All Forum Posts by: David Young

Hey BP,

A recent possible opportunity presented itself and I'm trying to do some analysis/due diligence.

I own a few multi-family doors in town, but have no experience with mobile homes or MH parks.

There is a property in town that recently went up for sale for what seems like a decent price.  It's 6 acres and has three mobile homes currently on it, with room for a number of additional pads to be built/set up.  The current income from the three units is about double what we would be paying in debt service/taxes/insurance if we got the property at what we think we could get it under contract for.

We've done some quick math (could be wrong), but it looks like we might be able to fit a total of 16 pads on the property.

In thinking through the planning of this, I had a few questions I was hoping some more seasoned MHP investors may be able to help me with...

1. At that size, should we try to go with county sewer vs septic?  What hurdles might I expect in trying to get county sewer connected?
2. Any cost ideas for what it would take to set up a new concrete pad for a MH trailer? (I know this is a broad question, so ranges and assumptions are fine.  Just looking for ideas to start with)
3. Is there some big thing that I'm ignoring or not even thinking about?

Thanks in advance to any and all assistance!

Best,
David

@Adrian Smude - awesome.  Just checked out your profile.  Looks like you are up to some great stuff.

After we get this one settled, I'm hoping to land 1 or 2 multifamilies in 2017.  Will likely look for a 4-plex first, then hopefully something a little bigger on the next one.

@Richard Leyba tejada - thanks for getting in touch.  I'll give you a ring! 

Adrian - that's my understanding as well.

I'm not looking to change GCs, just wanted to make sure I had myself covered that the contractor would get all the work done.

Btw - plant city...pretty close. What type of RE you into?

Hey Wayne,

Thanks for the comment. Just took another look through my docs and it looks like we covered it when doing all of the paperwork e the lender... There was a contract in there that the GC had signed and that I also signed. Just wasn't clear at first that the doc was actually between me and the GC and had nothing to do w the lender.

Thanks again.

I have a house under contract (Lakeland, FL) that has an attached MIL suite/efficiency apartment.  I plan on renting the apt to offset the mortgage.

The place needed a little work (fix up one room, new floors, putting in whole new kitchen), so I got an FHA 203k loan - streamlined version. We have the home under contract for $205,000 and are going to put about $28,000 into it with the 203k.

I have a general contractor lined up who has already walked through it and submitted quotes to the bank for me.  I've signed about a thousand docs with the bank, but I was wondering...

Do I need to have a separate contract between just me and the contractor?  Or is his contract with the bank enough?

I'll admit, I need to go back and comb through some of the language on all of the 203k loan docs that I and he have signed so to see what his obligations are, but thought someone here might have experience in this area that they could share.

Many thanks!

David

@Chris Seveney @Roy N. @Nathan Duncan @Nick L. @Christopher Telles @John Leavelle @Billy Guyette @Travis Lloyd @Nazz Wang @James Syed

Thank you all for your comments and help on this thread.  I thought I would provide and update, as some time has passed.

I sat on this deal for a while and some other stuff came up in my life (had a kid, moved, etc), so I was a little distracted.  I checked back in with the owner a few days ago and he said he had it under contract with someone.  No big deal. Wasn't incredibly disappointed, as I had some concerns that I've expressed above.  He called me back a few days later to tell me that the deal had fallen through while he was on the way to the settlement office.  So its back on the table.

To answer some of the questions/concerns above...

@Roy N. - the $13,616 cash flow number that @John Leavelle came up with uses your NOI number of $24,456 that you listed earlier in the thread (thanks for calculating all of that, by the way). In that number I believe you included taxes (from my original list of expenses), as well as a 10% reserve for maintenance and a 10% reserve for CAPEX. So his cash flow numbers actually might be close if the assumptions hold up.

@James Syed - thanks for the tip.  I had dinner with the owner and got copies of all of his utility bills for the last two years.  His estimates check out to be accurate.  Where he was being "optimistic" was the gross rent estimates.  Building had been usually 20%-40% occupied over the past two years.  He chalks it up to him having medical issues during those times and not being able to look for tenants (plausible).  He currently does have 7/8 of the building occupied (at last check), so that is better.  Although like I said before, the building seems to have high turnover which will hurt income.

