All Forum Posts by: Rudy Curtler

So, you're checking out BiggerPockets...that means you are at least 'interested' in learning more about real estate investing. But, are you really COMMITTED?

Over the years I often talk to acquaintances who indicate they would like to be real estate investors, but have not yet made the leap. It's easy to see that they really are envious of the work that we have done to acquire our $3M rental property side hustle. While this may (or may not...depending on your personal perspective) sound like a lot of property, consider that it has taken us over 11 years to acquire this portfolio and at some point it required us to jump from being 'interested' and to become 'committed' to the process.

The purpose of this post is to talk about the difference between being 'interested' vs. being 'committed'. The way I see it, many of those acquaintances who I talk to are merely 'interested', but they have not yet made the leap to 'committed'. What's the difference? Interested real estate investors are those who sit on the sidelines and dream about getting 'just the right circumstances' and hope for a day when they might have a real estate portfolio. They make excuses(consciously or sub-consciously) as to why today isn't the right day for them, why they can't find enough money to get started, why they can't find the right property or they justify why they can't begin the process. As an old boss told us once, 'you are standing waist deep in water complaining about how thirsty you are'. There's opportunity around all of us, if we look in the right place. Now, there's a big difference between jumping blindly into something vs. doing your homework and penciling out the numbers to see if the investment makes sense. I am in no way advocating that someone jump before looking and understanding. However, the act of doing research on your market, seeking out investors, getting your **** together financially and following home/rental prices are all part of the process of being 'committed'. You are committing time to learning and researching which puts you closer to 'jumping', so to speak.

Committed investors are always looking, researching, thinking, building networks with key people (bankers, agents, contractors, other investors, etc) to educate themselves and prepare themselves for when the time IS right for them to jump (that could be today, next week or next year). This way they can 'jump' when they find a deal that makes sense to them and where the numbers pencil out. For example, through my research I have found a resource where I can buy new mobile homes directly from the factory using a bank that will finance the deal for no money out of my pocket for a year. Let me say that again in a different way, through my research and asking questions and trying to find a solution to a problem (I needed more capital to buy more mobile homes to fill my parks...), I have now found a massive win/win solution that helps me fill my parks, helps the bank finance more deals, helps the factory sell more homes and helps customers with poor credit get financing...this is a massive game changer for our portfolio. On the other hand, I could have sat and complained that I didn't have enough capital to continue to grow my portfolio and only dreamed about the next steps (i.e., that would be 'interested'). But, continuing to look for solutions, doing research, talking to others and penciling out numbers are all part of being 'committed' to the process of learning and finding solutions. It's not easy, but it's a difference maker and takes some effort and thought to look in the right area.

One of my favorite videos that highlights this difference in people (i.e., the difference between those who are 'interested' in changing their outcomes in life vs. those who are 'committed') is from Angela Duckworth who has done a lot of study on what makes people tick. She calls this ability to overcome short term obstacles to achieve long term goals, GRIT. In other words, GRITTY people persevere in the face of challenges to achieve a better future. Check out her video here .

So, are you 'interested' or are you 'committed' to your real estate investing?

Rudy

Like this article? Follow my new blog @my6figuresidehustle.com or click here

So, you're checking out BiggerPockets...that means you are at least 'interested' in learning more about real estate investing.  But, are you really COMMITTED?

Over the years I often talk to acquaintances who indicate they would like to be real estate investors, but have not yet made the leap. It's easy to see that they really are envious of the work that we have done to acquire our $3M rental property side hustle. While this may (or may not...depending on your personal perspective) sound like a lot of property, consider that it has taken us over 11 years to acquire this portfolio and at some point it required us to jump from being 'interested' and to become 'committed' to the process.

The purpose of this post is to talk about the difference between being 'interested' vs. being 'committed'. The way I see it, many of those acquaintances who I talk to are merely 'interested', but they have not yet made the leap to 'committed'. What's the difference? Interested real estate investors are those who sit on the sidelines and dream about getting 'just the right circumstances' and hope for a day when they might have a real estate portfolio. They make excuses(consciously or sub-consciously) as to why today isn't the right day for them, why they can't find enough money to get started, why they can't find the right property or they justify why they can't begin the process. As an old boss told us once, 'you are standing waist deep in water complaining about how thirsty you are'. There's opportunity around all of us, if we look in the right place. Now, there's a big difference between jumping blindly into something vs. doing your homework and penciling out the numbers to see if the investment makes sense. I am in no way advocating that someone jump before looking and understanding. However, the act of doing research on your market, seeking out investors, getting your **** together financially and following home/rental prices are all part of the process of being 'committed'. You are committing time to learning and researching which puts you closer to 'jumping', so to speak.

