All Forum Posts by: Karen Morison

I had a VA working with me who was so good that all I had to do was give her the addresses of some properties we owned and wanted to sell. She could find out all the info, find photos, make up pdf flyers, get them listed all over the Internet, etc. She helped me do research on banks likely to have lots of REO properties. I set up the spreadsheet how I wanted it to look, and gave her some directions on where to get the information, and she was able to produce all the data for me from several different sites. She worked so fast it was hard to keep her busy. She could have easily have moved ahead and done her own deals. She knew how to find comps, and was familiar with all the usual real estate websites. She could work during her night hours (which are our day hours, there's a 12 hour difference) which allowed her to make phone calls to people who called us about buying our properties. Except for going to get me lunch, she could do everything. (Come to think of it, she could have ordered pizza for me, too!)
Hope that helps.

Tony,

I had a mentor with several decades in buying and selling apartment complexes for himself and his syndicate, and he told me the only way to really get into the apartment business is to write a letter to each of the apartment building owners in a particular market. Don't send them all out at once. Ask to meet with them and talk about the business, and about their building(s). And then, actually follow up with them. That's the way to do this business, by talking to other owners. Most of them love to talk about their properties! I will try to look up more of my notes of that conversation if I can find them. I'm swamped now, so it would take awhile. You might need to PM me to remind me. Anyway, he was one of the top in his field, and very knowledgeable. One great tip from him that I remember: Walk around the neighborhood of the complex or building you're trying to buy, and just talk to people you meet and ask them about that complex. He did that and one time somebody at the local 7-11 convenience store told him that every time it rained heavily, it flooded some of the lower apartments. Hmm. Somehow that wasn't mentioned by the sellers! A good tip.

Finally, let me add that soon, I will be a "motivated apartment seller" as we plan to put our 12 unit apartment building (a three story building in OH) up for sale. We've owned it for three years. If anyone is interested in knowing more about it, just contact me and I'll let you know when it's on the market. We're selling because we need the money to buy a mobile home park within driving distance to home. If any wholesalers want to take it on before we get it to market, move quickly!

Karen

Thanks, Kathy! Roy, I look forward to hearing about how your offers turned out. Good luck!

Karen

Thanks, Chris and David. This is an amazing place, and lots of fun, too. I've got to get back to work....! lol

Karen

OMG, skip the stock market at all costs, unless he likes to gamble and rely on others to determine his future.

Take serious courses in commercial real estate, then pick an asset class with the best current track record in a great market (NOT Las Vegas, MI, etc.) and plop down the 20% down payment on a mobile home property. Those give you 1) the highest return on your investment of any other commercial asset class, 2) the most control over expenses, and 3) the easiest management of anything (how hard is it to manage dirt? Not hard! Key=buy the right park!)

If your friend is not interested in doing hands on stuff, I'd research top investors like Ken McElroy on multifamily (MF) properties, or Dave Reynolds and Frank Rolfe on Mobile Home Parks (MHP) and talk to them about doing some silent partner projects. Dave is particularly good at buying parks and adding lots of value to them and selling them in as little as a year later having added more than a million dollars in value to them. How'd your friend like to get that kind of return in just 12-24 months? I know I would!

Good luck to your friend! He's lucky to have you around to help with research.

Karen

Travis and Nathan have covered everything else, but let me just add that with commercial, you can show an investor the income/expenses as they are currently, and as they might be if the property was optimized. It's called the "proforma" analysis. For example, if an apartment building only has an occupancy rate of 85% now, you would need to show the income at that level. But for the Proforma part, you would show the occupancy at 100%, and sometimes show the rent as being raised if you assert that the rents are currently too low for the market. Usually on a proforma analysis, the numbers change on the Expense side, too. For example, you might show how it would look if the tenants started to pay for their own electric, instead of having it included in the rent as it is now.

The important thing about proforma financials is that, as a buyer, you have to remember that this is the optimal way the apartment building (or whatever the asset class is) would be run, but it does not necessarily mean that goal can be reached realistically. As the Seller you want them to see where they could take the property, show it in its best light. As a Buyer (and Lenders think this way, too), you want to make sure you keep your eyes open to reality, and to remember that Proforma is just a dream, really.

Hope that helps.

Yes, it's common and they do it because it's very hard to fill a vacancy, so when I have a Lonnie dealer who wants to work with my park, I love it. I usually let them put the home in there and market it, without charging them pad rent. I know lots of other owners who do the same, so I've been told by them, and read.
Look around, you'll find someone who will do it. If you need a list of MHP owners in your area, [REMOVED] offers lists for free.

