Buying a 51-Unit Property with 0% Interest and No Money Down

Ashley:
This is Real Estate Rookie, niner niner.

Edwin:
Obviously, it worked well for me, but my goal wasn’t to come in and just low ball him and low ball him, my goal was to come and solve his issue. And as soon we figured out exactly what his issue was and he started to open up, then that’s when we came to terms that were fantastic for both him and me.

Ashley:
I am Ashley Kehr, and it’s always a great day when I can make Tony laugh. You should have expected that. I’m excited though.

Tony:
I wasn’t sure how you were going to play the 99. I wasn’t sure if it was the 99er, but the niner niner, I like that even better.

Ashley:
So, what’s new Tony. What’s under contract this week? What have you sold? What have you bought?

Tony:
I think we’re actually the same as last week. So we have our Joshua Tree Airbnb that’s up for sale. I think we’re hopefully going to be reviewing offers here shortly on that one. And then we have two properties under contract in Joshua Tree, both of which are rehabs. So trying to figure out how we slow things down a little bit so we can take those on and dedicate the right amount of attention to them. What about for you? How are things going?

Ashley:
My property that was going… We did a BRRRR. Well, we are going to do a BRRRR on it, but before we rented it out, we had a realtor come and say, “I can sell it for this much,” and got us all excited. So we decided to sell it. So it’s kind of like our first accidental flip. We built this property out to be a rental not to flip it, but we actually got it under contract, so that’s super exciting.

Tony:
Awesome.

Ashley:
Yeah. And we had the guy come and… So it’s nice to have that deal done. And then in New York State, it takes forever to close.

Tony:
Eight years. Yeah. So by episode 200, we’ll have this deal closed.

Ashley:
Actually, it’ll probably be a month after this episode airs, realistically. So that’s super exciting to do that. It’s actually kind of sad because I love this property so much and the property taxes are so cheap on it because there is a landfill near it and the landfill company takes care of almost all the taxes in the area.

Tony:
Are you guys going to 1031 into something else? Is that the plan?

Ashley:
No, actually, we’re not. We’ve thought about it, but yeah, we’re actually not going to do that.

Tony:
Okay. That’s good, sometimes you just take the gains and be happy with it, right?

Ashley:
Yeah. Yeah. I don’t know. We’ll see. And I think we’re both going to be at least in the meantime, maybe working on different projects. So we would have to buy something together again to do that. So we have to figure that out. We have to figure it out. We just signed the contract last night, so as of right now, no, we probably won’t do a 1031 exchange. And it’s not going to be that huge of a gain. This was a $27,000 house we’re talking about that I purchased it for. But if you follow me on Instagram at Wealth From Rentals, I will do a full whiteboard breakdown of the numbers once it gets closer to closing.

Tony:
Once it all closes.

Ashley:
Yeah.

Tony:
Which again, will be in about six years from now. So just follow Ashley, in about six years or more, we’ll see how this one turns out.

Ashley:
Yeah.

Tony:
Well, we had a great guest on today, right?

Ashley:
Yeah. Once again, everybody, we used it to our benefit to get questions answered that we wanted to know. Our guest today has started out doing a flip and then to a rental and then to a mobile home park. And I can’t do math in my head, but how many times did he triple, quadruple the number of pads in his mobile home units from one park to the other? So super great growth and scaling. But Tony does a great job of asking him questions on how exactly to set up seller financing. And our guest today, Ed, he does a wonderful job of explaining those steps, what to ask, and then after you actually agree on seller financing, what happens next? So what does the paperwork look like? How is that all handled?
So if you want to learn about owner financing, this is the episode.

Tony:
Yeah. The last thing, I think he did a really good job of just talking through the mental aspect of starting, of scaling, and how he broke past some of the fears that tend to hold a lot of other rookie real estate investors back. So just lots of good gems throughout this episode.

Ashley:
Well, before we bring Ed on, make sure you guys are subscribed to our YouTube channel, Real Estate Rookie. We put out videos of the podcast every single week, and we also put out extra videos that are tailored specifically for rookie investors and what you guys need to know.

Tony:
Ed, welcome to the Real Estate Rookie podcast. Happy to have you on, brother.

Edwin:
Hey, thank you so much for having me. Excited to be here.

Tony:
Yeah. I know you’ve got an amazing story to share, but before we start dropping all the knowledge on everybody, give us a little bit of background about yourself, Ed. How’d you get started, where are you coming from?

Edwin:
Absolutely. So I am from Mocksville, North Carolina originally, raised there, just about 45-ish minutes north of Charlotte. Background in real estate. I really, at a young age, I wanted to learn how to build wealth, that was pretty much it. And so I started reading books. I found a parallel in real estate, all the books I read had real estate in them so I figured it’d be a good thing to learn. Actually, pretty much everything I learned came from BiggerPockets. I started Googling real estate podcasts and such and found BiggerPockets and I’ve been learning ever since. And I’ve had the good fortune to be able to pick up a couple of deals in my investment career so far.

Tony:
Can you give us an overview, Ed, of where your portfolio is at today?

Edwin:
Yeah, absolutely. So I have got one single family home. I have a six-year mobile home park, and set to close on a 51-unit mobile home park next week.

Ashley:
That is so exciting. I’m going to have so much to talk to you about this episode. Let’s go back to the very beginning. How long did you analyze, how long did you research before you actually pulled the trigger on that very first deal?

