All Forum Posts by: Chase Louderback

Hi John,

For the first 2 questions you will need to ask your CPA. Forming an LLC can make your first deal or two a little difficult, but if you have a strong relationship with a local bank then it can be a lot easier. Keep in mind that those loans with be full recourse (you have to personally guarantee them).

Other food for though would be, if you decide to get into larger deals with loan balances over the $1MM then you can get non-recourse agency loans and it would be unusual for it NOT to be in an LLC.

Hi @Lance K.

It is very common to submit an LOI for MFH without a walk-through. Regarding the legal ramifications, it should be clear on your LOI that it is NOT legally binding. Generally, it is understood that Letter of Intents are not legally binding since they are not contracts.

The Letter of Intent is just a piece of paper that says "Hey, I'm interested in buying your property and here are the price and terms I have in mind. Please sign if you like it and we can continue the negotiations with our attorneys."

If you submit an LOI and then check out the property and don't want to progress any further then all you have to do is tell the broker.

@Dale Gwynn

The cap rate in this context is simply the return you would achieve if you purchased the property at X price for all cash.  So the broker is advertising that it is currently producing a 5% return for an all cash purchase, but has the potential to produce a 6% return.

That isn't to be confused with the Cash on Cash return which is generally assuming leverage.  Happy to help if you have any other questions!

I know Boardwalk Wealth has properties in the DFW area so maybe Omar Kahn and @Matthew Baltzell could help with this one.

Good Luck!

@Trent Lee @Mike Celli

Look for cities that have:

• Strong, diverse job and population growth.  Bonus points for more recession proof industries (health care, government jobs, education)
• Median income over $40k (your tenants need to be able to pay the rent)
• Average home price over $100k
• Low unemployment rate
• Low housing vacancy rate
• Market with a strong affordability factor
• Landlord friendly  

Those are just some examples.  Here are some sites that can help you with the school systems and crime rates as well, since they are also important:

https://richblockspoorblocks.com/

https://www.bestplaces.net/

https://datausa.io/

https://www.crimereports.com/

@Charlotte Dunford

This seems to pretty much be the norm in a lot of markets currently.  If you do find a deal that is value add and doesn't have the upside baked into the current price then you will start to wonder what you are missing. (i.e. is the property in a war zone? More deferred maintenance/capex expenses than the seller is leading on?)

@Jennifer Keller

Like @Ryan Groene said, we will need a little more information.  It's all about the numbers.  I'm going to guess that it is all Park Owned homes though unless this is in a major city with $600+ lot rents.

Hi @James L dodd

In my opinion, I don't think it would make sense to go more than 20%-25% down on a seller financed deal.  25% down would be conventional financing terms so if they start to require around that amount you should be getting much more favorable terms on the deal (for example, amortization at 30 years, 7-10 year balloon payment, interest only for 1 or 2 years, etc).

The big thing would be for you to confirm that the NOI is accurate. Looks like the seller is trying to sell this at roughly an 8% cap rate.

@Ryan Sajdera Do you care if you have brand new or used models in the park?  Also, how many mobile homes will you have to bring in before you are breaking even on your pro forma?  Some tips that have worked for us in the past are:

• Advertise lot rent concessions for owners bringing their home into your park (3-6months free lot rent or a couple of grand to help the owner move the trailer in)
• Networking with dealers/wholesalers so that you can get their used inventory when it comes available.
• Craigslist and Facebook for advertising/find used trailers to bring in.

In the past dealers would consider bringing in a setting up a home for display and to sell, but when we have checked recently about doing that, the dealerships said that they won't anymore as it is too much risk.  Be sure to check about that in your market.

Finally, if you get a used home to bring in check with your market to see the costs.  Around here you would be looking at LEAST around $15k to move in a used home, set it, and fix it up.  (i.e. 7k for a decent used MH, few grand for renovations, 3-5k to transport and set the mobile home).  These numbers can vary wildly.

Hi @Alonzo Smiley,

If you are trying to find distressed apartment buildings without using brokers whatsoever then it can be difficult.  Some potential resources could be ProspectNow.com or Reonomy.com.  (Costar is an option too but that is the priciest of the 3)

If you are only investing locally then your best option would be to "Drive for Dollars" and find properties that look neglected and cold call or direct mail those owners.