Committed investors are always looking, researching, thinking, building networks with key people (bankers, agents, contractors, other investors, etc) to educate themselves and prepare themselves for when the time IS right for them to jump (that could be today, next week or next year). This way they can 'jump' when they find a deal that makes sense to them and where the numbers pencil out. For example, through my research I have found a resource where I can buy new mobile homes directly from the factory using a bank that will finance the deal for no money out of my pocket for a year. Let me say that again in a different way, through my research and asking questions and trying to find a solution to a problem (I needed more capital to buy more mobile homes to fill my parks...), I have now found a massive win/win solution that helps me fill my parks, helps the bank finance more deals, helps the factory sell more homes and helps customers with poor credit get financing...this is a massive game changer for our portfolio. On the other hand, I could have sat and complained that I didn't have enough capital to continue to grow my portfolio and only dreamed about the next steps (i.e., that would be 'interested'). But, continuing to look for solutions, doing research, talking to others and penciling out numbers are all part of being 'committed' to the process of learning and finding solutions. It's not easy, but it's a difference maker and takes some effort and thought to look in the right area.

One of my favorite videos that highlights this difference in people (i.e., the difference between those who are 'interested' in changing their outcomes in life vs. those who are 'committed') is from Angela Duckworth who has done a lot of study on what makes people tick. She calls this ability to overcome short term obstacles to achieve long term goals, GRIT. In other words, GRITTY people persevere in the face of challenges to achieve a better future. Check out her video here .

So, are you 'interested' or are you 'committed' to your real estate investing?

Rudy

Like this article?  Follow my new blog @my6figuresidehustle.com or click 

A common comment I hear from others when I talk about my real estate investments is, “I wish I was doing what you are doing.” While it’s up to each individual to decide their commitment level, their resources and how/where/when they’ll begin their real estate investments, finding financing for that first, second, third or more deal can be the difference maker for you.

Here are 5 Creative Financing Ideas that I have personally used:

1. I found a GREAT partner! First of all, getting a partner has some upsides and some downsides. Not everything is going to go perfectly and not everyone has the same goals. I have seen some people get burned by their partners because they clearly didn’t have the same goals and didn’t communicate well. That being said, having a partner is still a great way to divide the risk, multiply the ideas and split the workload. My partner happened to be a business savvy entrepreneur who I knew well: my wife’s brother. He also happened to live in a city with a large mix of college students, a good, stable business climate and ‘landlord-friendly’ state laws. Our partnership is divided 50/50 and I have been primarily the ‘money guy’ and he has been the ‘boots on the ground’. By us leveraging each other, we each brought something to the table: I have capital that I want to invest, but am time poor and don’t live in that city. He (at the time) was looking for another niche and wasn’t necessarily flush with cash, but had the capacity and capability to be the day to day manager of the business. Win-win.
2. Seller Financing. We used this process when we had tapped ourselves out with some other recent RE investments but had found a small mobile home park that we wanted. The park had been listed for a few months, we knew the area and knew it could generate some cash flow for us. We contacted the out of state seller (no agents involved, fortunately), talked to him about terms that would allow us to use as little capital up front but with more agreeable interest rate terms for him. He liked the interest rate, liked that he wouldn’t have to pay a lump sum tax bill and was happy to collect one check each month without worrying about being a landlord anymore. Win-win.
3. 401(k) loan. Most 401(k)s allow loans up to a certain amount. My 401(k) allowed a loan up to $50,000 as long as my balance was over a certain threshold. We used this method for one of our mobile home parks. The upsides: the application process was super simple, you are borrowing against your money and when you pay it back, it goes back into your 401(k). The downsides: I found that this extra burden on my monthly cashflow hadn’t been fully penciled out and I put alot of expenses on credit cards that I shouldn’t have. If I had left my employer at while I still had this loan, it would become immediately ‘callable’ and I would have had to pay it all back at once. Good lesson learned, but it’s still a good resource if you have it–just pay it off as fast as you can.
4. Loan from an insurance policy. I have used this a couple of times. It’s a super simple application process and easy to get to, but I don’t like the interest rates. I paid 8% to borrow against the cash value of an annuity. As long as I am paying the loan back relatively quickly, I don’t mind due to the simplicity of the process. Just make sure you pencil out the real costs.
5. I used the cash value of my insurance policies as collateral for a loan for a mobile home park. This was pretty clever. We found a local bank that understood that the cash value in an annuity is a stable asset and they liked mobile home park investors. They agreed to take first position on my cash value, but limited it to 60% of the face value, which was around $70,000 and they were willing to lend me $42,000. I used this as the majority of a down payment for my first mobile home park. The advantage of this over #4 is that the funds stay in the account and continue to accumulate as long as I don’t default on the loan, so the compounding effect in the account isn’t lost. Win-win-win.