Edwin:
I started really learning probably about 18 years old. Learning, learning, learning. My first deal ever was actually in South Carolina, my older brother lives there and my first deal ever was purchased with him. There really isn’t a lot to unpack on this deal. He pretty much called me and said, “Hey, Ed, I have a deal.” I had some money saved up from working, ended up giving it to him, and we flipped that property and ended up making out pretty well on it. My first solo deal, it was about a year and a half of analyzing, analyzing, analyzing, analyzing, and found I just had to pull the trigger on it.

Ashley:
With your brother on that first deal, did you guys talk about investing? Was this his first deal too, or was he already into flipping houses?

Edwin:
He had actually had a mobile home park at that time. He had a small mobile home park at that time. And this was his very first flip though.

Ashley:
Okay. Awesome. Exciting. So let’s talk about that, partnering with your brother. Sometimes people say, “Don’t partner with family. If something goes wrong.” How did you guys set up your partnership and how did it work for you guys?

Edwin:
For us, we were both equity partners in the deal. He ended up handling most of the transactions as the property was down there in South Carolina where he lived. It’s about two hours south of where I was living at the time. But really, I gave him the money, I wrote him a check, took it down, gave him the money. He ended up purchasing the property from there. I was 19 at the time, we had no formal agreements set up or anything, it was just an understanding of what we were going to do. I’m fortunate that I come from an amazing family, so it worked out doing that. But I understand that in some cases, it doesn’t.

Ashley:
What would be your advice to a rookie investor that’s looking to do the same thing? Would you have done anything different or what are some things that worked really well, having a partnership with your brother for the first time?

Edwin:
One of the biggest things for me was it wasn’t a solo deal really. My first solo deal came a good while after that deal, but it was really nice to have… So my older brother, he’s 34, so he’s over a decade older than me, he has more experience in it. It was really nice to be able to do a deal with him, just mostly from the learning aspect of things. So he was a little bit more knowledgeable in the nitty gritty of how a deal actually works. I had an overview, but he helped me learn a lot of those kinds of things. I would also drive down there pretty much every weekend, since we did most of the work ourselves. I would drive down pretty much every weekend and help him fix things. And that was once again, more an act of learning experience than anything.

Tony:
I love that you leveraged partnerships as a way to get started. Ash and I talk about partnerships a lot. We both have partners on a lot of the units in our portfolio. I guess one last question, before we move on, how did you guys make out on that flip? If you can just run us the numbers really quickly, what’d you guys buy it for? How long did it take? And what’d you guys profit on it?

Edwin:
Yeah, absolutely. So we purchased the property for 33,000, ended up getting about 40 into the rehab and sold it. It was on market for less than a day and sold it for 135.

Ashley:
That’s great. An awesome first deal.

Tony:
Wow, that is great.

Edwin:
Yeah, it worked out very, very well, very well, for our first.

Tony:
Yeah. Okay. So you do that first deal and then you take some time off before you do your first solo deal, which turns into a single family residence. And then from that single family, you start scaling up pretty quickly from a six-unit mobile home park, you said to now a 50-plus-unit mobile home park. So I definitely want to get into that journey of how you went from one to six to 50, because I think that’s everybody’s goal. But I guess let’s start with that first single family home.
The first question is, why do you feel it took you so long after that successful flip to get into the single family home if you had already proven to yourself that real estate investing is something that you’re good at?

Edwin:
Simple answer, I was scared, Tony. I was. That was pretty much it. One night, I was watching some… Actually, I was on a webinar with Brandon. He has a webinar on how to close a deal in 90 days, and I was actually on the webinar. And I just decided, “Hey, I’m tired of being stuck. We need to make this happen.” And that’s what it took really. I had the means to do it, I was just simply scared. So when I finally made the decision, found a property that worked and closed in about 60 days after that.

Tony:
I want to pause on that just really quickly, Ed. I think what you just said is something that a lot of rookies will resonate with, is that they were just afraid. They had the knowledge, but there was something in them that was holding them back. What was it that changed for you mentally that allowed you to build the courage to move forward in spite of that fear? And what would your recommendation be to other rookies that are feeling the same way?

Edwin:
There’s a couple of different pieces that got me there. I think a big part of it was having a bit of a support group. Not all my friends were doing this, but I had been going to some real estate meetups, some local meetups and such. And I was meeting other investors who had 20, 30, 40, 50, 60 deals. And so for me to tell myself that, “Hey, this one deal is scary.” It helped to take it from something so big to something kind of minuscule, if that makes sense. And then another part of it is, I feel like for me, there was just a certain point where I had to decide, it’s not going to not be scary, when I bought my first one. Either we’re going to do this or we’re not.
And that’s what it really came down to for me, was, yeah, it’s scary. There’s a lot of unknowns. I’m young and by far the biggest purchase, but we just have to pull the trigger and make it happen. That’s it.

Ashley:
You said that you made it work, that you got over your fear, you found a deal and you made it work. How did you know that it was going to work? Because that’s a big question that a lot of people have when they’re jumping into it. How did you verify numbers? Did you consult with somebody who told you it was going to work? How did you know that first deal was going to work?

