All Forum Posts by: Matt Souza

Hi @Nicole S.,

I highly recommend familiarizing yourself with Michigan's Tenant/Landlord laws. There is no such thing as a 3 day notice in Michigan. There is only 24 hour notice, 7 day, and 30 day, depending on which element of the lease the tenant is breaking. For nonpayment of rent, a 7 day notice is required. A 3 day notice will not hold up in court, they will make you go back and serve a 7 day notice, and the cycle will start again.

If you do not follow these laws exactly as written, it will draw out the legal process and cost you a lot more money.

Here is a PDF of the most recent rules in Michigan. Page 13 is where the proper steps are outlined for the eviction process. Best of luck!

Hi @Ken Rishel,

I appreciate the clarification, I even mentioned in my post that I may be missing something, which I clearly am.

Can you please explain Clayton Homes' business model to me then? A large portion of their retail selling comes from selling mobile homes to park owners, who then sell the homes to applicants, advertising all along their partnered program with 21st Century Mortgage. Are you telling me the largest mobile home manufacturer in the country is illegally pushing their financing method? 

There are federal laws that prohibit park owners from steering people towards financing? I did not realize that. How are all realtors allowed to refer home buyers to banks they have worked with in the past for financing? Is that not a similar scenario?

I agree that as a park owner, you would not be allowed to quote interest rates or payments. That is up to the bank's discretion, and I never made that claim.

As a park owner, you cannot advertise lease-to-buy programs to prospective buyers? I know several park owners and that is a big part of their business model. But by your definition, that would be steering financing, and is federally illegal. Can you please elaborate?

I am not saying you are wrong by any means, you clearly have more experience in the field than I do. I just want to understand these laws better. Can you please point me to the laws? Articles posted by MHI? The only laws I can find are from the Truth in Lending Act, which prevents steering by "loan originators" for profit or monetary gain. Code of Federal Regulations defines who a "loan originator" is and states who is exempt from this status, "An employee of a manufactured home retailer who does not take a consumer credit application, offer or negotiate credit terms available from a creditor, or advise a consumer on credit terms (including rates, fees, and other costs) available from a creditor. (1026.36)" My interpretation of that is an employee can recommend financing, just not advertise any of the credit terms (again, which I never claimed). Is there another statue I am missing?

Again, I might be missing something. Any clarification you could provide would be greatly appreciated. Thanks in advance.

Plymouth is a pretty wealthy area, your applicants should be able to put down 1.5X rent as a security deposit. If not, are they going to be able to meet your credit score and income requirements?

I have seen many owners that will do 1X rent or just a fixed $500 security deposit. Just be aware that the lower this number goes, the more you open yourself up to troubled tenants, and the less recourse you have against those tenants. Best of luck!

What do you mean applicants cannot be steered to a particular mortgage company? As a park owner, you can suggest a particular bank, especially if you have used them before and are happy with their service. Am I missing something? Where did you hear that you could not make a financing recommendation to applicants?

It sounds like you are looking to do a lease-to-buy program, where you are the bank. In that case, you can definitely offer that option to applicants, park owners do it all the time. I would just suggest having two LLCs, one that holds the land/park and one that lends money. Best of luck!

Hi @Kathryn Mills,

The main advantage for investing in mobile homes (not parks) is the low upfront cost. You can often find deals for $3-5k that need some work or need to be moved to a different park. If you want to learn the ins and outs of mobile home buying/selling, I highly recommend reading Lonnie Scruggs. He provides a lot of great information and is hilarious.

It is extremely difficult to get bank financing on mobile home parks as an investor. Your best bet is private money or a line of credit.

Cap rate is irrelevant when discussing mobile homes themselves, but very important when researching parks. CoC ROI can be very high with both (20%+) if done correctly. Best of luck!

Hi @Michael Bishop,

A quick clarification, Warren Buffet is not the single largest holder of mobile home parks in the country. In fact, I do not believe he or Berkshire Hathaway own any MHPs (he may have a few). However, Berkshire Hathaway does own Clayton Homes, which is the largest mobile home manufacturer in the country. They also own 21st Century Mortgage, the largest lender on mobile homes in the US.

The largest "single" owner of mobile home parks is Sam Zell, who runs Equity LifeStyle Properties Inc, a MHP REIT.

All that said, I do think MHPs are a great investment right now. Low maintenance, high returns, and you are buying large tracts of land. They have my vote!

Best of luck!

If you look at this strictly from a penciled cash flow perspective, you are correct. I don’t think that tells the whole story though. Multifamily properties benefit from economies of scale. It’s easier to maintain and manage one building with multiple units opposed to several units spread across a market. You also have more upside for forcing appreciation and valuation, since those are functions of the NOI of the property. Lastly, it’s MUCH easier to go out and buy one 20 unit property rather than 20 SFHs. SFHs are maintenance intensive, time consuming, and heavily dependent on the market. All that said, it’s still personal preference. If you have a plan to achieve your goals through SFHs, by all means that is what you should do.

Hi @Christian Hutchinson,

Michigan law allows you to self-manage your own properties, even leasing and renting. Taken straight from the State of Michigan’s website, “Owners of rental property (landlords) who rent or lease their own real estate are not required to be licensed nor are the employees of the property owners who rent or lease their employer's properties in the owner's name.”

Hopefully that clears up any ambiguity. Best of luck!

Hi @Rodney Swindle,

To answer your first question, appreciation is based on how people value the property. If the property looks like and is zoned as a SFH, that's how it will appreciate. If it still resembles a mobile home, then you would unlikely get that appreciation from the market.

I am not certain about the disclosure aspect of the property, that probably varies state to state. The last thing you want to do is mislead and agents or buyers about your practices though.

As a side note, you actually need to lay a foundation and attach the mobile home to it to be considered real property. This process can be very costly, requires zoning permission, in addition to all the items you listed. By the time you are done converting a double-wide into a SFH, you have spent as much as you would on the same sized SFH.

Best of luck!

Hi April, If the park is stabilized (occupancy 70-80%+), most banks will loan money on it. Try a few local banks if the big ones aren’t allowing it, they will often have better terms anyway. If the park is not stabilized, getting financing is tricky. You will either need the owner to carry the note (owner financing) or you’ll need a REALLY good relationship with a bank. Best of luck!