All Forum Posts by: William Thorn

Hello, I'm under contract on a 90 lot park in Tucson AZ and I want to get opinions on what size homes to infill the park with. The current homes sit back off the park road about 30 feet and most home are 40-66' so I have the following questions:

1. There are at least 20 pads I plan on infilling homes with so my question is should I infill with smaller 64-66' homes or go with the larger 76-80' homes?  I think there will be more demand for the larger homes but aesthetically the park won't look as good if a 76' home is sticking out 10' farther than the neighboring 66' home. 

2. If I do go with the 66' home what can I do with the large 30' dirt area in front of the house?  Currently the tenants are parking all over the place because there is so much room in front of the house instead of parking on the side of the home.

3. Some tenants have built wood carports in front of the homes and it doesn't look good.  Can I make them take down those carports?

@Robert Strohmeyer This park is in a large MSA in AZ so the cap rates are definitely no where near 10.  At 7.5 cap I have a 3 point spread over the interest rate so that should get some good cash flow, another Frank evaluation tool.  Thanks for the input.

I have an off market deal in AZ that I would like some more input on evaluating. The owner has terrible records and even if he did they wouldn’t be very helpful since he bought the park with only 4 mobile homes on it a few years ago so financials would obviously be of no use because he has brought in a bunch of homes.

-40 MH lots
-8 RV lots
-city water/sewer billed back to tenants
-individual gas/electric meters direct billed to tenant
-30 occupied MH’s with 22 of the homes with notes, lot rent $395
-3 RV’s on MH lots at $300, tenants pay all utilities
-8 RV’s with lot rent of $300, long term and tenants pay utilities
-7 vacant MH pads

Again, the seller has basically no financials. He is offering seller financing with $500,000 down and 4.5% interest rate and wants $1,900,000.

MH value= $395x30x12x.7= $99,540 NOI@ 7.5 cap is $1,327,000
RV value= $300x11x12x.5= $19,800 NOI @9.5 cap is $208,421
The homes according to him are valued at $10,000 each= $220,000

Questions:

1. 1.Would you use a higher expense ratio for the MH’s because its a smaller park?
2. 2.Being mostly homes with notes, how does that effect value?
3. 3.He said the notes are in compliance but I thought with the Dodd Frank and Safe act it wasn’t legal?
4. 4.Should I give him 75% of home value?
5. 5.How do I factor in the note income in my underwriting or just leave it out?
6. 6.Any other significant items to look at with this info?

Thank you

@Eric Smith. I’m attending the OC Bootcamp with 4 other people. Let me know if you end up attending.

@Kevin Wood PM sent

Sounds good.  It’s a bootcamp for multifamily syndication.  

Hello, I’m attending the Jake and Gino event November 16-17th in Houston, TX. A few friends and I will be getting there on Friday the 15th and wanted to see if a group wants to meet up for some drinks and networking Friday night. Please let me know if you are interested.

@Cary Hawkins

I talked with my PM company about doing sub metering on a 10 unit I have in San Diego.  They recommended RUBS instead.  It’s a less complicated and doesn’t have the cost associated with submetering.

I’m selling a 4 unit building in San Diego and it was due to close on Monday. The buyers lender just came back and said they need to do a “field appraisal.” I assume it’s because they have some sort of issue with the appraisal but I have never had this issue. Does anyone have experience with this and what was the outcome? Thank you.

@Michael Ealy

1. Know what you are doing before you buy.

2. Must cash flow day 1.

3. Don’t buy properties with high vacancy if you aren’t experienced.

3. Have adequate cash reserves.

4. Don’t buy in bad areas.

In 2010 I had saved up $50,000 to remodel my primary residence. Instead I bought a duplex in San Diego county. I had no idea what I was doing and had never read a real estate investing book, listened to a podcast, attended a real estate course, etc. The duplex was bank owned, 100% vacant, needed a full renovation, was in a “rough” part of San Diego and when it closed I had zero money in reserves for the renovation. I ended up remodeling one unit myself putting the materials cost on my Home Depot credit card and got it rented out which covered the mortgage. I remodeled the other unit and now I was cash flowing after about 6 months. I ended up selling the duplex 3 years later for $340,000. Bought 4 more apartment complexes in San Diego over the next couple of years breaking even more rules that I didn’t know existed. Luckily I didn’t know any of these rules back then because I probably wouldn’t have bought any of these properties which have far outpaced my W2 earnings.