All Forum Posts by: Elihu Bogan

Oh - message me for images and supporting docs (lease, taxes, insurance, etc.)

First posting here, hope I'm doing this right :)

Over $5k in updates in 2016.

Delightful townhouse is located in the desirable Southside area. Spacious two story end unit features beautiful laminate flooring downstairs, modern styled bathroom with skylight,and an expansive master closet. Located perfectly near Mayport, shopping, Downtown, and dining. 

Amenities: Full Rear Privacy Fence, Microwave, Refrigerator, Stove, Washer/Dryer In Unit. 

Full disclosure - seller (myself) has a FL real estate sales license. 

Thanks @Ken Rishel! This is very helpful. 

@Kevin Martin welcome! Have you done any new affordable housing SFR projects? I'll send you a PM.

@Jeffrey H. - Finally have a complete list as I go into closing. I pumped the tanks, looks like about about $20-25k in septic updates recommended, $5k to fix entrance asphalt, $2-3k for dead trees. No water leaks that I've found yet, and I'm hoping to put off some of the tree work until the winter when pricing (supposedly) drops significantly. It's in Jax, Florida, and currently 95% park-owned homes, so no union-busting worries yet.

@Curtis Yoder That's pretty much what I did. I added a whole worksheet for capex scenarios and then plugged them into the main model. Worst-case scenario came in at about $250k in repairs on a $315k property, which broke even on cash flow and was a 6-cap or so. Still better than the 4-5caps I see where I live :)

As a general update, closing Monday, have already lined up landscaping, dumpsters, trailer scrappers, and a handyman/"contractor" to rehab the few that are worth saving. Biggest problem I have now is locating replacement trailers for a reasonable cost (I'm hoping to keep total cost to $10k each or less installed). Also trying to decide how much of the septic work is must-do / should-do / or could-do. Hoping to rent 2-4 new units per month til the end of the year. Refi (equity cash-out) in 12mos once I have a prettier picture to sell to the bank.

Hey @Reggie Wright I think in a lot of areas pre-HUD (i.e. pre-1976) trailers cannot be transported on highways without being lifted onto a flatbed truck, which is substantially more expensive. I would also recommend looking on CL too for 1960s era trailers and see what they're listing for. I'm looking to fill a park in FL, and I'm scrapping all of my 1960s trailers and expecting to pay no more than $5k for 1980s-1990s models before moving costs.

@Ken Rishel good point about the bidding war - I've heard horror stories about what happened at the end of the MH financing book in the late-90s, early-00s. I definitely wouldn't raise my offer from where it is - I even asked the broker if I could flip the contract somehow for the $35k spread, but they didn't seem too keen on the idea :)

Kevin Schulte the POH are worth about $1000 each in scrap metal :) Any homes that I buy to replace them will obviously have some minimal resale value, but I don't know that I would give them away to tenants to charge $200 lot vs $600 for the POH. I guess the question is whether there's ever a time when its okay to own the homes. I don't think each home requires $400/mo in repairs (again, at that rate you could replace the homes every year or two), so there's some positive spread to collecting home rent.

Hi Bill Devola thanks for the feedback. Yeah, I've never seen those rules of thumb outside the MHP space either, but figured someone would want to see it. $15k is actually pretty decent for a used singlewide I think. Some on CL going for $1-2k, but the install can run you $5-7k so they're never free. Brand new is about $30k in this area for a singlewide. It's really an average assuming I fix half at $10k each and replace half at $20k each, fixing those in the best shape to start with. As for septic, that's one of my big fears too! I'm set to schedule the pump outs and inspections today (22 at $250ea = $5500) so I'm doing a last ditch social call out in case I'm missing something obvious. Don't want to find out after I've finished cleaning out the seller's septics for him. :) Sewer is on the road, city person I called couldn't give me a cost for the private hookups to the homes, but said I'd need a private lift station at about $20k. So not likely unless everything falls apart at once.

Hi BP! Long time reader, first time poster. I have a deal under contract that goes against most of what I've been taught from Frank & Dave, Jefferson Lilly and the other experts, but I can't shake it so I'd like someone to talk me out of it before due diligence closes in a week. The offer was well moer than I'd been taught to put out there, but some podcast somewhere did say 'when it doubt, get it under contract.' :) Without further ado, here are the numbers (I'm sure I'm missing something vital and will update as needed):

- Westside Jax (32244), Wal-Mart supercenter 2.5mi, 60k zip population, MSA 1.3 million population

- Unemployment 6%, Median home price $85-110k (border of two areas), median income $55k

- Rent for 2BR $970/mo, vacancy rate 10%

- $315k contract price, $65k seller carry @ 3.5% interest-only, 5yr balloon.

- 21 units, 1 unit $200 lot rent. Avg. for area is $250+ lot rent.

- 13 POH occupied at avg $550/mo ($6700/mo after collection losses)

- 40% expense ratio (after-purchase)

- Homes are all pre-HUD and not well kept up. 8 vacants are total guts or replace.

- Vacancies due to (extreme) neglect and negligence/deferred maintenance, not lack of demand. 

- Large lots (5 acres = 1/8 acre each + recreation space)

- city water and septic, sewer available right outside.

So, the rule of thumb is 14 units rented @ $200 lot rent * 12 mos * 50% expense ratio * 10 cap = $168k. Fully occupied would be 22 * 200 * 12 * 50% * 10cap=$260k lot rent only. Land appraised last year for a land-loan at $220k. Contract price is $315k, there are multiple cash backups going up to $350k at this point (for some reason, it's harder to walk away when you know there are other people willing to pay more...)

Now, I'm not foolish enough to capitalize the value of the homes, but any appraiser will tell you there is an income approach that will assign value to something that generates rents regardless of what it's made out of. By renovating the vacants (say another $100k including needed park fixes), I am confident I can get the rent roll to $10-12k with $415k out of pocket. At $150k, I can bring in 10 'new' trailers that would be probably preferred to 'polishing a turd' as my father would say. That puts me at $465k stabilized with $10k rents, which at the bottom of my spreadsheet works out to $6500/mo before financing, or about a 17-cap. Also hits 2.2% gross cash flow, which is the first time I've seen 2% plus on something over $50k around here.

Happy to update with missing details, please do not flame with anti-POH rhetoric, etc. I know this is not a cookie-cutter deal, it's just really high vacancy for a correctable reason.