Edwin:
I had been listening to a lot of BiggerPockets Podcasts. Like I said, I had been networking. I had been taking webinars and just talking with as many people as possible to try to find out how to analyze a deal and stuff like that. I did start, once again, at about age 18, when I started getting serious about real estate and wanting to purchase my first deal, I started previewing a lot of real estate. So I would go out and look at as much real estate as possible on weekends or whatever to try and spend a lot of time on Zillow or Realtor.com, whatever, to try to figure out the market and say, “Hey, this is what a good deal is.”
When I found this property, I really didn’t do that many things right. I didn’t have my numbers nailed down to a T, but I did have a great general idea of what a house in that market should go for. So when I saw, hey, this has bedroom, bath square footage, and this is the price it’s going for, there was a tenant already in it. So even if it’s not great condition, I knew it was livable. I saw the number, and I said, “Hey, this is a good deal.” And then quite frankly, once again, I think there’s a portion where you don’t know 100%. I don’t think there is a way to know 100% on your very first one.
You have to take a bit of a bet on yourself and say, “Hey, other people have done it, I’m going to do it. We can figure this thing out.” And come into with that attitude of understanding, I don’t think there is a way to know 100%, which is we know the numbers, we know where we’re at, so let’s figure it out, let’s make this work, type of thing.

Ashley:
I think it seems like that you knew that if there was something that went wrong, you would figure it out. You looked at what these worst case scenarios could be, and you knew that you could overcome them, that you could get past it because you had gotten to a certain point where you knew the deal would work. There was just that maybe 5% chance it wouldn’t work, but you knew that, you were knowledgeable enough and you had the resources and you had the connections and you had that year of analysis paralysis under your belt that you could make it work. And you were very determined to get that first deal.
So congratulations to you for getting through that, because that is a huge mindset shift for somebody to actually just push forward and go forward, knowing that something could go wrong with something. But the fact that you, it’s even like you planned, but you knew that you could overcome whatever was going to happen if something did go wrong. So did anything go wrong with this property?

Edwin:
Yes. So after I purchased, there was a tenant already in place, like I said/ I had gotten it at a good price and I planned to keep that tenant there. She made one payment, then never paid again. And I was an awful landlord, I didn’t act very quickly, and she ended up staying there for about six months without paying anything at all. I collected one rent payment, and then I collected half of a rent payment, I think. Other than that, didn’t make a dime from it. So yeah, that went wrong and I didn’t handle the situation well at all, but it was a learning experience. Excellent learning experience.

Tony:
How did that situation end, Ed?

Edwin:
I finally manned up, I guess, if you want to call it that and told her, “Hey, you either need to leave on your own immediately or I’m going to file an eviction.” I told her, “An eviction is not a pretty thing to have on a record. So it’d be easier for both of us if you just leave,” and she accepted and then she just left.

Ashley:
Doesn’t that make you wish you would have done that six months earlier?

Edwin:
Absolutely. Much, much quicker. But it is what it is. You learn.

Tony:
I want to go back to one other thing you said, Ed, before we move on. You said it’s not going to not be scary when we asked you about your mindset going into that first deal. And then you also said that you just need to take a bet on yourself sometimes. And I think those two points for all of the rookies that are listening are super, super important. You should go into it knowing that it’s going to be scary. It would be more weird if you weren’t afraid buying your first real estate investment. So I really think that the mindset that you walk into a situation with really dictates how you respond in those situations.
And you didn’t let the fact that you have this tenant who didn’t pay stop you from continuing to become a real estate investor, you just understood like, “Hey, that’s part of the process of owning rental properties, is sometimes you do have to evict people.” You were just lucky enough to have that eviction happen on your very first tenant. But I love the approach there. I want to talk a little bit, Ed, about how you scaled. Because to go from a single family residence to six-pad mobile home park, now up to a 50-plus unit, that’s pretty cool. I guess really quickly, give us the timeline. So, how far or how long after your first single family purchase did you get that six unit?

Edwin:
Yeah. So single family purchase, that happened in September, 2019, and then July of 2020, I purchased my six unit, and now it is currently June of 2021 and buying a 51.

Tony:
Can you walk us through a little bit of how you made that decision or why you made that decision to step away from the single family homes and you moved into the mobile home park space. What was it that you saw about that asset class that jumped out to you?

Edwin:
Well, like I mentioned, my older brother had owned a mobile home park when I had invested in that first deal with him. And he has since picked up another mobile home park or he owns a couple of them now. And I was obviously very interested in it. It wasn’t really my target at the time, but he would show me numbers and they made a lot of sense. Plus, on top of that, at my age, you have a hard time, and at my day job, I’ve never made excellent money. So you have a hard time getting banks to lend you much money. So owner financing is the way to go. You’ll probably find more parks owner financed than any other asset class out there. So it just made sense for me with what I was looking to do.

Ashley:
Can you break that down for us? Did you approach this person with owner financing or when they were selling it they said they would do that? And what did you negotiate? How did those terms look like?

Edwin:
Absolutely. So I used the money from that very first flip and also some money I had saved up just working to buy my single family, and I purchased that one cash. After she moved out, I continued to fix up that property and get it reappraised and everything. So I did own that property outright. And when the six unit came along, I knew an older gentleman, he was starting to liquidate portfolio and I had tried to build a relationship with them. Once again, my older brother knew him. He had bought a park or two from him, and he liked to owner finance this, so you had to do 20% down, owner finance the rest.
And that’s how he liked to structure the deals. So I had talked to him several times before and tried to stay in contact and say, “Hey, whenever you have a part that you want to sell, please let me know. I’ll be the guy to buy it.” I tried to put that bug in his ear a little bit. Actually, he ended up bringing the deal to John, my older brother. And John didn’t want to buy it at the time, it was a little bit smaller than something he was looking for, so he handed it straight to me and I got in contact with the owner and we went from there.

