All Forum Posts by: Scott Novak

I originally thought of my lots as mobile home spots but then I got a bunch of calls from people living in large RVs long term.

100% of my properties could be quickly modified to sell as a self-sustained, with full-utilities, quarter acre or two-lot side by side half acre lot for someone that wants a place for their single family residence - Mobile Home or stick built/tiny home etc. Hopefully a less crowded wooded ryral area 1 hour from Houston still sees demand for that post-covid. That would be my exit strategy if I my current model became unviable. I also have flexibility in the size of the plot I offer because I have septic capacity to spare. 

I have not done a formal market analysis post Covid. I am still seeing demand for my spots -I have called RV parks to make sure my pricing is competitive - basically viewing my 1/12 lot size as equivalent to their lots. I am still getting calls based on my ads currently. I suppose RV parks built and funded based on oil/gas worker demand are going to take a haircut post Covid. I have not been that aggressive in my assumptions - I am only counting on meeting the 2% rule for my rent gathered to money invested ratio. That probably isnt as aggressive as the standard RV park in greater Houston pre-Covid. Currently, I am getting plenty of people that want move to or within the Greater Houston Metro area and see putting their RV or mobile home on rural land as an option - my question post Covid is will they pay what they agreed to! So I view tenant screening as key more than ever - especially because evictions are harder to impossible.

I should have specified - my space sizes are between 1/12 to 1/2 an acre and I am not relying on an aggressive high rent for daily/weekly/monthly standard RV park strategy for my numbers to work. Though when the Rennaisance Faire comes in the fall to Todd Mission very close by (Its the largest in the country and lasts 2-3 months) that may be feasible for any of my vacancies.  My most common size is 1/8th of an acre (renting a 1/2 lot in two). Enough people see that as a big enough place they would like to live long-term. Even the 1/12 lots I am seeing interest for 6 month leases. My recent rented lots over the past months with one year leases involved military pensions with other income sources making me more comfortable post Covid. I also have a teacher that wants to downsize and live on a 1/6 acre spot long-term.

Goals and story: Hello, any advice would be welcome. have a business model developing RV/Mobile lots in a rural area to hold for long-term rental income by bringing in utilities (water, power, septic) to platted lots of land in a particular subdivision in Texas. I live in California, but I have equity partners living in the subdivision acting as property managers and supervisors of contractors developing the properties. Their stake is much Junior to mine. Their property management fees are 10% gross rent, and they receive 1099 income for land development supervision activitites. I am in the process of establishing an LLC. I currently have 9 developed, unencumbered developed lots in the process of being leased up and I have 27 more undeveloped, unencumbered lots.

Type of property: Lots of raw land, or developed for renter owned RVs/Mobile homes.

Location of property: All property is in a subdivision 10 minutes off the freeway between Houston and College Station - about a 45min-1hour drive from Houston and a 35-45 minute drive from College Station.

Purpose of financing: Seeking $250,000 for development of 10 more lots and $100,000 for purchase of 14 more identical lots in the same subdivision using letter campaign.

Type of financing sought: I am looking for a long-term option.

Current or prior ownership of real estate: I own my own home and house-hacked it by adding rooms (turned a 3-2 into a 4-2) and rented out 3 rooms, getting my mortgage paid.

Occupancy: Mostly investment with traditional long term leases that are basically long-term RV housing, but some lots will be reserved for short term RV rentals.

Value of property at present: $503k - 27 raw lots at $9k for $243K plus $260K worth of developed lots - Calculated utilizing 2% rule for 5,200k fully leased up rent. ($5,200/.02 = $260k)

After Development Value: $920k: 14 new lots from 100k of off-market purchases, + 16 already owned undeveloped lots =$270,000 ($9k*30). Add in 19 developed lots renting for $13,000/month (We've learned ideal lot design and RV placement for ideal rent so 10 new lots should get $7,800 in rent - $7,800+ $5,200 = $13,000/month). With 2% rule $13,000/month is worth $650,000. $270,000 + $650,000 = $920,000.

Anticipated or actual appraisal issues: Lots go for $10k on open market. Appraisal may discount for illiquidity. But homogeneity of lots in one subdivision means appraisal shouldn't be too difficult or costly.

Current rents per month: $2,150 (Still being leased up - $5,200 expected after lease up)

Fair market rents per month: $5,200

Down payment or equity: specify down payment for purchase mortgage, or how much equity you will have in the property afterwards if a refinance.

Source of down payment funds, if applicable: Own Funds

Income Source: Salaried W2, Rental income from primary residence

Gross monthly income (optional): Current $10,425 (Should be $13,475 at lease-up of my already developed lots which is in progress)

Monthly debt obligations appearing on credit report, plus (if applicable) personal rent and alimony/child support/etc: $7,988

FICO: Low score due to high utilization, but I have never missed a payment in my life.

Credit issues: None. Never missed a payment.

I would appreciate any advice you have to offer, thanks!

Scott Novak, CFA

I don't know if a junior percentage ownership in a property would allow my partners to be property managers (I am referring to "them" as they are a couple) without being brokers. 

How are you structuring ownership if not in an entity?

I was planning on keeping it sole proprietorship or partnership and amend the deeds to the land to give my partners a junior percentage. I am providing the money and they are providing the on the ground work. 

Greetings! I am a California beginning investor/developer building a portfolio of quarter to 3 quarter acre plots to lease to renters for placing their own mobile homes (I call it a distributed mobile home park) in a Texas rural neighborhood. I have partners in Texas that I am paying to manage contracts for development, and it is convenient that they live in this neighborhood. Unfortunately we realized they cannot be property managers without becoming real estate brokers, which would take four years.

The only other option seems to be that Texas law states I can make them W2 employees and then they can do management activities on my behalf. 

"A real estate license is not required for an individual employed by a business entity for the purpose of buying, selling, or leasing real property for the entity. An entity is considered to be an owner if it holds record title to the property or has an equitable title or right acquired by contract with the record title holder. An individual employed by a business entity means a person employed and directly compensated by the business entity. An independent contractor is not an employee".

Do you see this as a good option to stay on the right side of the law while having them undertake property management activities, or do you see big pitfalls here? Do I have any other options such as giving them a small ownership interest? I don't have an LLC.

Thanks for your thoughts!

-Scott Novak