It's late so I'll be quick, sorry! I would never buy the homes. There's too much to fix that eats up profit quickly. Owning the parks themselves is much, much smarter and much better business model. No one ever got rich doing the Lonnie model, according to two of the largest investors in MHPs, Dave Reynolds and Frank Rolfe. (Google them.) They've even told Lonnie they'd pay some large amount of cash -- I forget how much -- if he can produce just one person who became a millionaire doing Lonnie deals.
But, you gotta do what you gotta do, so if that's what you wanna do, best of luck to you. But I'm telling you, I could take that same money you spent, put it down on a MHP that you can quickly add value to (meaning increase its profits), and you all will make a LOT more money, and never touch a toilet. Just at least look into it, okay? Frank and Dave have a terrific course which is the only good one I've ever taken as an investor. I think you can also just buy the course materials, but the 3 day course is worth the time and money.

Congrats on the new baby and the mortgage! That's very exciting! My kids are now teens and they're still worth it! LOL I hope your real estate business really takes off!

Karen

Lee,
Too many posts for me to read and memorize, but I'll lend you the benefit of my experience and training, for what it's worth.

1) Craig's right; don't buy a park that small. (He's right on everything, btw.) You'll never sell it, and you can't get a loan on it, if that's an issue. They won't lend on anything less than 15 pads.

2) call local parks and get their rental amounts, so you're dealing with actual data to compare to. No guessing!

3) Are these all park owned homes? (Some of what I'm writing is for others who might read this later) If so, plan to lose a LOT OF MONEY on repairs. In a park that small, they could completely eat up your profit. With a park that small, losing 1-2 tenants can be devastating.

4) Where did you get the $300 amount for liability insurance? Call Kurt Kelley, [REMOVED], ext. 17. Best guy in the MHP insurance biz.

5) I'd NEVER buy a park with those percentages and expenses at a 76%. The whole point of buying a MHP is to have a place with low, controllable expenses. But your tax bill already exceeds more than I'd want to pay for the total expenses, and you can't change that! Why is it so high? Strange. You should be getting taxed as undeveloped land. Look into that to confirm.

HERE's the BIG advice: After I bought such a property, I would transfer the water/trash/sewer costs to the tenants, which would give you $3798 more in profit. Get the details of the $1200 amount. Aren't the tenants mowing their lawns, or is this just for common areas? Get rid of those, lol. If the park owns the homes, send the tenants a letter the first day you take over (which hopefully you won't) and offer to sell them their homes at 10 year, 10% interest rate, no down pmt, seller financing. They'll love you for it, you'll get more money each month, and -- this is the most important part -- they'll be responsible every time their toilet breaks down. So all you will pay for is taxes and insurance.
How in the world did you come up with $119,000? I'd use the current numbers and offer no more than $26,000, if I was crazy enough to buy it.
Re septic tanks, you never mentioned the leach fields. How old are they? Have them evaluated. Moving them to a new location can cost $4,000 each. Get professional opinions on all that before buying.
My suggestion: Look elsewhere for a park to buy! You're on the right track with that! And second, take the 3 day training course from Dave Reynolds and Frank Rolfe. Dave owns [REMOVED] and it's got everything you need to know, including listings for parks.
For Don Hines, no one I know of uses "3 times the annual revenue" as a way to value a commercial property. Here's what you should do: Get the Income and Expenses, subtract them for the Net Operating Income (NOI). Say you get $25,000 for the NOI on a property. I'd multiply that times 10 (for a 10 Cap rate) and THAT's the value of that property.

So (for example) if the other park your wife hated was producing $95,000 NOI each year, that $580,000 price tag would be GREAT. It would have given you a 16.3% cap rate which is a terrific buy. It all comes down to how much profit it can make for you--that determines the value. Stick with the numbers. Too many people are wandering around with no idea about how to value commercial real estate, and that makes you a sitting duck.

P.S. Forgive me if I missed something you said after your first few posts. Sometimes I add things in for the benefit of others who are learning, too.
Good luck.

I would get at least two other quotes. Just speaking to others with expertise means you'll probably get different opinions, which is good. You can talk to them one at a time, ask LOTS of questions, become a mini expert, and make a more informed decision. those margins sound pretty tight to go into this without more certainty.
If I had a house with a 10 inch differential, I'd assume that the contractor who built it was a disaster and that it would show up somewhere else in the house, too. I'm sorry, but honestly there's no way you can be that far off and not have it be indicative a serious problem.
If you want to be more certain that you'll hit the mark on a retail sale in terms of demand and price point, get one or two (if possible) realtors to come by and give you an opinion. If you have to, mention that you'll talk to them about giving them the listing on this or future properties.
More information can't hurt you, but less can.
Good luck.