All Forum Posts by: Tyson Cross

@Shweta Patel it is preferable to have tenants on RTO contracts as they are "trending" towards owning their home. However, they don't yet! You still own the homes and will hold title. Therefore, they are considered park owned homes by the bank. The only time you wouldn't hold title is if they were sold on a contract and the resident holds title. In which case you'll pay the seller of the park for some amount of the remainder of the note. You'll want to check the length of time on these contracts and discount accordingly. For example, we typically would discount the value of the "note" by as much as 50% if the contract is relatively new. If the resident has been paying on that note for a year or two and closer to paying it off then you might not discount it as much. I hope that helps.

If you really want to get technical, I wouldn't cap the income on the park owned homes and only take a shell value of the home's worth as a stand-alone value. For example, take the income for the lot rent only portion of the whole park - 

12 homes x $230 lot rent x 12 months - $33,120

Apply a 40% expense load to that - $13,248

Gives you a Net Operating Income - $19,872

If your evaluating the park purely on the lot rental income (which is really how you want to buy them) then it would be roughly a $200,000 purchase price based on a 10% cap rate.

Now since you have 5 park owned homes, you want to look at what the true market value of those homes are worth as if you were buying them from someone. For example, look at zillow or craigslist and see what mobile homes the same size, vintage and location are selling for. Discount them about 50% and that's your "shell value" for each home. Let's say they worth $10,000 each in that market. That gives you an additional $50k in value. Thus, the total sale price of the park plus the homes is around $250k. Let me know if you have questions on that. Good luck!

First, check your landlord tenant laws in AL. Make sure you know what is permissible and the timelines in which you have to operate for notices, eviction process etc. Have you had a conversation with the owner regarding the past history with these particular tenants? Have they posted late notices or filed any notices to pay or quit? Typically when tenants get that far behind, they almost never end up paying it off. That is a lot of money to be in the hole and frankly, its the rare case where a tenant will agree to some payment plan and stick to it. I believe there are a few options. 1. You end up wiping this past rent away and start new. Make it clear the tenant has one and only chance. I've seen this to be the case when a new owner steps into a property with major bad debt. 2. You put a payment plan in place with this tenant and they agree to pay and let them stay. But, again first time they miss you have to take action. 3. You file notices to pay or quit and if they don't pay, start the eviction process. I hate to say it but these people probably will most likely end up not paying again at some point. Once they're allowed to get away with it once, they'll likely try again and again until they get evicted. Depending on the owner's history with these tenants will likely the scenario. If I was a new owner, I would probably give them a clean slate and then one chance to stay. If the owner's had the property a while it's partially their fault for letting the past due rent build up this far. Again, make sure you understand the state laws as it pertains to notice filing and the eviction process. I hope that helps!

@Nita Martin I second Jay's opinion. If that's a local bank giving you those rates go for it. Like he said, unless the owner is willing to finance that small of a park it can be near impossible. The nice thing about a local bank giving you the thumbs up is they know the market and likely the park so if they believe in it then it must be a good deal. Good luck!

@Jacob Calbillo there is no minimum amount of homes - the definition of a park is multiple mobile or manufactured homes on one piece of land that is usually owned by someone else. Theoretically, by that definition you could have a piece of land with 2 homes on it that you rent the space out to and call it a mobile home park. If you're looking at how many homes you can add per acre, the general consensus for density is 10-12 homes per acre is in the sweet spot. Hope that helps!

For a lot of people, a house is an asset and will appreciate over time. It is most people's largest purchase and historically if you look at the appreciation rates, homes will go up in value. True, you can offset that by taxes, insurance and all the maintenance costs that go with it over time. Most people don't factor these in when they think about how much value you they have in their home. But the truth is, everyone needs a place to live and for the average person, buying a home makes the most sense. 

