All Forum Posts by: Ben Reese

Andrew,

In that ACHF 5 is open to accredited investors, exactly what are you bringing to this that one wouldn't get by investing in the fund directly?

Ben

David,

I doubt anyone here can give you a good idea of it's value as there are simply too many unknowns as to the demand for this product in its specific market. On the plus side you'll be offering someone very affordable housing. On the downside, it's an older MH.

But in almost any event you have to assume your customer is the end user, not another investor. This means, whether you rent or "sell", you'll likely be receiving a stream of monthly payments. So keep this in mind: A sale is going to look a lot like rent, and the value of a stream of payments is determined by time and interest rate assumptions.

From others in the business I've heard that the many if not most "rent-to-own" or "contract-for deed" MH rent-own deals are structured with a down payment of whatever they can get, 7-10 year terms and, rates north of 9%...and that most ultimately default. Those investors are generally OK with this as they soon take another small down payment and repeat the process.

Ben

I posed this exact question to my accountant and attorney a while back. My attorney advised that as a limited partner in an investment LLC I was only at risk for only the amount of the investment. My accountant also pointed out that if I formed another entity I would incur the additional annual expense for preparing a return for an entity that served no real purpose.

As always, if you have any doubt seek your counsel's opinion.

Ben

While there is "hair" on this deal, those of you critiquing the so called purchase price are missing the essence of this sort of opportunity. Assuming I've done the math correctly, the sum of all the payments (including the down payment and 50K of renovations) over the next 15 years is about 510,000, Assuming a 6% interest rate the Present Value of these expenditures, is about $305,000. So if we are to assume the PV (or purchase price) is $461K the implied interest rate is about 1%. That's cheap 15 year financing. There is money to be made here if other problems can be corrected.

Now correcting problems is the essence of most real estate opportunities. If I were looking at this I'd want to ensure there was no illegal activity in the home at the time I purchased it and so would insist the tenants vacate before I held title. I would not want to knowingly buy a home where the rennet's were engaging in illegal activity. Too many risks in that and for little cost you can find new and less risky tenants. I'd also have an engineer look at the foundation before I took a chance on it.

Ben

Hi John,

What is the access to the property. Is it on a paved road? Are there city utilities to the property? And is there power there as well? How about the surrounding uses. Is it primarily residential or mixed?

In the Carolinas a MH on an acre is a product that is in demand as there are not that many new MH's going to parks any more. And as you point out you could put an inexpensive MH on the property and rent it for a decent return, assuming of course you have access to utilities.

Ben ( Another Ben R. !)

Hi Gary

I don't have any experience with flipping MH's, but I have done extensive research on purchasing a park.

You can purchase a MH park for far less than you could develop one yourself. Furthermore, you'll have an immediate income stream if you buy one that is up and running. Lastly, if you own a park, you'll have a way to turn those trailers in to both home and land income.

The folks at the mobilehomeparkstore.com are an excellent resource. (I took their "Boot Camp" and can't say enough good things about it.) You can also find parks for sale on Loopnet.

Ben

Jamaal Hunt...I like your positive & determined attitude!!!

Hi Jason,

Several things about your plan jump out at me.

[b]Age: There are a lot of 25 year old MH's that can be bought for less than $23-25K which causes me to wonder if you can truly get this for yours as it sits.

[/b]Your Exit Strategy (AKA, Who is your buyer?): Let's say you move it to the new site. Now you have a 25 year old home on a piece of property. Who is your targeted buyer? Very few (if any) banks are going to touch this meaning this buyer had better be bringing cash to the closing table...And anyone with $75K plus in cash is probably not in the market for an old MH, especially considering $45K or less will buy an absolutely gorgeous single-wide these days. And that new single wide IS financeable.

[b]Hard Money: You may find some family or friend who would help you, but a HM lender is not going to touch this. HM lenders are concerned with loan-to value and will not want to be secured by a depreciated asset that could literally be hauled off in the middle of the night.

[/b]Idea: Your home is likely worth the most it is ever going to be right where it sits. (Unless it's in a hopeless park) That's because it's going to take $4-6K out of your pocket just to move it. And unless you move it to another park you are going to have expensive utility hookups to provide when you get there. So why not rent or sell it where it sits? And before you do, instead of spending $10K why not spend $1500 by cleaning it up, repairing the skirting, putting $100 worth of cheap painted shutters on the exposed side, finding some carpet remnants for the floors, and attacking the interior with a cheap airless paint sprayer and then either: 1) rent it or 2) take a down payment and sell it on terms? Google "Lonnie Dealers" for some ideas on how to do this.

Good Luck!

Ben

Ann Bellamy and Mike D'Arrigo are correct that structurally a HM loan would be a good way to go, but If I read this correctly Engels Rojas has only a small down payment available. That usually precludes the use of Hard Money.

Hi Bryan,

Believe it or not, there was no sales pitch. I think Frank and Dave view their Boot Camps as a way to expand their network. Frank mentioned to me they find a lot of deals through their graduates as oftentimes a deal is too large for the individual and Frank and Dave will partner with the grad to make an otherwise good deal happen.

Ben