All Forum Posts by: Berry Leonard

@Daniela R.

Most of my rentals are a mix of Natural Gas or Heat pump. I converted a few to propane because natural gas was not available at the street and I did not want to upgrade my electrical box to 200amp. This was a mistake in my opinion.

Check your electric panel and make sure you can upgrade to a heat pump. If you do not have a 200amp panel , you would need to upgrade the panel.

If the gas is supplied by a tank vs city supplied, it can be tricky getting the tanks filled when transitioning tenants.

Filling the tank can cause challenges with rentals because you need to fill the tank or the tenant must fill the tank. The cost can be high for many tenants and has caused us some challenges in the past. Some gas companies fill tanks on credit and if not paid by tenant they could place a lock on the tank.

We avoid all tank gas systems if possible or plan to covert in the future.

@Amber Hagen

We just started investing in Mobile Home parks. We have purchase three parks in 2020 and 2021 with a total of 73 lots.

My first recommendation is strong due diligence before purchasing.

Focus on zoning, water and sewer issues.

It is critical to have a clear understanding of the sewer/septic and water source/conditions. In our area, family owned parks are great buys but have most likely taken many short cuts to resolve sewer/septic and water issues.

If the park is on city water and a single meter, check the water bills for the last 18mths. Solving a leaking water issue can be costly. We calculate the average water usage per home to insure no leaks.

If the park is on septic systems, I recommend pumping every tank and having them inspected. If they have not been pumped in the last 5years, request the seller to pay for 1/2 the pump and inspection cost. Also, make sure the previous owners provides a connection Map. If the septic system and homes are not sized to current code, you could have issues if a drain filed or tank goes bad. In one park we purchased, some of the tanks had not been pumped in 20 years.

Also, check the zoning and make sure you can fill empty lots. In some counties, they have rezoned or changed zoning that could limit your ability to fill the park. In a recent due diligence, I found that one park was rezoned General Business and the previous owner never contested the re-zoning. Therefore, the new owner could not fill lots if a lot was empty for two years.

Check flood plains and other city planning records. We found one park in TN was in a 100 year flood plane and was not allowed to replace homes. In other words, if someone moved a home it could not be replaced.

Good luck.

@Kaylee Walterbach

We have been exclusively investing in SFHs for 14+ years in the Triad NC area. When housing prices started increasing, we decided too venture into MH parks in VA. We have successfully purchased three MH parks, purchasing one in 2020 and two in 2021. Our goal was to buy family owned parks and develop a strategy to convert them to an efficient MH park business within two years.

Additionally in 2021, The mobile home parks have allowed me to introduce my 20 year old twins too the real estate business by enabling them to acquire, renovate and rent Mobile Homes. I am so proud that my children understand the value of real estate and are starting to build their future real estate career.

I believe MHs offer great affordable housing as prices continue to skyrocket across the country. Our goal is to insure our parks offer safe secure affordable housing for families.

So far so good, looking forward to executing the MH business plans in 2022 and beyond !!

@Sarah Pursell

Sarah , I would raise the rent by 20% since you are extending 6mths, assuming you have a min 1yr lease and the rental market is strong in your area. We typically raise the rent for 6mth extensions unless they have been a very good long term tenant. If they have a good payment history, 6mths is not much time to deal with the tenant.

We have had many demanding tenants over the years, it is part of the business. You are in control, you can ignore their texts and calls, respond on your time frame or let them know when you will respond. If we have disrespectful tenants, call them out and let the know you will not deal with them until they change their attitude.

You have the control and leverage in the relationship.

@Carson Kesner

Carson , I have mixed experienced.

We signed a four year lease with tenants who did not have a good stream of income because they had just received a workman’s compensation payout. They passed our tenant screening except for income. We agreed to 4yr lease with 12mths in advanced paid 2mths prior to beginning of next lease year. This gave up enough time to remove them if they could not pay. In year one, they paid $15800 cash (rent plus deposits) and 2mth before year 2 they paid $14,400. As we expected, they blew through the cash payout and were forced to break the lease after year two. They forfeited their deposit and we moved to the next tenant. Overall, great experience and cash upfront paid for a new Heat Pump needed for the home. Would not have handled it any different, We screened the tenant and made a judgment call.

2nd experience, we took 6mths of a two year lease upfront because we had multiple tenant options. The tenant could not pay additional amount and they agreed to leave, Not a good experience. Looking back, I would not have agreed to only 6mths upfront and we only considered 12mths.

For the future, we take advanced payments if we get 12mths upfront on a one year or longer lease. We perform normal tenant screening and have enough income to support future years rent. Having the cash in hand upfront is not different than monthly payments, if you screen the tenant.

We have tenants offering upfront advance payments to encourage us to select them over others. We do not take this route with such a strong rental market, we select the best tenant. If the market was weak, we may handle it much different.

Good luck.

@Jenine Maggio

Around 8yrs ago, we purchased our 2nd SF rental which included a second building lot in the purchase. For years, we discussed options of building a new rental home, a modular home or moving a old home to the lot. After studying our options, we decided the modular home or moving a old home have similar costs. After much discussions, we decided to take on a very large project and move a house to the lot. We located a home about 20 miles away and decided to pull the trigger. We are 80% complete.

