All Forum Posts by: Seth Wells

I currently own 7 properties (in contract on the 8th one) but I am looking to purchase a property with a partner and I honestly have no idea how to do that.. Our deal structure is that I will find the property to purchase, he will buy it under his personal name, we will split all costs 50/50, I will manage the property, and we will split all the profits 50/50. I like this because I will not have the property in my name so it will be easier to get loans since I will not be required to have reserves. The issue is that I am not sure how to do this. We have an LLC, so after he purchases it, do we just quit claim deed the property to the LLC? My mortgage broker said that we cannot buy it under the LLC even if he personally guarantees the loan. How have y'all done this? Also, if he has to buy it in his name first, how will I be able to pay for half of the costs, since you cannot gift money for an investment purchase? Should I just deposit X amount of money into his account so it can "season". I feel like there has to be a more logical way investors do this, I just do not know how. Any advice would be greatly appreciated.

If I am just counting the currently rented 17 homes with the lot rent of $250, that equates to $51,000 gross income and $35,000 NOI, which is based on their numbers which is 30% expenses. With a 10% cap rate, that would make it valued at $350,000 not counting the homes. He values the homes at $250,000. If I cut that in half, and said they were worth only $125,000, that would still make the entire thing worth $475,000 if I wanted a 10% cap rate (the sales contract is for $395,000). My thought process is that I can do rent to own with the tenants and have them pay the $250 lot fee, plus $250 rent to own payment and after 5 years, they would own the units (and then only pay the lot fee) and I would have been paid $15,000 for the home. I also heard that investors also require the tenants to do their own repairs during that 5 year term as well and if they leave the park, they forfeit the home.

Also, the seller has the homes valued at $250,000 which is probably a gross over estimation, but even if they are worth half of that, then I think the deal still makes sense.. I just don't want to make a mistake.

I have a mobile home park in contract for $395,000 but now after reading some of the forums I think I may have made a mistake with the evaluation. It has 23 spaces, 17 current homes rented (all owned by the park), 3 homes that need rehab, and 3 vacant spaces. I already own 12 residential units and kinda jumped into this deal without a ton of research on the differences between residential homes and mobile home parks.. Since then I have realized that most investors seem to only buy parks that do not own the homes and that they evaluate it based on the lot rents, not home rents... The cap rate listed was 16% and if you consider the home rents (which that rate does) the numbers make a lot of sense.. The big unknown is the repairs.. It was a distressed property and an investor purchased it two years ago, rehabbed a lot of the units and got it almost fully rented before now selling it for a profit. It currently has a gross income (including home rents) of $81,000 and the NOI is $65,000. If I only considered the lot rent portion, then the gross income goes down to $51,000 (but it is making the other $30,000) so I do not know how to think about this... If I continued owning the homes, I could get the gross rents to $110,000 by fixing and renting the 3 vacant homes, slowly increasing the rents for people who have been there a long time paying a low rent, and by filling the 3 vacant spaces. PLEASE lend some advise.. I can still get out of this deal if I need to but it seemed like such a great deal before I read that I SHOULD sell all the homes to the tenants.. In a perfect scenario, that would be 23 spaces x $250 = $69,000 gross income. That would equate to a NOI of $57,000 with no vacancy and no repairs. I am not sure what to do and need help!!

I have 6 properties, 12 total units and they all have mortgages on all of them; I do not have that much more income than you (about $1000 more). My advice is to find another mortgage broker. With almost all my properties I have been told no at least once and had to find another lender. Don't go to a bank, find a normal mortgage broker, they seem to have less stringent rules. I have never heard about the 100 mile rule and I would argue that it is not a normal thing (my properties are all over the place). I have even had different mortgage brokers calculate my DTI differently. Also, some will use the lease you will get on the condo as income and some won't unless it has been rented for a year, you have to find the right lender. Also, do NOT do another FHA loan. Do a conventional loan at 5%. FHA does not allow you to get out of paying mortgage insurance unless you refinance, but a conventional loan allows you to once it appraises at 75% (meaning you dont have to refinance and get a higher interest rate if it is now an investment property). ALSO, with a conventional loan, you can actually "buy out" PMI for a flat rate price depending on your credit score... this could save you money in the long run and also make your payment less, therefore making it easier to get approved on the new loan. My last piece of advice is to always pay attention to the income the property is going to bring in, in relation to the mortgage payment you will have. Your condo is not a good rental property because it does not cash flow enough and therefore is not only a bad investment for that purpose but it also makes your debt to income ratio to high. It sounds like you are doing the exact same thing again..... meaning that if you find a way to buy this new property, you might not be able to buy another after it. The rent on my properties are double the mortgage payment, which has made it a lot easier on me. If you are serious about being an investor, you need to focus more on that, than where you want to live.