All Forum Posts by: Keith Hand

@Kelli Huang, a lot has happened since this post. I paid my partner's original investment back over the last two years. We also bought three other parks. The second purchase we made, the bank did not ask for a down payment because we had so much equity in the first park. They tied up another property for 12 months, but just released it. Also, the last park we bought appraised for $159k higher than our purchase price. About 8 months after we closed, we got a line of credit for $135k, which we used to remodel some of the units and a commercial property we bought with on of the parks. We are raising rents about $200 per door with the remodels and are looking for to a cash out refi this year in a larger loan that will lump the parks together. We will be able to get much better terms on a larger loan with one of the local banks we have been working with.

@Brent Shields, we actually wound up getting an equity line on a different park for remodels based on the original appraisal. It was through Heritage Bank.

@Jeros C., I totally agree that converting them all to TOH's would be easier to handle from a management standpoint. If the numbers made sense for us we would do it, I would do it in a heartbeat. I still fight with the idea, and probably will until we either sell the parks or try it. But every time I put it in a spreadsheet and try to make sense of it, the numbers just don't work for us in our market. I would think that managing 400 TOH woukd be easier than managing 400 POH, but I don't see how managing 400 POH is any different than 400 apartment units. I can tell you one thing I have learned in this process is that more units is easier to manage than less. We have 100 now, and it much simpler than when we had 30. I'm guessing 400 would be easier than 100. We have built systems and now have an in-house manager and full-time maintenance man. That frees me up to do other stuff. more units would make it easier to build a team, which would mean I'm not as reliant on a single person to do the work. If our maintenance man has an emergency and needs to miss a week, we would have other team members to step in if we had more units and available capital to have a larger team. Our maintenance man had a death in the family recently and had to travel. he missed a full week, but luckily we have built relationships with other landlords around town, and they had their guys work with us. That would have been much easier if we had a crew working for us. I can definitely say that with low end rentals keeping those labor costs to a minimum is a must. I don't think it would work if we had to hire contractors to do our work. Labor is very cheap in our area, and that certainly plays into why the numbers make more sense with POH for us. We also bought a mobile home supply store with one if our parks, so we get some of our materials at a deep discount. @Eliot M., you are correct that HVAC is HVAC, but it certainly helps that we can buy a $1,500 furnace for $400. All of this plays into why it makes more sense for us to own the homes. It is also why we think we can run these parks at an expense ratio of around 35% once we reposition the distressed park. Another lesson I have learned through this is that I would (most likely) never turn over a distressed property with cash flow again. I will raise the cash and do the work up front. There is a multitude of reasons for this, but it's been really tough to have to fix one unit at a time instead of just cleaning up the entire park at once. It makes it tougher to rent the nicer units, and the money we have lost just in time value has been much more than if we had just put in the cash up front.

@Eliot M. Man, a lot has happened since I originally posted this. We did follow through with this purchase, and we also purchased three more parks. We currently have seven lot rents and about 100 POH. The park that I originally made this post about did very well last year. We had a lot of expenses right after the purchase because of deferred maintenance, but after that was taken care of, the expense ratio was not outrageous. We made about 95% cash-on-cash with that deal. We purchased another park in August of last year, and that one was in very bad condition. We are remodeling many of the homes still, and using the cashflow to do that work, so our expenses are high with that one. We have not made a profit on that park yet, and we have about 5-6 more months of rehab since we are using cashflow to do repairs. We just closed on another park last month, which was in much better condition and had 26 POH and 5 lot rents. I foresee our expense ratio being small with that park. Last month our expense ratio on all of our parks was 50%, including the remodeling expenses for the distressed park we bought. I had a meeting with our in-house manager yesterday and we are confident we can get that down to 35%.

I am convinced the POH vs. TOH debate is regional. In our area, lot rents are scarce. In fact, the last park we bought was owned by a family who has had the park for about 15 years. He told me he never raised the lot rents for the 5 TOH because, and I quote, "Lot rents are a thing of the past." So, they are paying $85 per month for their lot rents. The second park we bought had 2 TOH, one paying $75 and the other paying $100 for lot rent. We have found that to be about the average for the very few lots being rented in our city. The numbers don't seem like they would work for us to convert them unless we could get $300 or more for lot rents. Surrounding areas are getting $235, so I don't think it would work for us.

A previous comment said that financing would be based on lot rent + value of home, but we have not found that to be the case with the local banks that we have used. Their appraisals have used both income and market approach, and they are making the loans based on the rent being collected, just like an apartment building. I think this may be different in larger cities.

I have some multifamily rentals and we have a large warehouse at one of our properties where we store extra materials. Sometimes we buy materials in bulk and we use the left overs on different units. I want to keep track of what inventory we have and where it goes, but I'm not sure how to do that. Does anyone have a form or some kind of system they use for this?

I invest in Georgia and it is a very landlord-friendly state. Evictions in Georgia are very simple, and it usually only takes 7 days and only costs about $75. There is a lot of leeway in how leases can be written in GA, and most of the laws favor the landlord. However, in my experience the magistrate judge makes a big difference. I invest in a small town in South Georgia, and though the laws are landlord-friendly, the magistrate judge can be difficult for landlords. My recommendation would be to talk to lawyers in your local area where you want to invest and see how the magistrate court operates in that area. It definitely makes a difference. We have had to adjust some of our procedures based on how the magistrate judge wants things done, even though we shouldn't have to based on the law.

I had never been in court until a couple of months ago when I took over a property with some bad tenants that I had to evict, so I was and still am a little unfamiliar with all of the proceedings. The first dealing with the court was quick and easy, but the second was complicated and I lost the case. So now I have tenants living in my property for free because I made mistakes in how I filed (I think). The lawyers I have spoken with don't seem to understand exactly what the laws are in my situation, and they have told me that the magistrate court is unpredictable and that the judge basically makes the decisions instead of the laws. So, I would like to meet directly with the judge and talk with him about what I can do differently in the future to make sure I am compliant with laws, but also that I am doing things the way he likes, since it seems like he is the deciding factor. Is it appropriate for me to ask for such a meeting? Since my case is over, can I ask him questions specifically about what happened in the last case?

I need some good real estate finance books. I am specifically interested in multifamily and I want to learn more about finance and the terms and ideas associated with underwriting and managing these properties.

I am fairly new to this, but I own two trailer parks right now, and have two more under contract. It seems that the consensus is that you can't make money by owning the mobile home. Most people argue that it is better to own the land and collect lot rent from tenant owned homes. However, in our area, all of the park owners own the homes and the land. We own 30 mobile homes right now and rent them for $395-$595 per month, which is about what similar apartments cost in our area. We have had a lot of success with this. Mobile homes have issues because they are constructed cheaply, but if you keep up with the maintenance, they are very cheap to fix and maintain. A full remodel will cost $4-5k. The toughest thing is getting financing. We have been able to buy our parks at such low prices that the banks will lend to us, but they are harder to sell at higher values. Banks usually won't value them based on income, but rather what the land and home is worth, unlike apartment buildings. And the vast majority of banks won't lend on them at all, so many times to sell at full price you will need to seller finance.

I am buying a multifamily property from an older couple who did not manage the property very well. We will inherit roughly 40 tenants. for some reason, the previous owners let the tenants choose their due dates. They pay on all different days of the month. Very few are due on the first, and they are spread all throughout the month. I would like to change all of the due dates to the 1st when we take over. Is this change reasonable, and how do I implement it? We are dealing with low-income tenants, and I am not sure to transition the people who are paying late in the month.