The modular building projections: - I found modular deals between $60k & $80k. Most modular Homes have $25-$30,000 added cost above the base price depending on your location, watch for hidden costs. A few costs: - Septic or sewer tap ($4500) - Build the footers for foundation / crawl space($10,500) - Add external Heat Pump in most cases ($3500) - Driveway ($3500) - Move Home ($1500) -water tap ($2500). The Best deal I found in NC was $60,000(special deal) + $25,000 = $85,000 - 3Bed/2bth 1200 SQ FT ($71/ft) ARV $100,000 to $115,000 - I have found that modular homes do not appraise has high as stick built homes. Rent = $1100/mth

For my move home:

Financials: 4Bed , 2 Bath, 1500 Sq Ft. 1/2 Acre Lot

- $18,500 purchase and move home, 1960s brick ranch with all brick removed and prepared to move, around 1100 sq ft plus carport.

- $80,500 renovation cost - New Heat pump, electrical wiring, plumbing, enclosed carport to add laundry room, master bed room and bath, refinished hard wood floors, new roof, new appliances, new siding, foundation, septic, driveway and much more, almost new home.

- $99,000 total investment ($66/ft)

ARV = $150,000, Rent $1250-$1350/mth

I determined the move home would offer better long term value and higher quality.

Looking at new construction in NC with current building costs, I would expect greater than $80/ SQ FT.

Pros Modular - Low risk, much easier process, much faster

Cons Modular - Low cost version feel like a Mobile Home, do not appraise has high , concerned about low quality construction.

I own one modular home that I purchased and it is a great rental home. However, I did purchase it at a discount vs stick built homes in the same community.

@Shanese Francis

I lived in Orlando from 1988 until 2007 leading up to the last real estate crash. The property values remained flat until around 2003 and then property values skyrocketed. I was just starting to buy rental properties but could not justify the escalating prices. I had friends flipping properties and doubling their money with each new deal. There was a frenzy in the market that you needed to buy or be left behind.

I decided the escalating values did not make sense financially, the average household income was still flat but the average house price doubled in a few years. I decided it was not a good market and did not buy any properties, thankfully. In Orlando, house prices dropped 40-50% in some cases because the market was not sustainable.

As a buy and hold investor, I prefer to invest in linear markets where property values track the household income without major changes. If home prices are increasing faster than the household income, it is not a sustainable market. Low interest rates and low supply has caused markets to overheat again but the income growth in the area must be able to sustain the growth.

For rental properties, we use 40x rent and determine if the family income of the area can support the property. Example: $1250 rent requires $50,000 family income. For my focus area, the median family income is $41k to $51k and we target rents between $1000 to $1350. This insures we stay in the average of the market and should be able to adjust if we have a recession.

Even with a recession, if you buy properties that track the household income and do not over leverage, it should be a safe investment.

Looking back at my experience in Orlando area, investors over leveraged and over paid for a market that was not sustainable for the long term.

@Alex Turchetta

Alex, I am not a qualified tax attorney to give you advice about the self directed IRA but they are very good investment vehicles.

We have used a self directed IRA as one investment tool and would recommend this option to others. However, I always recommend a very conservative approach, especially when you are dealing with Self Directed IRA.

Below is our approach:

- We converted one of our IRAs to self directed check book IRA after researching many options.

- The self directed IRA owns the LLC and all transactions are handled through the LLC, including the LLC checking account.

- The IRA had enough cash to fund one single family home, renovations an enough reserves for any unexpected costs. Since you cannot add cash to the LLC, you should hold some reserves.

- Their are financial institutions that will offer non-recourse loans at 50% of the value of the cash. Example: If you have $100k, you could get $100k loan and purchase a $200k property.

- You cannot secure loans that require personal liability, only non recourse.

- We handle all transactions on this LLC completely separate from personal or other LLCs, it must be handled independently.

- We have owned this LLC for two years and it generates a nice cash flow that can be reinvested in many areas: we use the cash flow to buy and resale smaller tax deed and land purchases.

- Our goal is to generate better returns than the stock market but you must find alternative investments to invest free cash flow.

- The self directed IRA offers you many investment options

- You should select a reputable company and follow their guidelines exactly.

I recommend this option if you already have funds available in an existing IRA.

I do not have enough information to recommend setting up a self directed IRA and using it as a vehicle to save for your investments. I would study the setup and management cost vs tax savings to determine the best option. Also, understand the restrictions to insure it is the best option for your investment strategy.

@Phillip Massey

Yes we invest in Greensboro, High Point and Kernersville. Most of our properties are in High Point and Kernersville.

@Daniel Brown

We work through a local Bank and it is a commercial loan. They under write their own loans.

Example of one of our purchases:

We purchased a home for $83,000 cash from another loan, Reno cost $22,000, ARV $140,000. Loan for $100,000, rent $1200/mth with two year lease. We opened the credit line after reno and could hold for up-to three years. We found another property within 3mths and locked in the 10year loan for the full $100k.

They will go as high as 15 years with higher int rate. We target 10yrs with higher payment but acceptable since most of the payment is paying down principle and we have good cash flow from other properties. The 2yr lease was up last month and the loan balance is $85,000.

When possible , we save enough cash to add a free and clear property to help increase cash flow to the business and lower the debt to equity ratio. It is critical to maintain an acceptable Debt ratio to keep our risk low to protect the downside.