These different approaches have allowed me to continue to purchase deals as I find them, even when I thought I was tapped out financially. These ideas might help you stay in the game or, better yet, get in the game. Remember, a little creativity might help you find your own win-win!

@Lane Kawaoka, I have found Jefferson Lilly and John Fedro (both BP Pro Members) to be great resources for more detailed info on parks or mobile home investing.  Hope that helps!  Rudy

Hi KarLee.  John's note from a few weeks back is very thorough!  I also recommend BiggerPockets episode #195 :-)

Most people overlook mobile home parks as an investment vehicle due to negative perceptions about the kinds of people that might live there or what they represent (poor, dirty, untrustworthy, etc). If you look at the picture above, many might find it unappealing, be turned off and ultimately, not benefit from the park's potential as a great investment. From an investor's standpoint, we have found that there are many reasons to LOVE mobile home parks. Here are 5 of them:

1. The cash on cash returns can be crazy. Because the industry has been a bit overlooked, there isn't the same demand for mobile home parks as there is for apartment buildings. As everyone knows, demand drives prices. Higher prices for the same rents means lower returns (or lower 'yield' or lower 'cap rate'). Our cash on cash returns for the parks we own average somewhere near 40%.
2. In the right areas, there is plenty of demand for affordable housing. We look at the current rental rates for single family homes and apartments in the areas surrounding our parks. If the single family home and apartment rents are pricing entry level workers out, mobile homes become more desirable. In our areas of investment, we like it when per bedroom rents exceed $250 to $300, then demand for units in our parks goes up!
3. Lower maintenance costs than apartments. In an apartment building, the landlord is responsible for the HVAC unit(s), roof, water heaters, toilets, exterior of the building, windows, common areas, landscaping, etc. A mobile home park that is full of owner occupied homes will only be responsible for common area maintenance (this could be road/parking lot, storm shelter and common area landscaping/maintenance). Our parks are set up so the home owners are responsible for their yard maintenance, leaving us to only worry about the common areas. We don't have furnaces, toilets, roofs, windows or building exteriors to worry about---that's up to the home owners! We just collect the lot rents and make sure the common areas are kept up! Super simple and we get NO midnight phone calls about clogged toilets or broken water heaters!
4. Lower taxes and insurance per unit. Owner occupied units transfers the tax and insurance liability to the owner of the mobile home. The park owner is responsible for the tax and insurance liability of the land only (i.e., the park), thus further lowering their fixed costs. If the park owner chooses to get into the mobile home rental business, then they would assume the tax and insurance liability for the home(s) as well. As you can guess, we prefer to sell our mobile home units to our residents!
5. Pride of ownership! This is a big one. It's hard to beat the intangible benefit here when a resident owns their mobile home unit. When the park rules and guidelines are clear and consistent, there is a huge benefit to the overall look and feel of the park because the unit owners want to keep their property values up and go above and beyond to make sure their house looks good and is cared for. Their care for their unit and the lot around their unit helps the overall park out.

There are lots of benefits of mobile home parks if you can see past the stigma of owning a mobile home park in the first place. Happy hunting!