Ashley:
In what interest rate are you doing on the seller financing for that one?

Edwin:
It was 20% down and then a 5% interest rate on that under finance.

Ashley:
That’s not bad. That’s maybe a point higher than what you’d get at a bank right now, but also, you don’t have to pay closing costs, you don’t have to go through the hassle of bank financing. And then, is there any balloon payment or what is it amortized over?

Edwin:
That’s fully amortized over 15 years. So it’ll be life of loan.

Ashley:
Nice.

Tony:
I guess just one other follow-up question onto there. In terms of the actual, I don’t know, value add play for this mobile home park, is there an opportunity for you to go in there and increase the revenue or decrease expenses? Where did you see the value in this asset?

Edwin:
With this asset, it’s like I said, 60-unit mobile home park. I own the land and the mobile homes, so I own both. For the units, we’re good to go. They were all under rented. And then two of the units needed… The one needed just a bit of rehab, the other needed full rehab. So I have since gone in, I’ve raised rents to market rent, I’ve redone three of the mobile homes, I’ve got one left to do. I had two tenants leave, so I redid their mobile homes and I did one of the other ones. And I still have one mobile home to finish the rehab on. But yeah, we right at doubled the income that it was bringing in.

Tony:
Wow. You guys doubled the… That is amazing. Usually see the ability to double what the rent is, sounds like you guys are still there. You keep saying that we went in and did this and we went in and did that, are you doing all of this rehab work yourself or is there someone else that you’re working with?

Edwin:
No, when I say we, I mean me and my property manager. So really, it’s just my property manager going in and doing everything. I have a manager that manages all my units for me, he also does all the rehab, he does everything.

Ashley:
Is this a third-party property management company or this is someone you hired that works specifically for you?

Edwin:
This is somebody that I hired, he works specifically for me and my brother. So he manages all of our stuff.

Ashley:
Awesome. That’s great. And then are you guys using any software or anything like that to collect rents or is he going and collecting them? How is all of the backend stuff for the property management working?

Edwin:
Absolutely. Actually, pretty new to that part of things. I’m still getting a lot of stuff figured out, but we have been using TenantCloud, and that seems to work excellent so far.

Ashley:
I’ve never demoed that one before. I’ll have to look into it.

Edwin:
Yeah, it’s great. From what I’ve heard and demoed of other ones, it’s very similar to, they let you go up to 10 properties for free, and then it’s like $35 a month, so relatively low cost, but they allow you to market properties, collect online payments, everything. And you can do a lot of different separate properties, you can do multifamily, you can do whatever. I’ve liked it a lot so far.

Ashley:
In your mobile home parks for the one you’ve purchased and the one you have under contract, do these have public water and sewer or are they private?

Edwin:
The 51 unit would be public and then the sewer would be septic, but it’s public. And then the other mobile home park that I own, that one as well in septic.

Ashley:
Oh, so they’re both public, so you don’t have to deal with any wells or water tests or anything like that?

Edwin:
Yes.

Ashley:
Oh, that’s very nice. What I’m looking into now is, there’s tons of mobile home parks going up for sale, but a lot of them are wells and you have to do the water testing on them daily and you have to chlorinate them, and you have to take care of the pump houses and there’s so much work that is involved, but you also don’t have a water bill, so there’s a trade-off. Are you going to pay for somebody to continuously maintain a private well or are you going to go with finding a park that has a public water? For each tenant, do they have their own meters on the water or are you paying the full water bill for the park?

Edwin:
Sorry. I think I got it mixed up a little bit. My six unit, that one is well, the 51 unit is as public.

Ashley:
Yeah. So for your wells, how do you handle that? Do they have to be tested every day? Maybe it’s just New York State because that’s where I’m looking right now, but do you have to do anything special for the wells compared to your park that has the public water?

Edwin:
There’s definitely some extra testing that has to be done, and we do that regularly. So we generally test at least once a month. It doesn’t have to be daily, at least not here, and then other than that, there’s repairs that have to be made sometimes. I had to get the well house insulated, had to get the platter replaced for the well. There’s some maintenance that comes into it, but like you mentioned, then we have no bill, so that’s nice. To answer the questions about them being metered for like electricity and such, they’re all separately metered.

Tony:
And I think what Ashley’s really trying to ask is, is your mobile home park for sale?

Edwin:
Everything os for sale for the right price, guys.

Ashley:
Well, I have one mobile home park under contract right now and I put in an offer on another one yesterday and then I have two more I need to write up my offers on.

Edwin:
Awesome.

Ashley:
But I’ve been thinking, because the one that I have under contract, it has a well and septic, so it needs to be maintained and doesn’t have any public utilities to it. And so I’m thinking, well, if I’m already going to be maintaining this, maybe I should just buy another one and pay someone to maintain both of them because it’ll be worth it to have that overhead if I have more pads instead of just one small park. So I’m definitely just very curious and I’ve been picking people’s brains because a lot of the big capital groups, they’ll only go after public water and sewer because they don’t want to deal with the headache of private, but I have a headache every day anyways, so what’s the difference?