I am in the camp that does not view a home as an asset. I have many discussions (arguments) with most people in my immediate circles about this and I am usually the odd man out. I believe that a home is a liability for all the reasons I mentioned (taxes, insurance, maintenance, etc.) I also live in a market that will no doubt continue to rise in value. My home will likely be double what I paid for it in 20 years. However, if we look at inflation at that point it will technically likely not be double. But the main reason I don't consider a home an investment is because MOST people will accrue a ton of equity in the home, only to die with that equity unrealized. A true investment vehicle allows you to capitalize on the return the investment produces. Not so in a home, unless you use a HELOC or other methods to access the equity. Again, most people are not sophisticated enough to use this so this "investment" does them no good. So ultimately, I do not view a personal residence as an investment.

Having said all that, my family and I recently received a notice to move from our landlord after only 9 months of living in a house that we had become quite comfortable in very quickly. It was also in a neighborhood that we loved and had met many neighbors we were quickly becoming friends with. It was a horrible experience. Not only for having to pack and move again, but for realizing that we were not in control of our situation. My wife was crushed. Keep in mind this was after I convinced her to sell our home and reinvest the funds into a mobile home park. She was not happy with me. I was screwed. We had to buy.

Fast forward, we ended up finding a home we absolutely love in the same neighborhood with everything we want in a home. We bought it. Now I wasn't super stoked on it, but I knew it was the right decision for us. The best part about it is we have income producing assets that now PAY for the home. So, just like my residents pay my debt down on my mobile home park, the cash flow from the park that we bought by selling our home now pays for our new home and then some. THIS is how one should buy a home. Then it can be an asset. We will use the equity in our home once we have enough to buy another income producing asset - I will never pay off my house free and clear. It doesn't make any sense.

So...in the end, my recommendation to the OP is to find a play where you can create value. Use it as a stepping stone. House hack, by and renovate, whatever you do buy with the intent to create ea ton of value and leverage that into the next project. Once you have enough equity, find a value add income producing asset that can pay for your next purchase. You will never technically buy your home that way. If I was starting all over, I would buy a 4-plex and fix it up. Live for free and learn how to be a landlord. Then you're off and running.  Good luck all!

Hey everyone, I'm starting to curate blog content and post once a week with links to other people's articles with some brief commentary on each one. If you have a real estate blog and would like potential articles blasted out on my blog and social media, let me know. I'd love to take a look! Shoot me a DM. Thanks!

I would use it to buy another income property. but I wouldn't buy a single family home. I'd take a big enough chunk to buy as many doors/pads as I could - the return on the money is going to most likely be substantially higher than the interest rate on the debt. Additionally I invest purely for cashflow. Appreciation is gravy and you will get that with improved operations and increasing the income. But let's say you bring in an extra 4k a month in cash flow - it's definitely worth the 1k payment is not?? Just hypothetical numbers, but if it supports the payment with income producing property and gives you cash flow, it's a no brainer. Take advantage of it. Only thing you want to ensure is the terms of the debt and interest rate fluctuation. Other than that, I think a HELOC strategy is a great one.

@Jay Hinrichs Well as you know Portland just passed an ordinance preserving mobile home park zoning within the city meaning you can't redevelop these parks. It's still a little unclear what you can and can't do with the land at this point, but a lot of people with the run down dilapidated parks (meaning the homes are not worth anything) will need to make drastic changes including bringing new homes in or RVs. These particular parks are difficult to do anything with because the homes are so bad that eventually they will not be habitable. on top of that the land is surrounded by commercial property and the best use is clearly redevelopment. The city is trying, but in this case, I'm not sure that's the best solution. OR is also more tenant friendly and tougher to get things done in. But we're still looking for parks!

@Joshua Gutierrez congrats on making the decision to jump into real estate investing. Great choice! But don't think that you have to jump all in by yourself on your first deal. Do you have any other experience with real estate investing? The beauty of real estate is there are so many ways to make money. How do you know you won't like buy and hold, or value add apartment investing, or mobile home park investing? My advice is to talk with your mentors and maybe throw in 50k on your first flip as a passive partner. Learn the business, offer to help in some other capacity while investing some of your money. See if you like it. Fix and flip is its own animal. You may love it, you might not. The point is, test the water a bit -if you are truly having a tough time analyzing deals and can't pull the trigger, this may help. Lastly, always ask someone else to analyze a deal if something just doesn't seem right. Good luck!!