Most people overlook mobile home parks as an investment vehicle due to negative perceptions about the kinds of people that might live there or what they represent (poor, dirty, untrustworthy, etc). What you think of when you visualize a mobile home park may make it unappealing, may turn you off and prevent you from benefiting from the park's potential as a great investment.

From an investor's standpoint, we have found that there are many reasons to LOVE mobile home parks. Here are 5 of them:

1. The cash on cash returns can be crazy. Because the industry has been a bit overlooked, there isn't the same demand for mobile home parks as there is for apartment buildings. As everyone knows, demand drives prices. Higher prices for the same rents means lower returns (or lower 'yield' or lower 'cap rate'). Our cash on cash returns for the parks we own average somewhere near 40%.
2. In the right areas, there is plenty of demand for affordable housing. We look at the current rental rates for single family homes and apartments in the areas surrounding our parks. If the single family home and apartment rents are pricing entry level workers out, mobile homes become more desirable. In our areas of investment, we like it when per bedroom rents exceed $250 to $300, then demand for units in our parks goes up!
3. Lower maintenance costs than apartments. In an apartment building, the landlord is responsible for the HVAC unit(s), roof, water heaters, toilets, exterior of the building, windows, common areas, landscaping, etc. A mobile home park that is full of owner occupied homes will only be responsible for common area maintenance (this could be road/parking lot, storm shelter and common area landscaping/maintenance). Our parks are set up so the home owners are responsible for their yard maintenance, leaving us to only worry about the common areas. We don't have furnaces, toilets, roofs, windows or building exteriors to worry about---that's up to the home owners! We just collect the lot rents and make sure the common areas are kept up! Super simple and we get NO midnight phone calls about clogged toilets or broken water heaters!
4. Lower taxes and insurance per unit. Owner occupied units transfers the tax and insurance liability to the owner of the mobile home. The park owner is responsible for the tax and insurance liability of the land only (i.e., the park), thus further lowering their fixed costs. If the park owner chooses to get into the mobile home rental business, then they would assume the tax and insurance liability for the home(s) as well. As you can guess, we prefer to sell our mobile home units to our residents!
5. Pride of ownership! This is a big one. It's hard to beat the intangible benefit here when a resident owns their mobile home unit. When the park rules and guidelines are clear and consistent, there is a huge benefit to the overall look and feel of the park because the unit owners want to keep their property values up and go above and beyond to make sure their house looks good and is cared for. Their care for their unit and the lot around their unit helps the overall park out.

There are lots of benefits of mobile home parks if you can see past the stigma of owning a mobile home park in the first place. Happy hunting!

@jeff mcnutt...I own 4 MH parks (and was featured in podcast #195 on the subject), this doesn't make me an expert, but I have formulated a couple of opinions on the subject :-).  Lots of great comments from other members above, btw!  To highlight one of the comments that I think is the biggest thing to think about:  What's the demand for affordable housing in this community?  If you buy this park, buy it for TODAY's lot rental income, exclusive of the rents for the park owned homes and the laundromat and not at a projected or 'pro forma' assumption.   Is the community growing?  Are normal stick built home prices in the community rising to the point that they are pricing out the entry level buyer?  If you can buy it right (i.e, $200k or less), there are options for buying smaller single wides (expect a NEW small 2br/1ba to run you $30-35k after home, freight and set up) to fill in the current vacant lots and the lots where you scrape off some of the duds.  Can you sell a $35k MH in your community or would you be competing with stick built homes at that or near that price?  Also, if you can't sell NEW homes, could you buy a couple used homes off Craigslist?  This gets risky because the older they are, the harder they are to move without causing lots of structural damage and your community may have ordinances that limit the age of homes that you can bring in---worth checking with the local planning/zoning office.  Another big consideration:...what are the lot sizes and are you boxed in to buying small units just to fit the current lot sizes?  Or can you go bigger?  If you go bigger, can you sell homes in those price ranges?  (as you can tell, I am a proponent of selling the MH, not renting them...in my experience, they end up being money pits)  Hopefully these questions are helpful...I am a fan of smaller parks, but like most real estate, the key is buying right. 

Rudy

@Jon Peterson:  I have used Greg Nelson at Olsen Thielen and Associates in Eden Prairie/St Paul for the last 10 years.  He's dialed in to the real estate world.

Hope that helps.

Rudy