Tony:
What’s one more?

Edwin:
Yeah. There’s always something.

Tony:
I got one more question on the, on the mobile home park because again, I think what listeners might be really intrigued by is if you went from a one single-family home immediately to these six units. What has been maybe the biggest challenge for you in scaling your business? Because every time you add another unit, you figure out some process in your business that’s broken. So I guess, what were some of the sticking points as you went from one to six that you feel you can share with us and the listeners?

Edwin:
Yeah, absolutely. When I purchased that first one, I was self-managing in the first about two months of me owning the mobile home park, I was self-managing as well. I realized very, very quickly that if I want to scale the way that I have wanted to, an M scaling, that wouldn’t work. I had to get systems in place, and once that structure was there, then maybe I could look at scaling. So that was really my focus. Soon after closing on that part, that was really my focus is getting systems in place, getting a good manager I can trust, getting the tenant software in place, making sure I have good tenants at market rates, rehabbing the units if I have to, and just making sure that all my bases are covered and we have systems in place so that we can then scale on top of that.
Most of that happened after the purchase of that first one. I definitely figured a lot out on the single family, but there’s a lot of difference between having one tenant and multiple tenants.

Ashley:
Do you have a plan to go and refinance the park, either one of these that after… you’ve doubled the rent on one of them, are you going and pull some equity and pay off the owner financing and then use that equity to go buy another park? Do you have any plans to do that?

Edwin:
Absolutely. That’s exactly my plan.

Ashley:
Basically, BRRRRing mobile home park?

Edwin:
Exactly. We have relationships with some lenders down here that’ll do that for us, fortunately. And exact same thing on the 51, that’s going to be our plan on that one as well.

Ashley:
The goal is to try and grow and scale using refinance and pull your money out. And I think that’s a huge benefit of getting the seller financing is a single family and duplexes, a lot of times they’re not as expensive as a mobile home park would be. So it’s a lot easier to come with a cash offer, but on these mobile home parks, first of all, sometimes they’re hard to get bank financing on, especially if they have the wells and the septics, then you have to get all that testing done before a bank would even put financing on it.
So be able to have that owner financing and then go and fix it up and to increase the rent and increase the whole value of the park to get that bank to come in and do an appraisal. You’re not paying net closing costs twice by going and getting bank financing right away, then fixing it up and then refinancing it again with a bank. So I think that owner financing is a huge, huge resource for anybody that wants to do this with a mobile home park right off the bat. For the 51 unit, do you want to break down how you purchase that one and what those seller financing looks like on that one?

Edwin:
Yeah. Absolutely. To be honest with you, this was a bigger deal than what I had been looking at. I was definitely looking to purchase, I’m always looking at real estate. I was definitely looking to purchase, but this one here was a lot bigger than what I had been looking at. I did bring in a partner, ironically is my older brother, John. This is my first partner deal, we are in this together. And like I said, it was a lot bigger than what I had been looking at, but at the same time, I can’t say no to an opportunity. So I got in contact with the owner and I told him, “I would love to purchase, can we sit down?”
We did. We sat down and talked about it a little bit. I told him, just laid out what would work for me. And I told him, “I have no idea if that’ll work for you. And if it doesn’t, that’s fine. It was great meeting you, but this is what’s going to work for me.” And at the time he said, “No, I don’t think that’s going to work.” I said, “Look, I totally understand it. I appreciate you meeting me.” We went on our ways, didn’t think much of it. About a week later, I got a call from him and he gave me terms that were actually substantially better than what I had told him.
So on this one, we are doing a certain amount of dollars down, I think it comes out to about 15% down, and then the rest of the park is owner financed at 0% interest.

Ashley:
So did he really just want more money down? Is that really what it was?

Edwin:
Yeah. He wanted a certain amount of money down, and there’s reasons for it that I can’t really say because it’s personal to them, but he wanted X amount down. He really didn’t care about getting a lot out of the park as far as total amount, he really didn’t care about making interests. He just wanted to click the check, that’s it. I threw it out there, I didn’t expect for him to say yes to be 100 % honest because the terms are crazy. They really are, but you never know. And this happened to fit his specific situation.
He had actually gotten an offer that was better than mine and John’s, but whenever you do owner financing, it’s somewhat of a marriage for the life of the loan. And he really, really liked me and John. But even after we sat down and had an LOI typed out and signed, some things ended up changing in the financing and he was more than happy to accommodate because he liked us, he wanted to sell it to us. And having that rapport with that owner was the thing that’s getting this to the closing table.

Tony:
I don’t think I’ve ever met anyone who’s gotten seller financing at 0% interest. I need to bring you and John with me the next time I go negotiate it. That is amazing. But I think the point though, Ed, is that it sounds like you were able to solve a problem for the seller. And it was your ability to solve this problem that allows you to get such favorable terms. And I think when we as real estate investors, when we’re negotiating with sellers, when we’re trying to find the right terms, we should keep the focus on how do we solve the problem of the seller, not necessarily how do we maximize our own personal position?
And if we go into it with that approach, I think then it does become easier to build rapport because the seller understands that you’re not just trying to beat them up to get the very best possible deal, but that you genuinely care for what’s in their best interest. So man, kudos to you guys, 0% interest for the life of the loan is literally free money. That’s crazy.

