All Forum Posts by: Sam Parkins

John Fedro Thank you for the mention.

Kathryn, I think you're on the right track. I wanted to get into investing and attended all the local REIA (Real Estate Investment Association) meetings, I attended a mentor group (fairly inexpensive) and read everything I could get my hands on. I was able to make the first jump by going to work as an office manager for a realtor. I figured it wouldn't hurt to learn the market. Then I found my niche and passion in mobile homes and so on-so forth.

That said, I would try to network your tail off with all the folks you can get with. Meetings for coffee with successful investors, meet local realtors, etc; I've even called signs ("I buy houses") before to introduce myself to those folks. I could certainly elaborate more, however I will get to the point.

We have a gentleman in the Fredericksburg area that is active military that we are trying to team up with currently. His buddy is ex-military and he comes down and drives our mobile home toter for us on occasion. Both of those guys could be excellent resources for you, especially if you are considering mobile home investing. And further, I would be glad to chat with you and help in anyway possible. Obviously I work in mobile homes, but I do run the Charlottesville REIA group (it's a Meetup group) as well as know many contacts in many different niches of investing. There are a handful of large groups that meet in the northern VA area; a google search for REIA groups as well as a search on the Meetup website should produce at least 5 or 6 investor networking groups that you could attend.

I hope any of that helps and I'd be happy to chat about your goals anytime.

Best of luck to you!

Sam

There is a decent amount of literature out there to get help with parks.

The cap would be determined in the above scenario by taking the asking price into the net operating income, $26,308 / $220,000 for a cap of 12%. An easy way to remember cap would be to take the NOI and multiply by 10 to create a 10 cap and thus (in this market) USUALLY the max you'll want to pay for the park. I.e. you would want a higher cap than 10.

I don't know the area, but around Virginia a septic can be installed from scratch for roughly $6,000 to $8,000 (CONVENTIONAL, alternative can go over $20,000!). Call it $7,000 budget. I have never replaced one totally, only worked on replacing parts. Assuming $2000 for full removal of existing septic and $7,000 for new, you'd be looking at $9,000 or $10,000 for a new septic if one goes bad. At $250/mo income on that lot, you'd have the money to pay for that septic in 40 months, or just over 3 years. If you get to 6 years you get a "free" septic if one goes bad. Depending on how deep your pockets go and your level of risk taking, it may be worth considering getting a qualified company to inspect the septic and see the conditions (should do anyway) and try to determine how much life you'll get out of them. If they're in good shape and you plan to regularly pump them, I'd try to make the money on the lot.

Talk to a commercial banker at a local community bank to try to get your best deal.

Good luck. I'd get more information on the park and consider it...obviously knowing that I have never met a park that sells at full asking price!

All areas are different but with the mark up on new homes you could buy a used one and have it moved for less than what that mark up would cost...just like cars. It's similar to the value dropping the second it's pulled off the lot.

Personal property tax is inexpensive. It is like a car, and most of the used homes are taxed for less than a newer car.

Insurance is relatively inexpensive if you get a company that is versed in mobile homes. Some companies do not know a thing and will charge more based off that. If you buy multiple, inquire about a commercial policy covering the dwelling and recommend to tenant to carry a renters policy.

I'm with Bill W. regarding the price. Seems you can find better value or negotiate it down.

Best of luck!

Val, seems like a decent opportunity and I'm sure you'll get a LOT of help here! Congrats on the opportunity and being in position to make some money and help some folks right away!

I'll make a couple caveats to start here as well as a couple assumptions to try to help.
1. Each state/locality is different in terms of how "they" handle and influence mobile home investing. I'm in Virginia and can only respond based on what is pertinent in my market. Markets vary. I have also taken the liberty to generalize in responses, with shorter/limited examples and such.
2. Each area can vary widely in the values on homes/land.
3. Exit strategies can vary widely based on location (state) and by a myriad of influencers such as federal legislation, financing availability, so on and so forth.
4. I'll assume you are in CO and the property is away in MS. I'll assume you are able to manage your investment from afar or are closer to the opportunity to be able to properly manage.
5. I'll try to help by itemizing your questions and not get too far off base. Obviously starting from scratch analyzing an investment could offer a few chapters worth of response.

1. Land price. I can't see getting a piece of land most anywhere for less than $5000 as a bad deal. Said less confusing, I think land for less than $5K is a decent deal most anywhere...with some exclusions.

