All Forum Posts by: Adam Lendi

@Sara W.

That's exactly why we should talk! My team and I are doing just that. I dropped you a personal message with my calendar scheduler. Let's connect soon.

@Brady Pratt

Hi Brady! First off, congratulations on getting your park under contract. Definitely take your time on this due diligence, as you have a lot of moving parts here. It sounds like you know the right thing to do on the gun range.

The cap rate looks a little high, even though RV parks perform really well. I would really scrutinize the expenses to make sure they are all inclusive. There are a ton of expenses involved in running an RV park and you don't want to find out the hard way that their P&L is missing some. I've seen plenty of P&Ls missing critical expense items. Especially with Mom and pops, they will only put parts down for repairs and maintenance and none of their labor will appear.

My partner and I, also RV park investors, have a similar model to yours. Parks must be self-sustainable and be able to pay for their own manager, so they can be remote managed. What we have found typically is that it requires parks of at least 50 spaces. It is possible to make it work below that threshold, however, it will really depend on how much manpower you require. Is your park seasonal? Or open year round? If you have to pay a manager for 12 months out of the year on these numbers, it could be very difficult.

Although the occupancy is pretty darn high, there may be some opportunities in that area. The monthly and weekly rates seem to be extremely low. Are you buying from mom and pop sellers? we've seen this often where they are tired of the frequent turnovers and lower their monthly or seasonal rates to incentivize people to stay longer. The trouble is, they end up leaving money on the table. Is there an online reservation system now? With dynamic pricing, this could be a great way to keep that occupancy number high (or even raise it) and maximize your income.

Finally, on the mortgage front, here are my thoughts. Definitely reach out to local banks. Oftentimes, they have a lot of flexibility and if they know the park, they can give you some pretty enticing terms. Dad said, keep the SBA options in mind as well. most recently, I had an SBA 7A loan beat out a local bank loan, which was in itself a fantastic offering.

I'm happy to share some of our knowledge, wisdom, and strategies if you'd like to chat outside of this thread.

Originally posted by @Sara W.:

Originally posted by @Adam Lendi:

@Sara W. I don't know your local market, however, I can imagine it is probably as challenging or more challenging than Denver, where I live. This is why I partner and I have changed asset classes and we are working on RV parks, rather than residential. We both have a background in single family, multifamily, and apartments. It could be as simple as changing what you invest in.

Hi Adam, very interesting proposition. I have been thinking about RV parks and mobile home industry recently and been talking to someone from Four Peaks. It's a very different landscape than residential. What your experiences have been like? 

The reason why I am looking to do OOS is also because I am planning to do a 1031 exchange. I don't think there are mobile or RV park that take in 1031 exchange investors yet.

Hey Sara! My partner and I landed on RV parks, as investors in residential single family and apartments, as RV owners ourselves. The industry has been growing, with the largest group of RVers now being millennials. Last year saw an explosion of new RV travelers and parks have seen great growth, most of which is expected to remain into 2021 and beyond. Whether you look at RV parks or another asset, its good to keep your options open. I'm happy to chat further about RV parks if that is a path you want to learn more about. You'll need to check with your CPA and 1031 intermediary, however, you may be able to reinvest your gains into RV parks and other commercial assets.

@Evan Polaski

Thank you for that feedback, Evan. Having seen your portfolio, I put a lot of weight in what you have to say.

The carry strategy was one I picked up from Sam Freshman. It is ultimately our long-term strategy to have a massive holding of RV parks. I suppose we would need to have a clear path out for investors who want/need to get out sooner. The thought was that we have these talks on the front end with investors, ensuring their expectations align with ours. Through the eyes of an outsider, would that generous pref entice you to stay engaged for the long haul?

@Sean Delagrange

You are absolutely within your right to put multiple properties under the same LLC. To build on my earlier point, some investors do choose to group properties together under individual LLCs. The consideration is that a claim could expose all of the properties in that entity.

If you are looking to purchase a few residential rental properties, a great structure would be to put each in its own LLC and then have an umbrella policy for your person. That structure protects you from any claims that extend beyond the LLC. You wouldn't need an umbrella policy for each one.

@Steven Hershey

Check with your CPA. Most single member LLCs are pass through, meaning your tax situation will not change. You can elect to be taxed as an S corp, but by default it's pass through.

I just replied to another post on this topic this morning. Here are my thoughts, based solely on my experience, as it relates to this topic:

I'm going to open this with my disclaimer... I am not an attorney, tax attorney, or CPA. Definitely consult with yours before getting started.

My two cents... I think it is a very good idea to hold your investment properties in LLCs. The thought being, if tenant at Property A, LLC sues over damages at Property A, so long as you have structured it properly and have not commingled, the only thing that risk is the holdings of Property A, LLC.