Ashley:
I was just going to say, I thought that I was really good because I had got 3.5% on seller financing, and now we know that’s not good enough.

Tony:
Not good enough, Ashley.

Edwin:
That’s excellent. To this day, I didn’t know people owner finance is 0% to this day. I’m still the only person that I’ve met that’s getting that. So I haven’t ever seen somebody else get that. But I think Tony, I think you absolutely nailed it with, you have to come at it, at least most people are selling because they have something they want to solve, whether they’re an old landlord and they’re tired or they have X bill come into their life and they need to liquidate for a specific reason. You’re spot on there. It really is about that, and what it comes down to being able to approach that and be able to talk to them and say, “Hey, this is where I’m at.”
“And this is what a work for me. If it doesn’t work for you, that’s fine, but why are you selling? Let’s see if we can meet somewhere and make something that works well for you and for me.” My goal wasn’t to get this property at 0% interest, what I had offered him was actually some interest. And he came back and said, “I don’t really care about that, let’s switch this. Let’s do 0% interest and switch this.” And obviously, it worked well for me, but my goal wasn’t to come in and just low ball him, and low ball him. And my goal was to come in and solve this issue.
And as soon as we figured out exactly what his issue was and he started to open up and we started to open up about where we were, then that’s what we came to terms that were fantastic for both him and me.

Tony:
One last question, how long did you guys go back and forth on negotiating that?

Edwin:
It was about three weeks, being in contact almost every day. Very, very long negotiation, at least for me, it felt like a year and a half.

Ashley:
I think too to add on to what you guys were saying about being open and finding out what their problem is and how to solve it, it’s really about listening, to make sure that you’re listening. And I feel as though our situation is very similar with the recent deals we just did because I took an offer in and ended up leaving with a better offer. And I went there three different times, was there three hours each time, at least, but I was listening to everything he wanted, everything he was saying, and he would want it on certain monthly amount. That’s what it came down to.
He didn’t really care about in straight, he didn’t really care about the terms. So I should have offered 0%, but it was just because I listened to him and that’s really what he cared about. He needed some money to build a house and he needed a monthly amount every month. And I think that is such a valuable thing, and It’s definitely taken me some time to learn that, to listen and to not just walk away and be like, “Okay, well, this is what I’m willing to do. You don’t want to do that, you don’t want to work with me? Fine.” And go on to the next thing.
So it’s so important to sit down and listen to the person as to what they want, let them do the talking. Don’t try to justify, don’t try to explain why this is going to work for you, listen to what they want and then try to make the terms fit around because we all know in real estate, there’s so many different ways to actually put a deal together, especially as you start learning about different creative financing ways, there’s so many things you can do. Jay Scott was just telling me how him and his wife are working on getting this property forever, and this lady just won’t sell. Finally, they figured out why she wouldn’t.
It was because she didn’t know how to move. She’d lived in the same property for 50 years and she didn’t know how to move to another property. And they said, “We will take care of it. You tell us where you want to go, we’ll have the movers come, we’ll have them pack you up and we’ll have them drive the truck. You just follow along and they’ll meet you at your new place, unload everything for you.” And they got the house. That was the only issue that was stopping this lady from selling. And so I think that’s a great reminder to everyone to take a minute and to pause, and to listen instead of just trying to rush, rush, rush, and get the deal and get it how you want it.
So I think that’s awesome how you guys have figured out this deal. And like you said, it took three weeks going back and forth, but I’m sure were worth it.

Edwin:
Absolutely. Almost every second.

Tony:
One more follow-up add on the actual how you guys are facilitating this seller financing. I’ve never done a seller finance deals, so I’m curious, what kind of paperwork goes into making this legitimate? And then I don’t know, just how are the payments actually handled? And how are you keeping track of the loan balance and all those things? Walk us through the backend part of setting up seller financing.

Edwin:
It’s not crazy complicated. You come to terms with the seller, and generally on a deal like this, we’ll write up an LOI, that’s a letter of intent. And you go back and forth, and you can tweak this and you can tweak that, and whatever. As soon as you have agreed on that, then at that point, you get both buyer and seller signature date and send that off to whatever attorney you’re going to have draft up the contract. Generally, we’ll have an attorney draft up the offer to purchase and let him know the terms of the loan as well.
We’ll make sure the terms of the loan are in that LOI, and the attorney pretty much takes care of all that, all the paperwork, drafting all the documents. And then really from there, you get an amortization schedule just like you would any other loan, it’s just in paper form generally. And from there, it’s just like a normal, you just go to closing and everything else is pretty much normal from there.

Tony:
Does it get recorded though like a typical real estate transaction? Is the purchase and sell agreement gets sent to the county’s office, all that becomes public record? Is the amount of money that you owe to this seller public record as well? Or is it all behind the scenes?

Edwin:
To my knowledge, it’s all public record. I know in my state it is, so it varies state to state. So sometimes in owner financing, the seller will retain title to the property. In North Carolina, it’s a title state. So when we close on an owner-financed property, that title, that deed goes to buy the capital of my company. And the only way that the owner could ever get that back if something were to happen would be to foreclose, just like a normal purchase. In other states, it’s different.

Tony:
Ashley, how was it for you? Is it the same process in New York?