2. Home price: If it's a newer model home then you're in the right range. Yes it's big and I'll assume it's vinyl/shingle thus carrying more value. I would think (within reason) you're fairly safe if it's at least in the 2000's or newer. Up to the early 2000 models we typically won't spend over $15-$20K for them. A new doublewide with base features and a little smaller (if you are a dealer or find a good dealer willing to cut in with you) could be about $30-$35K cost.

3. Rent: $500 is slightly low in my market unless the land/home is extremely rural. I'll assume it's about the going rate in MS. If the lot rents down there are around $150-$250 then I think you're in the right range. If lot rents are higher, I think you can come up. Reasoning is that someone getting a loan or "financing" on a home in a park will be at about $250 home and $250 lot for a total payment of about $500 - to be in a park. Thus there should be a slight premium to be on their own land. Now this is comparing ownership, so the rents may be slightly off from there, but should be close. However, I will ALWAYS negotiate a little better price for the "renter in hand" that I qualify and WANT rather than waiting to find the one later at a higher price.

4. Maintenance and rent terms:
A. Assumption is a renter will not take as good care of your place (especially if you're a distance away) as if they had skin in the game for ownership.
B. Manufactured homes are made cheaper and with cheaper material than stick built, so expect more maintenance issues. Newer models usually have better plumbing, but busted pipes is a common problem in manufactured housing. You may be safe here as I don't know the weather in Missouri (MS), but if it gets cold you'll want to make sure there is heat tape on the lines to protect from freezing. Busted pipes could run you $150-$1000 (full replacement) if you're not careful. Drywall (if not panels) is thinner and gets holes and cracks easier. Water gets into the home easier without proper care. There are plenty of things that go wrong - however I don't usually work with rentals so can't advise as to a proper budget for maintenance. I would guess you would be slightly low at a $1000/yr, especially when you need to flip the house between tenants or preparing for sale as you'll probably need to replace carpets/flooring, paint, etc. among other things. If you don't have a crew and need contractors a full flip on a bigger home like this could get you between $4000 and $8000.
C. If you're farther away it may be worth enlisting a property manager or trying to negotiate terms with your tenant to make trades for the care of the home so that they try to take better care. And this is a generalization, but even if you are close with the tenant things can still go awry (been there before with friends).
D. Assuming it is well/septic, those things can be expensive if they don't hold up. They should be fine if newer, but your due diligence should include dating these items. If your septic is older, it could be older material (the clay pipes) and can EASILY damage. I know some investors that with even new septics will not buy anything on land unless there is enough land included that they could dig a new septic beside the original should catastrophic failure occur. I have seen condemned homes as foreclosures sold for less than $15K with land because the septic failed and would need to be 100% replaced to make it work again...with no available land to dig a new one.

5. Return: I typically value my deals when looking at parks with a cap rate but do not with home deals only or land/home deals. I would typically look at APY (annual return) and ROI (total return on investment). Obviously if you're only renting for a shorter period (2 to 3 years) you'll get your debt down, but not out. You'll want to be as confident as possible that your future exit is solid. Do not rely on appreciation (appreciation is used in this scenario - within reason and assuming the home is considered real estate, i.e. it has a permanent foundation) because NO one knows what the market will do, no matter what they say. There are educated guesses and indicators, but nothing is for sure. Now, financing (assuming MS is like VA) is ONLY attainable conventionally on a manufactured home IF and ONLY IF (at least from any source I've found) the home has a permanent foundation and is considered real estate instead of personal property. Once the foundation is on there, the title SHOULD have been turned into DMV and the property is considered real estate.

6. Return is closely related to the financing. In my market, MOST purchasers of manufactured homes are investors; a primary resident purchaser with $30K or more in their pocket will usually apply that as a down payment for something a little more expensive. There are MANY exceptions to this, but I want to imply that I do NOT rely on selling "retail" any of my deals on the market where a primary resident buyer would obtain financing to buy from me or would have that kind of cash.

7. If I'm not mistaken AND this home is not yet real estate (still personal property without a permanent foundation) the depreciation would be 5% per year until a max of 50%...or something like that. I could be WAY off, but hopefully that's close. And if it DOES have a permanent foundation and is real estate, I would expect the least amount and slowest appreciation with a manufactured home lagging behind the market. This is a broad assumption and I have no basis. Others on this blog may have much better insight here, as I have not been around long enough to see appreciation (started investing in 2010).