There are a ton of considerations and you need to make sure you are doing things the right way. Let's start at the top. First and foremost, you are probably going to have a very tough time qualifying for a mortgage in your new LLC which has no tax history. The majority of us get a mortgage in our personal name and then quitclaim deed the property to our LLC. This can trigger a due on sale clause from the lender, as a quitclaim deed does transfer the title out of your person's name, as a sale would. That said, I don't know any investors who this has happened to yet and everyone pretty much does this. This does mean though, that the lender could demand you either quitclaim back to your person or if they trigger the due on sale, you would need to refinance, as your person.

For the LLC to be worth the paper is written on, it must be an independent entity from your person. This means it needs to have its own tax ID (EIN) and bank account. Do not commingle any of your personal money with that business bank account. The only things you can legally do are inject money to support the LLC if the company is not performing and take distributions in a manner which follows your operating agreement. Transfers in and out of the bank account to your personal account can pierce the corporate veil and expose you to liability in a lawsuit.

If you hold multiple properties in the future, you will likely want each one to be in its own entity. As I mentioned before, to reduce your exposure to liability, you probably won't want multiple properties held in the same LLC, since they can all be considered if damages are awarded. There may be certain tax advantages available someday for you to form another entity to sell management services to your other properties (CPA).

Hope this helps.

@Kenyon Williams

You'll get really good at estimating most repairs and projects in the near future and you'll be able to get darn close. My most recent flip, I budgeted $15k (didn't need a lot) and ended up at $13,800.

Build a good team (front the people you get 3 quotes from now, select your favorite) and this will get easier as time goes on. Enjoy!

@Sean Delagrange

Hey Sean! I'm going to open this with my disclaimer... I am not an attorney, tax attorney, or CPA. Definitely consult with yours before getting started.

My two cents... I think it is a very good idea to hold your investment properties in LLCs. The thought being, if tenant at Property A, LLC Sue's over damages at Property A, so long as you have structured it properly and have not commingled, the only thing that risk is the holdings of Property A, LLC.

There are a ton of considerations and you need to make sure you are doing things the right way. Let's start at the top. first and foremost, you are probably going to have a very tough time qualifying for a mortgage in your new LLC which has no tax history. The majority of us get a mortgage in our personal name and then quitclaim deed the property to our LLC. Has mentioned in other comments, this can trigger a due on sale clause, as a quitclaim deed does transfer the title out of your person's name, as a sale would. That said, I don't know any investors who this has happened to yet and everyone pretty much does this. This does mean though, that the investor could demand you either quitclaim back to your person or if they trigger the due on sale, you would need to refinance, as your person.

For the LLC to be worth the paper is written on, it must be an independent entity from your person. This means it needs to have its own tax ID (EIN) and bank account. Do not commingle any of your personal money with that business bank account. The only things you can legally do are inject money to support the LLC if the company is not performing and take distributions in a manner which follows your operating agreement. Transfers in and out of the bank account to your personal account can pierce the corporate veil and expose you to liability in a lawsuit.

To get a bit closer to your original question, let's again consider the liability protections of the LLC. If you hold multiple properties in the future, you will want each one to be in its own entity. Your LLC names typically won't be public facing and most of us aren't super creative when we form them. I use the property address or the street name (i.e. 123 Main, LLC). As I mentioned before, to reduce your exposure to liability, you probably won't want multiple properties held in the same LLC, since they can all be considered if damages are awarded. There may be certain tax advantages available someday for you to form another entity to sell management services to your other properties (CPA). This would be your chance to pick the pretty forward-facing name you'd want the public to see.

@Sara W. I don't know your local market, however, I can imagine it is probably as challenging or more challenging than Denver, where I live. This is why I partner and I have changed asset classes and we are working on RV parks, rather than residential. We both have a background in single family, multifamily, and apartments. It could be as simple as changing what you invest in.

I am an advocate for learning about investing and investment property ownership in your own backyard, before looking out of state. The success stories you hear of investors buying into out of state markets revolve around either hyper-local knowledge of speculated growth or depressed housing markets where the values of homes have not kept pace with national appreciation, causing good cash flow. If these opportunities were really the golden geese some think of them to be, demand would drive their sales prices up. There is risk that you could buy into an area which is not growing, where property values may plateau and rents could compress. If your market is expensive, you may be best served to seek out opportunities in the area you know, because you will know where the growth is and what to expect in terms of appreciation. If net spendable cash is important to you, it may be wise to start as a passive investor, unless you want to do a lot of research into areas and asset classes of opportunity.