Ashley:
Yeah, ours is the same. You can take title and they basically hold the mortgage. So they have a note against you and they can file lien against your property as the owner financing, which most in the scenario that I’ve done it, a couple of times, all of the owners had being one to do that file for saline on the property. And then there are times, especially when you get up into bigger deals like multi-family, you can have the seller take a second position lien where maybe you don’t have enough money for the down payment.
So you’re getting bank financing and you need maybe the seller to hold the second position note for maybe 100,000, and then you’re going to bring the other 100,000 for the down payment. So that’s pretty common too, to see that where there’s owner financing for that second position.

Tony:
Well, thank you guys for the breakdown. I’m taking notes here, that way when I go out and try and get my first seller finance deal at 0%, I know how to break it down to them.

Ashley:
Tony will be back next week telling us somehow how he’s seller refinancing at 0%. Okay. Let’s move on to our Mindset Segment. We just want to know when you’re doing your analyzing or maybe even before you started researching about real estate, did you have any big shift where you thought it was going to be like this and expectation, and then now that you are an investor that it’s actually different than what you thought it was going to be

Edwin:
Yeah, somewhat. I think one of the biggest shifts that I’ve seen in my own mindset is first of all, what I thought was big versus what I currently think is big. Your mindset definitely continues to grow. Another thing was really, it’s very similar too, but it seems so, so, so… Before I purchased a piece of real estate and I was just learning, it seemed so like out there, and so big and so scary. And once you get into it, you realize pretty quickly it’s not, at least for me, it’s really not nearly as complicated as I thought it was in reality. It’s just doing the work and it’s not that hard to learn. It’s not that complicated really. It’s not easy. I’m not saying that, but it’s relatively simple.

Tony:
Man, you took the words out of my mouth. I’ve used this analogy before, where people mistake easy and hard with simple and complicated. And just like you said, real estate investing itself is not a very complicated thing to understand. If you find a property, put a down payment, place the tenant, you get a check. The actual process is not all that complicated, but it is hard to muster up the courage. It is hard to dedicate the time to find good deals. It is hard to put the right processes in place and build the right team. It is hard to save the money you need to get the down payment.
A lot of these different things are very hard, but the overall concept of real estate investing is pretty, pretty simple. Man, that is spot-on advice.

Edwin:
Absolutely.

Tony:
I want to take us into our next segment, Ed, which is the Rookie Request Line. And for all of the rookies that are listening, you guys can have your call potentially featured on the show. Just give us a call at 888-5-ROOKIE. And if we’ve got a good question, we will share it on the show. Ed, are you ready for today’s question?

Edwin:
Absolutely.

Tony:
All right. Here’s today’s question.

Tyler:
Hey, this is Tyler out of Austin, Texas. I was calling to ask you guys what the process is seller financing from, let’s say I find in off market property and I negotiated seller financing, what would be my next step?

Edwin:
I think the big misconception that happens with seller financing is that everybody would just love to do it. I tend to see that a lot where I’ll also have investors that come to me and ask about my seller financing, how I’ve been able to structure that on these deals. The ticket is, from my experience so far has been finding landlords that are done with the business pretty much. You’re generally not going to get seller finance deal from a 30 or 40-year-old guy that plans to go to purchase more properties. You might find that occasionally, but it’s rare.
Generally, when you find the owner financing or your target, if you’re looking for owner financing, your target needs to be a landlord that’s done with the business pretty much. He’s just tired of tenants, or he’s just retiring from the business. And you can structure it to him that way, because he’s not so much planning on reinvesting the money as he is living off the money. And I think that needs to be your target seller. And then from there, it’s really not that simple, find what number works for you as far as the amortization and what monthly number works well for you, present it to him, go into negotiations if you need to.
And once you have something nailed down, just simply bring it to an attorney and have him handle the rest.

Ashley:
Yeah. Ed made a great point there as to who your target sellers should be. And I think you have a huge advantage if it is an off-market seller too, because when you tell your realtor you want to put in a seller financing offer and then they relay that to the other realtor, and then it’s sent to the seller who maybe doesn’t even know what that is, all they think is, “Wait, no, this person’s going to own me money. I’ve had trouble with these tenants that haven’t paid me and that’s I’m selling. I don’t want someone else to owe me money now.”
But if you have the opportunity to be face-to-face with the seller and actually show them what opportunity it is to them such as the tax advantages where they’re not going to pay taxes on a huge capital gain from just the sell of the property right now, you can talk to them getting the monthly payments like they’re used to from tenant rental income. And also how they’re going to be making X more amount of dollars unless their buyer is Ed and it’s 0%, but you can show them the amortization schedule and show them that you’re going to make $100,000 more off of the sale just in interest too.
So if you have the opportunity for an off-market buyer and to get face to face with them and just show them the breakdown on paper, print out the amortization schedule, show them how much you’ll be paying down principal, how much they’ll be making an interest, show them at the end of five years, 10 years, what they’re going to make in total and how that can keep going on for them. So definitely a huge advantage for off-market deals to get face to face. We’re going to move on to our random questions. Tony, I’m going to put you on the spot today to ask the first question.

Tony:
I guess my random question, Ed, and you touched on this already, but how many of your friends were interested in real estate when you caught this bug? Were you the only one that like out of the parties on Friday night, that tried to bring up real estate or rich dad, poor dad and your friends are looking at you crazy. What was that experience like getting started so young?

