All Forum Posts by: Paul Stout

Thank you @Derrick Craig and I do not mind at all.

@Sharad M. I do not believe anyone was unfairly classifying a certain area in NW Indiana.  The point of the discussion that was perhaps missed was the price point.  I agree wholeheartedly that there are many great areas in NW Indiana that have low crime and exceptional schools.  However, you will not find a $50k property that rents for $1000 plus.  Someone may stumble across a great deal like that but they are the exception (rare exception) not the rule.  I think the entire region from Milwaukee to Indianapolis have many great opportunities for investors.  You just have to accept that you will pay for B class.  Nothing is free in any area.

@Account Closed Its good to hear that you have a plan and that you are thinking about your strategy.  The details of that plan and strategy are dictated by your risk tolerance.  Identify your why and decide what you can accept by way of risk and the rest will fall into place.  The fact that you are here on BP and are willing to ask questions, listen and rethink your strategy based on sound advice indicate that you have what it takes to succeed.  One of the biggest hurdles investors face is shifting their paradigm from a homeowner or tenant to an investor or business owner.  You do not need to find a place or property where you want to live.  You need to find a place or property where your clients want to live.  This is a business and you need to know who you are selling to.  Only then can you make a plan to market to that target group.  Only you know whats right for you.  You will receive a lot of garbage information.  You have to learn to pluck the useable items from it and trash the rest.  If it sounds too good to be true, it is.

Thank you @Belinda Lopez.  I have been reaching out to an investor who has been investing in MHP's since the 1970's.  He has been a participant in over 100 transactions.  I have been contacting him quite a bit lately and he made me an offer that I am considering once I verify his background.  He said he would spend up to 25 hours both actively searching and evaluating deals I find.  He will negotiate for me and guide me through the entire process.  He said he will charge e a consulting fee of $900.  At first I thought it was not a good idea but with his network and experience (I will confirm those are what he says they are) I am beginning to think it is a good deal.  I do not blame him for charging for his time.  I have taken more than 25 hours to date and he has not charged me.  By hour that is very inexpensive.  I think it tells him I am serious if I am willing to pay.

Another thing you might want to look into is house hacking if your circumstances allow for it.  Mine do not but you better believe if they did I would take full advantage of that strategy.  @Account Closed

@Account Closed If the $45-$60k range was for a cash purchase then I would tell you that you should definitely look at using leverage. Many people feel safer paying cash for a property for a variety of reason. Most people look at the holding costs of vacant properties and feel better knowing that they can eliminate a mortgage from the equation and that makes them feel safer. The reality is quite different. If you pay $50k for a property you will own a $50k property. Your depreciation (this is one of the biggest benefits of real estate investing) will be on a $50k property. That's roughly $1,800 per year that you can write off on your income from that property. There is a high likelihood that this property will be a single family home (SFH). When you lose a tenant in an SFH you lose 100% of your income. Turnover is a real and high expense (go back to my comments on IRR).

Now lets take the same $50k and put it into a $250k triplex (based on a 20% down payment). You can't buy an SFH in a B area for $50k but you may be able to buy a duplex or triplex for $250k in a B area. Your depreciation is now roughly $9,000 per year. If you lose a tenant you only lose approximately 1/3 of your income.

There is also an economy of scale to consider. If you bought three SFH properties and they all needed roofs you would be paying for three roofs. If you had one triplex you would only have to buy one roof.

If you stay at or below 4 units you can get a residential loan that can be amortized over 30 years with a fixed rate. 

When you move to B class areas you will notice that the cap rates tend to drop. Do not be fooled into believing you are getting a lower return. Everything on and in a residential property has a life span. When that life ends it takes real money to replace it. Those costs must be considered when calculating your actual return (IRR).

If you are looking for a good area to invest it is always best to start near somewhere you or someone you know are familiar with because you live or work there.  I see you live in an area where that is easier said than done.  You may be surprised what you can find within 2-4 hours of where you are even though it seems impossible based on your immediate area.  There are things I know about where I live and work that I would never have a chance to glean unless I was here watching it on a daily basis.  The demographics are very important and they should guide you to the right area.  Three websites you want to become familiar with are bestplaces.net, city-data.com, and irr.com.  These sites will tell you who lives where you want to invest.  That should be the first step.  Who do you want to service and why?  Find them and you will find your property.

Sure thing! @Garrett H.

One last thing that I must advise @Account Closed. If you decide to move forward with C areas, become intimately familiar with the concept of internal rate of return (IRR). You absolutely must factor that in when dealing with lower income housing. Do your due diligence. You can find properties where you catch the previous owner at their saturation point where they have already dumped money into a property in hopes of deferring its obsolescence. Just remember that you should use these properties as a stepping stone. If you keep them too long the IRR will slowly but surely regain any profit that you thought you had. Don't count on appreciation on any real estate deal but especially these.

@Belinda Lopez My biggest issue right now is finding a broker.  I have connected with a couple of MHP investors and they have been a great help with the education.  I have contacted many brokers and I get one of two things.  One, they are lazy and expect you to find the deal or look at their website and they just facilitate the transaction and collect a check.  Two, they are very successful and hard working and therefore are impossible to tie down.  I have been contacting a few brokers that seem to do well and they just will not call or email me back.  I have been hounding them to the point that I would think they would call me back just to say "stop emailing and calling me!"  I cannot buy a $1M dollar park with cash.  Ii do have funds ready and I am willing and able to close on a $1M park with the right conditions.  Any tips on getting these people to get back to me?  Another issue I had was a broker wanted me to sign a two year agreement that stated that I couldn't buy a park without paying her a commission even if I found it on my own and she didn't have a previous relationship with the owner.  She may have been insane.  I'm pretty sure anyone who would sign that is insane.  I am not insane and I will obviously not sign anything like that.

Welcome to the community.  There is a lot here to absorb @Tim Huffman

 It can be very easy to get caught up in numbers without knowing an area.  I have been working in Northwest Indiana since 1998 so I know it well.  Every time I read people's comments about how it is the mythical place that has low crime, low property prices and high rents I have to shake my head.  

I choose to invest in the area because the below average schools and above average crime rates do not deter me.  There are all types of people that need to live in all types of areas.  Real estate investing is no different than anything else.  The risk and the reward are hopelessly intertwined.  Typically if someone professes that an area offers high rents and low aquisition costs, there is a reason.    I choose to accept the risks inherent with the reward of investing in C areas.  

If you are looking for a B class area with $45-60k aquisition costs I'm afraid the only way to find them is with a time machine.  

Search within yourself to figure out what you really want and what risks you are willing to take.  Many investors do very well in C areas.  Your price range will invariably lead you to C areas at best.  

The key to success is knowing your risks and controlling them.  Do not take anyone's word for anything.  Look at the facts without the rose (or green) colored glasses and base your decisions on facts and leave emotion out of the equasion.  The rules of economics dictate that if an area was a true B class area where properties could be bought for $50k, the smart money would flood in and the values would rise to match any other area of its type.  

I hope the best to you.  Just remember that education is the key to making sound decisions.  If you can sleep at night investing in C class areas then do it.  If you can't then you are better off choosing a different approach.  You will succeed if you want to.  Don't rush into a bad deal but don't pass on a good one because it isn't perfect; few are.  @Account Closed

What I meant to say was $200 lot rents and...