8. Banks in my area will finance a land/home ONLY with a double wide and ONLY if that doublewide is NEWER than 15 years old. That's conventional in my area. 21st Mortgage does national financing, Vanderbilt finances Clayton Homes, Greentree (I don't know if they're still originating), are some I can think of off the top of my head. And I only know of about 2 or 3 banks with those conventional terms, most won't touch them.

My long winded answer can be summarized by the following; I hope my detailed insight gives you better knowledge into the industry that could help on this and future deals.

I would take this deal if you have the ability and desire to keep it long term. I would not put my eggs in the short term "basket". This is my personal preference, and there are MANY ways to do this. There may be hundreds of manufactured home investors that get to cash out, but I don't find it viable in my market.

Hope this helps and best of luck to you!

Stefan, my intent was to use the metric you are referring to and I think I confused myself when writing.

That said, I will still say that the 25% discount is still low. Let me run through a quick example to make sure I'm on the same page with you:
- Original Principal Amount: $5,400, Interest, 0%, term 3 years, total of payments $5,400.
- Home has been through 1 year of schedule, thus $1,800 paid in, balance to payoff for tenant or par value is $3,600.
- Discount 25%, purchase price $2,700.

Referring to this $2,700 purchase (leaving out market value as you mentioned) I would still contend it's low from my experiences with note buyers. In short, most note buyers wanted a 20% to 30% discount on REAL ESTATE, and started barking up the tree of 40% to 50% to even start to consider mobile homes. Now, I could have been getting the runaround from those buyers, but that's my experience.

In trying to think like a note buyer instead of the active agent in such a transaction, I think 25% is okay for the fact you don't need to search for a home for sale or a buyer for that home. However, if there is any issue/vacancy you'd be in the same position as the "originator" and have the same work had you found the home and buyer yourself with more profit on the table.

I'd be interested in hearing how things turn out! Best of luck!

Bill Gulley Well done and thank you! Great information there! I especially enjoyed the "buyer" name in your fictitious agreement! :)

And YES!!!! Document all you can in ALL transactions. We basically had to give ourselves an audit to go back and get information from transactions that we should have documented up front. For instance, keep a spreadsheet with the values (document it as laid out in the example) but also include the home's VIN and Title #. We ran into an "issue" last year and spent days digging through files collecting all the data we SHOULD have recorded (for our own records) up front. We had all the data from the contracts, but it's a good idea to consolidate it all together. Now it's very easy to track tax bills, insurance, etc.

Ryan M. I'm with you! I realistically considered that a threat myself (and understand your reply is in good nature) until I started moving the homes.

It's NOT EASY or QUICK to get on wheels and axles, and even with a mobile home toter I doubt I'd get too far in an evening without someone in a park making a phone call. I personally cringe at the thought of putting on 4 to 10 wheels without using the impact driver!!!

Assuming Joe Dirt's F350 purchased with his "famous" funds could actually pull a home, could you imagine the police officer's reaction upon happening on such a scene! :)

Modular and manufactured are not necessarily the same.

For the quickness in response: (I have all the same access to documents and google as the next guy, I may be slightly off in my interpretation but you will get the point)
- Modular are made in a factory and brought to the site on wheels and a modular frame. They are set on a foundation with the frame but leave the wheels behind and are mostly set by crane. Therefore, there is no chance a modular can have wheels underneath. Considered real estate from day one. The frame sets on top of the transporting vessel.
- Manufactured arrives basically the same way, however the option to leave the wheels (with axles) on is available. SHOULD the home be set up with vinyl (or similar) material it is still personal property. SHOULD one put a permanent foundation (block) underneath (and technically remove tongue and axles) it is then the owners option to turn the title into DMV for shredding and consider it real estate.

There are companies that make MANUFACTURED AND MODULAR HOMES under the same roof - Ritz Craft. It's not a matter of preference per say, and they are both very similar.

Russ, some components of what you are trying to do are going to be determined by budget. I urge you not to "look down" on manufactured housing as you can save a fortune buying it versus modular and the following should be considered in your exit strategy:
- Sales method: manufactured depending on the year (most areas 15 years is the max age for financing conventionally)
- Price: manufactured $10,000 to $20,000 total price for something VERY habitable. Modular prices vary, but could easily be talking $60K to $70K for the same product. (I have sold modular and manufactured professionally hence input).
- Your solution is very "you" oriented. It also depends on your preferred exit (cash now or financing for later - assuming full compliance). Me? I save the money up front, put a manufactured home there, put a perm foundation under for $3,000 to $5,000 to call it real estate, and then market as real estate to get cash AS WELL as market for rent to own/owner financing/rental to make sure I capture all the "payment" buyers as well.