Edwin:
Most definitely the one and only. I still catch flack for all the time for talking about real estate. I still get made fun of all the time because they just aren’t interested in it and I absolutely love it. So yes, most definitely the one and only. Definitely got picked on for it, definitely still get picked on for it. I don’t mind it for a second. I enjoy it.

Ashley:
Ed, my question to you is, do you have any certain buying criteria for mobile home parks? Are you looking for a certain thing cash-on-cash return? Are you looking for a certain amount of cash flow per unit? Are you only looking in markets with a population of acts? What is your buying criteria for mobile home parks right now?

Edwin:
At the moment, I do have very strict criteria, but from what I’ve found is not same as a lot of people’s criteria. So I need to be able to purchase a deal with no money down. So I need the property to, I need it to cash flow, I need the monthly payment to be X amount to make sure it cashflows the right amount. It has to be a value-add project because if I’m going to purchase this property, my goal is I’m going to purchase this property, no money down, so private money for the down payment, and then I’m going to rehab the property or we’re going to do whatever needs to be done for the value add.
Then we’re going to go to a bank, we’re going to refinance, pay off the private money and the first mortgage, the homeowner’s mortgage. And then I’m just going to hold it and let it cashflow. So it needs to be able to hit that criteria in order for my strategy to work. That being said, as far as location, I’m pretty open. I’ve been fortunate, all my properties are within 30 minutes of where I live, but I’ve looked up to three hours away, even asset class, whether it’s apartments, mobile homes, I’ll do it with single family. It doesn’t matter, what matters is that criteria that allows me to pull off that strategy.

Ashley:
That’s awesome. That’s great. Thank you for sharing with us.

Tony:
Yeah. And I also love how specific you are with what you’re looking for, Ed. And I think sometimes rookie investors, they can get caught up in just trying to look for everything. Sometimes you’re looking for a mobile home park, maybe other days you’re looking for 50-unit apartment complexes, then it’s like a duplex, then it’s this, “I’m want to turn two properties.”

Ashley:
Tony, why are you describing me? That shiny objects syndrome.

Tony:
I think you get a pass, Ashley, because you’ve been in the game for a while. But if you’ve never done a deal before, just pick one thing, just pick one thing, try and get really good at that one thing. And then once you’ve gotten that first deal done, then maybe diversify a little bit, but it’s going to be so hard to get that first deal done if the net that you’ve cast is this wide. Just find that one little thing and find your groove. So thank you for sharing that as well, Ed.

Ashley:
Tony, I just want to say, I 100% agree with you because that has been a fault of mine, is having that shiny object syndrome and chasing after different things. And when I am narrowed down and I am focused on something very specific, it’s amazing how I seem to find more deals and better things come because I am narrowed down and focused on that. So that is a great point.

Tony:
I think that’s just anyone who’s entrepreneurial struggles with that. I was on Instagram yesterday and I saw some guy posting about how he’s got this really lucrative vending machine business. And I found myself spending maybe like five minutes googling how to start a vending machine business. And I had to stop myself, it’s like, “I know nothing about vending machines, why am I even spending time looking at this right here?”

Ashley:
That’s what you have to have your son do. Get him started doing that business. I see a lot of people have their kids do vending machines.

Tony:
That’s not a bad idea. See, now I know what the rest of my day’s going to look like. I’m going to be googling how to start a vending machine business.

Ashley:
No. You have him do it. Have him put together a business plan and present it to you to be his investor.

Tony:
Anyway, that’s a great idea. I love that idea.

Ashley:
I just want to point out, this is a second time within a week Tony has told me, “I’ve had a great business idea.”

Tony:
That’s true. If you guys think of business ideas, just send them to Ashley, she’ll respond to all emails, DMs that she gets. All right, Ed, as we wrap things up, I want to give a quick shout out to one of our Real Estate Rookies. So again, for those of you that are listening, if you guys want to get a shout out on the show, just get active in the Real Estate Rookie Facebook group. There’s I think over 30,000 people in there now, super active group. But today’s Real Estate Rookie is Laura Marie. And Laura purchased doors one and two back in August of 2020.
Ashley, you’re in Buffalo, New York, so I know you’re neck of the woods, Ashley. And they just purchased doors three and four on April of 2021 down in Tampa, Florida. Their first property was a duplex. They bought it for 140, at 20% down. They inherited some tenants, but all seems to be going well. And the second purchase is another four unit, and that one’s a house hack. So using different strategies, investing in different markets, so Laura, big kudos to you for making this progress there.

Ashley:
Great job, Laura. And if anybody else wants to be featured as our Rookie Rockstar, make sure you guys leave us your success story in the Real Estate Rookie Facebook group. Well, Ed, thank you so much for joining us today. Can you tell everyone where they can find out some more information about you and connect with you?

Edwin:
Absolutely. If anybody wants to connect, more than welcome to. Instagram, Edwin_Byler Facebook, Edwin Byler. I have TikTok in case people want to find me on TikTok, it’s Edwin_Byler. That’s pretty much it. Anybody who wants to go, welcome too.

Ashley:
Well, thank you so much for coming on the show with us and talking mobile home parks. This has been exciting for me.

Edwin:
Absolutely. Thank you guys so much for having me. I count it an honor.

Ashley:
I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram. Make sure you guys subscribe to our new Real Estate Rookie YouTube channel. And we will see you guys on Saturday for another Rookie Reply.