All Forum Posts by: Peter Amico

Does anyone know how rental income is taxed that is sourced in Puerto Rico though I live in the states and am not pr resident? Do I have to file pr taxes? Property is held in a pr llc.

Hello. I've searched the forums and can't find this answer. I'm about to buy a 4 plex in Puerto Rico. What is the tax rate on rental income sourced in pr to a person who has primary residence in Florida? Is there a foreign tax credit for any tax paid?

Hi all. I am in the process of flipping a house with a partner. I paid for the house and he does the repairs and pays for the rehab. Then we split the profits. My question is how I should be taxed on the profits and how to report them. I think he will just write me a check for the profits. Is this short term cap gain or ordinary income with employment tax implications? House is owned in a land trust with each of us holding 50% interest (mine in llc).

@Rachel H. thanks. This is helpful. 

@Joshua Dorkin I was just giving you a hard time. :) I am learning a ton from your great work. 

@Joshua Dorkin @Brandon Turner where is the love on MHP forum?

For the two of you who were interested in this post, I spoke with a friend whose company owns/manages MHPs across the country and this was his advice. 

-Cap rate of 7-8 percent is good, but do not include rents in your NOI calculation. If the owner wants to get something for the park owned properties, offer no more than 5k unit.

-Laundry- recommends tearing down. This is where crime happens.

-Recommended looking at the average home price in the area to get a sense of the comps between what a renter is paying at the park (700 all in) vs. what they could buy a house for. He said that nationally they shoot for 650/mo.

-Water/Sewer- good that these are public. Only buy with public utilities. If these are master billed, don’t buy install meters, just charge these back to the tenants proportionately (RUBS system).

-When tenants move, see if they will transfer the title to you. That trailer is never going to move again. If not, you will have to follow the protocol for abandoned property before you can take title and rent it.

-The most desirable mobile homes are 3/2. These are probably going to run about 30k if you have to buy one and put it on the property.

-In 2008, the SAFE act prohibited seller financing if not licensed and manager licensed. You can probably get away with it at this juncture, but it is not scalable. They follow a rent/credit program where the non-pad portion of their payment goes into a credit account and they can then purchase a place for cash. This skirts the SAFE act.

-Requires tenants to carry insurance on their mobile homes for replacement.

-You can purchase loss of rent insurance to insure against hurricane.

-Fannie/Freddie will underwrite mortgages for these properties. 4-5% with 20% down and 30 year amortization with 5-10 year balloon payment.

-They think about 100/door net as a good goal.

-He recommended not self-managing because those dollars you are saving are deductible and takes away potential to scale. Hire someone in the park and pay them their pad fee + 100$ to take care of the property.

325/pad. I am not sure on lot rents in area. Trying to find that out now. 

@Alex Olmo Would love to connect. Send me a PM. 

Hello BP Community. 

I have an opportunity to purchase a 24 unit mobile home park in the greater Orlando, FL area. 23 of the pads have mobile homes and 7 of those are park owned. I have three questions I would love to get some help with. I will elaborate more below, but here they are for brevity sake. 

1) How much would you value this property?

2) How can I insure against a catastrophic loss (e.g., hurricane) that may cause me to lose rent for years? 

3) What is the best approach to the 7 park owned homes? 

4) Laundry facility vendors?

5) Financing

1. Value of property- 

Here is the information I have so far for this off-market property. 

-1.2 acres, built 1972

-current seller paid 390k for it 9 months ago

-23 units on property with one vacant- about half of residents are snowbirds

-pads rent for 325/mo, 7 homes rent for 700/mo- Any tips for finding market rates? Can I raise these to 375? It seems like a fairly large fixed cost to move your trailer so I assume raising these is relatively safe. 

-city sewer/water (I am not sure if master meter or if included in pad rent price, but will find out)

-Laundry room, workshop, paved road

-I am not positive, but believe it is 55+ community

-Gross Rents= 121,200

-Expenses: Vacancy- 9,696 (8%), Insurance 2,500, Taxes 7,000, Management (8%)- 9,696, Maintenance/Repair (5%)- 6,060, Garbage- 2,000, Lawn- 2,500= Total expenses 39,452

-NOI= 81,748- One question here, should I be including the payments for the 7 park owned properties? I have seen others mention I should just calculate the pad rentals for the NOI. If I just look at pad rents and also im ignoring laundry, NOI drops to 56,863.

I am also calculating a 5% capital expenditure budget, but taking that out post NOI- another 6,060.

-Cash flow before tax (keeping the park owned home rent in calculation of NOI)= 25,121

-Cash flow after tax (assuming 35% marginal)= 20,389. 

-If I can raise the rents to 375 and I assume a bit lower vacancy rate (5%) and self manage the property. NOI comes in around 100K.

Anything else I should consider?

2. How can I insure against a catastrophic loss (e.g., hurricane) that may cause me to lose rent for years? 

Because this is in FL, I worry that a hurricane could wipe out all of the properties. I am hoping to sell the park owned homes to the tenants so would not be worried about the park and would have insurance for the minimal land structures. However, if we had a hurricane event, we would lose rents for a sustained period of time if all the homes were destroyed. What is the best way to think about/insure against this risk? 

3. What is the best strategy with the park owned homes?

I would prefer to keep this low maintenance, so I would like to sell them to the current tenants. I have heard others mention collecting 1k-3k down-payment and then amortizing over a 3-5 year period for the tenants. This takes insurance off the table for these as well as repairs and puts them as the onus of the owners. If I did this for the 7 park owned homes, I could gain 7k-21k up front and then continue with the pad + monthly payments (keeping them at the 700 number they are currently). Is this realistic? Will the current tenants be interested? 

4. Do any of you have vendors who service the laundry facilities? I have no interest in doing that. 

5. Seller is a partner for a hard money lender and said he would finance. What kind of terms should I expect? I assume that my negotiation will be on the terms of the loan as well as the price of the property. He mentioned that I need to bring 20% to the deal. I am thinking 6% with 1 point over 20 years. Are there lenders who specialize in mobile home parks?

Thanks all!

By the way, does capital expenditure come out before NOI or after?