We have another park with a free space rent manager and as we have raised the rents he continues to live there for free.  Good guy, little forgetful, but I wish we hadn't inherited this arrangement and it is tough to retract it.  We are eventually going to have to address this.

Quote from @Fred Scott:

@Roger D Jones:  Any insights on why the North Carolina purchase in Fund IV makes you nervous?

They paid 3.7 million for this property at 29% occupancy.  Park has experienced a mass exodus over the last 20 years with no explanation why.  Their plan is to raise rents (on the poor remaining souls, improve infrastructure and exert some sweat equity.  How are they going to fill the park?  "Leverage infill opportunities"... Typical PE investor double speak.

Well... they are who they are.  The PE investment feeding frenzy that started up 15 years ago as TOH parks started getting gobbled up is starting to slow as supply tightens.  This feeding frenzy has driven up park prices and there are fewer and fewer Mom and Pops to take advantage of.  The big stuff is gone and if anything does come available Mom and Pop know what it is worth.  I question when these PE groups start wanting to unload their newly inflated parks who is going to be willing to purchase them with no further upside.  

There North Carolina purchase leaves me scratching my head.  When PE investment groups start using terms like 'sweat equity' on near empty parks I get nervous.

Quote from @Joel Montoya:

Hi there! I’m a contractor with a couple single family homes for rent. It’s getting very pricy in my area so I’ve also been looking into investing in mobile homes. There’s a lot of content on YouTube. Someone there advised to buy 1976 or higher. I think this was to ensure your buyer can qualify for a loan. Good luck!

Prior to 1976 they were considered pre-HUD. Small windows, aluminum wiring, etc. All kinds of restrictions on selling, moving and financing. After 1976 trailers were considered mobile homes and standards were upgraded. That is mobile home park investing day one, first period lesson plan.

Quote from @Melanie P.:

Quote from @Carl Rowles:

I appreciate the response, Roger. Part of my calculations does figure in vacancy, repairs, and capital expenses. Are mobile homes more prone to these issues than a typical SFH and I sure increase those allotments?

 Carl, There are nice mobile home communities that include the parcel of land under the home. These homes tend to individually appreciate over time and are actually not bad places to live.

The places with the lot rent you have to decide if you want to be in the mobile home business and buy the park. Then you wind up with units in your park that default on lot rent and cannot afford to move the trailer. Most trailers cannot be moved or would cost more to move than they are worth. So, if a developer comes along and buys the mobile home park you will lose your entire investment. This does happen. Almost any use of land is better than a mobile home park - which is why most of these parks still around are in far off areas.

 Melanie 
I am not sure I would concur with your statement that any land use is better than a mobile home park.  Large investment groups and small investment groups have been scooping them up in batches over the last ten years.  Carlyles, Blackstone, Sam Zell and Apollo to name a few of the big dollar groups.  I get three calls a week on each of our parks from groups looking to buy and they are each far from any metro areas.  I would proffer that though that no one is building NEW mobile home parks with some exceptions for long term RV parks which continue to be developed.  Existing mobile home parks are in high demand for all investors large and small.

Quote from @Carl Rowles:

I appreciate the response, Roger. Part of my calculations does figure in vacancy, repairs, and capital expenses. Are mobile homes more prone to these issues than a typical SFH and I sure increase those allotments?

 Carl
Sorry about my vacant response above.  It was early and I did not think my communication was very clear so I tried to delete the post but I guess it left your 'quote' in place.

So to answer your question- Yes.  Mobile homes are much more susceptible to repairs than SFHs.  Mobile homes are 'baby chick eggs'.  Everything is smaller, thinner and cheaper.  Water is the root of all evil.  I own thirteen mobiles in one of my parks and the only way it pencils is that we A) take very good care of the homes staying ahead on the maintenance, B) Rents are high in the area so we can charge $550 over the pad rent which is $450- so $1000 per month.  

You can look at a mobile home and see it as an easy rental with new carpet, trim and some paint but there are other bigger uglier expenses that can come up.

Roof Replacement, soft floors (water damage) in kitchens and bathrooms- most floors are particle board, exterior door replacement (special order), underbelly insulation falling, bad hot water tanks with rotten floor underneath (real joy), bad windows (water again), bad bloated siding (water), water damaged base frame around perimeter of home, cracked tubs (special orders) and frozen pipes (Good luck finding a plumber to come work on a mobile home- they do not exist). Now your husband may be willing to take these on but that is not much of a life for $500 per month. If you sub these out you will be wiping huge chunks of your annual NOI.

Now I not saying to not take the deal... just go in with eyes wide open. 

Quote from @Carl Rowles:

Quote from @Roger D Jones:

@Jason Velie is right.  Cash flow is a trickle with a lot of hard work.  Find a park a distressed park, find some distressed trailers, put your husband to work.  That is what my wife did and she is loving the cash flow.  

Hi Carl. 
Sounds like a nice trailer with a lot of potential.  I own 13 trailers in one of my parks and I will tell you they are like baby chick eggs and we treat them like that.  So say you are into the trailer $12500 by the time you get ready to rent.  Lot rents could climb to $500 eventually and you can rent it for $1200.  You have taxes and insurance so that pulls another $100 per month- so you clear $600 per month.  Not bad... weekend vacation money.

But here are some of the things that can disrupt that.  Water leaks, problems under the trailer ie insulation falling, a tub cracking, a new roof, frozen/cracked pipes (usually in January- and plumbing companies simply will not respond to mobile homes), rotting siding, bad exterior doors etc.  We had a tub break and had to remove the entire end of the trailer to get the new one in.  I guess what I am trying to say is everything pencils in a perfect scenario with nothing going wrong.  And every time you get a new renter... it's four or five days fixing the place back up.  So yeah the $600 per month gets you and your husband a weekend away but you will be losing some weekends 'down at the park' also.  

Again- doesn't sound like a bad deal and if it was in my park I would buy it too, but then again I get the lot rent also.  Just some food for thought.
Roger

 So if I bought one for $7,500, and it probably needs a few thousand dollars of work (more than 1, less than 10). But it's a 3/2 and I think I could rent it for $1000-1200, has a lot of NEW things already in it (AC/heating, kitchen cabinets, appliances, flooring) but bedrooms need to be finished remodeling.  Lot rent is $365 and includes water. Can I still do simple 4 box calculation?