Obviously the name of the game is creating the maximum amount of successful exits for yourself.

You said: "I want something that is not on wheels, and has never been on wheels" And I hate to point it out, but both MODULAR AND MANUFACTURED WILL COME TO YOU ON WHEELS!

Discount and Return:
To be honest I think your discount is too small (way too small) and your annual returns could be better as well. BY NO MEANS am I soliciting business, but i've given fully managed properties to private investors for more annual return than 27%.

It could be a great way to get started, and yes it's not bad, but if you're jumping in this far you might consider doing a deal yourself instead of buying someone else's, especially if it's NOT a passive investment for you. Real estate can be passive from 10% to 15% (in general, obviously give or take), and mobile homes with more risk can range from 12% to over 30%; I've given and seen others give in many different ranges based on the investor, including over 30% APY.

Further, I have not dealt with too many note buyers, but most are looking for a 20% to 30% discount on real estate if not more (the one's I've run across). In full disclosure I do NOT KNOW ANY that want to buy mobile home notes. It would occur to me that with more risk and less collateral (again depreciating versus appreciating) mobile homes should be purchased for much more of a discount than real estate, i.e. 30% to 50% or 60% of value.

So for that interjection, please forgive me if I interpreted your "15% discount" to mean something other than buying for 85% of value. If that is the case, I encourage you to find a better deal or renegotiate.

Buyer and Credit:
Chances are the buyer does not have great credit. Personally, I put MUCH less emphasis on credit and most of my energy into their rental history. I'm much more interested in their references and previous landlord contacts than credit. This is not a practice I would coach to others, but personally if the park approves the tenant that means they (the buyer) met some form of qualification and or minimum standards. Inquire from the park what those standards are or were. If you agree with their standards, then you may be more able to focus on their previous landlords and references/employment.

Rely on the note sellers documentation of the buyer but rely more on the parks documentation on the buyer. Unless there is some unknown relationship between your seller and the park, make friends with the park manager/owner and get their version of the buyer. They SHOULD be a neutral 3rd party. And also buddy up to them as they may rather send you the next deal directly instead of the guy that is your seller.

Exit Strategy:
I don't want to turn this into another SAFE ACT post/reply, but unfortunately you will be limited in your "resell/exit" because it could be difficult or more expensive to finance/rent to own/rent etc. the home if it becomes in default. As previous posts have pointed out, you'll want to make sure it's a sound note and in compliance from the start, but realistically after that you'll need to know how to get out or recoup. To be honest, I have not and can not see a situation where I can not get rid of a home even if someone wants to only pay $25/month. I'll just agree to collect that money for a 45 year term to get my money back! :) So it would be up to you to decide if 45 years is worth your <$5K investment! Just kidding, but you get the point. Ask all the folks on this blog how to finance/rent to own/etc and SELL THAT HOME ON TERMS to make your money back! DO NOT WALK AWAY! Hint: selling/renting on terms is your defense to a depreciating asset!

Bill Gulley I am certainly glad to see the progression of the conversation as it played out. Obviously your opinion ranks up there with my attorneys, yet still I'm sure you could see me on this end reading your post multiple times in disbelief that my attorney advised me incorrectly! :)

However, and again maybe the confusion is state differences or attorney language, but I'm not 100% familiar with this paragraph of yours:

"PS, the reason you should have an accounting is to have the seller attest to the par value at sale and show the amounts paid as the receipt. If the seller lied, orit was with recourse and he gets to take it back there will be no argument as to how things were and are. :)"

An accounting?
Par Value? I don't understand why there is the need to attest the face value of the note if it would be stated on the note itself. My notes are titled first thing with "Promissory Note, Value, and Date" and then the guts of the agreement.
I think I understand correctly in that you're saying one should document all facets of the transaction? Is that correct?

Marc Faulkner Thank you for the clarification. If you had the time to read my response above you'd fully understand my confusion to the replies of my post. Further, I have a very good friend in San Diego looking to start in mobile homes. It is good to know the details to help pass along to him.

Bill Gulley I'd be interested in hearing more about the "Assignment of Deed of Trust" as I may not be getting great information from my attorney...it may seem. Was instructed to act as I laid out in my response.