@John Leavelle - The original building is quite old (want to say early 1900s).  It was completely gutted and refinished by the current owner 10 years ago.  The 2015 tax assessment was $129,300.  I want to say each of the 8 units is around 800 sq ft.  There were no obvious cosmetic repairs needed in the two units I looked at.  Although if there are unruly tenants in there now, I can imagine that a few things would need to be fixed when the tenant turns over.  I don't have a ton of cash to put into this (a few thousand), and would likely go in with another equity partner to provide most of the down payment money.  Thanks for running the numbers.  Yup, this one is for sale by owner.  And I asked - he doesn't want to do seller financing, although he does own it outright.

@Billy Guyette @Travis Lloyd - thanks for your advice on the property management.  I will do some extended due diligence there.  All I've done so far are phone interviews.

If anyone else has any additional comments, thoughts, or advice, feel free to chime in!

Best, David

@chrisseveney I haven't had a contractor look at it.  That's something I have considered doing, but didn't want to take that expense until I had done a bit more research.

I am looking to get into long term RE investments, so exit strategy isn't quite as important, since I am investing for the monthly cash flows.  That said, an exit strategy might be difficult unless I can find some other investors willing to take the building off my hands after I improve the property a bit (make a few improvements, maybe the area gets better, finish up the empty first floor space, etc).

I should also add that there are 3 prisons in the area, contributing to a higher than average crime rate.  One website rated the national crime rate at 40/100, and this area had a rating of 72/100. 

Hi BP,

I found an 8-unit apartment building for sale by owner on craigslist.  I've been studying real estate and reading/listening to BP for about a year and a half, but have yet to do an actual deal.  I wanted to run this deal by some people on the forums to get some advice from people wiser than I on this.

Here are the details on the property:

• Located in western Maryland - old coal mining town; weak but seemingly steady economy; lots of blue collar workers
• 8 units - 2 bedrooms in each unit
• Each unit rents for $500-550 (one unit rents for $400...special deal for tenant with current owner)
  • 100% occupancy = $49,800 gross rentals/year (not including laundry below)
• Comes with laundromat on first floor - 6 washers, 6 dryers; open to public; current income unknown to owner, but estimated by me at $250/mo
• Taxes:  $2,800/year ($233/mo)
• Owner-covered utilities:  $7,200/year ($600/mo)
• Insurance:  $2,700/year ($225/mo)
• About 1,000-1,500 sq ft of unfinished garage space on the first floor that is not being utilized.  Could potentially finish and rent out or rent out as garage/workshop space.
• I plan on having a property management company manage the building.  Already identified a company and have spoken with them about terms.  They charge 10% of rents and a flat $100 for each tenant that they place (and will place new tenants for free if they are evicted or leave within the first year).
• Asking price $150,000

I have already met with the seller to do some due diligence:  looked at schedule E tax returns, last year of utility bills, last two years of rent rolls, walked through building, looked at two of the units, etc.  It seems like this price generates an attractive rate of return, but I have some concerns about the long-term outlook and liquidity of the investment.

Some of my concerns:

• Quality of tenants - this town is generally lower income, and the building is in a lower income area of the town (low of the low).  The building is in decent shape, but given the above factors, brings in some "rough around the edges" tenants.  Rent rolls showed a decent number of evictions (maybe 3 per year for the building)
• Long term outlook of the local economy - the economy does not seem to be growing in the area, and from talking to some long term residents, it sounds like jobs are drying up.  There is an economic development plan in place by the local government, but I don't know how the execution of this plan will go.  May make finding tenants more difficult in future...as well as exiting the investment if need be.
• Financing - banks seem to have a hard time with the 8-unit building, particularly with the low price.  I know some people to where I could get equity partners or potentially some private money to fund the entire purchase price, but this would obviously impact cash flow, and I want to feel good about the investment before pitching it to others (hence this post).

What do you think?  Would you pursue this deal if you were me?  The numbers seem good, but does that override my long term concerns?

All advice is appreciated!

Thanks, David

Hello BP,

I am looking at potentially purchasing a fourplex in Richmond, VA that is likely going to need a lot of work to get fixed up and rentable (looking to do buy and hold). I am about two hours away, in DC, and don't have any connections to contractors in Richmond. Are there any investors out there that have had positive experiences and/or have recommendations for someone I could use?

Thanks, David