I hope you all had a good Thanksgiving. Mine was relaxing, filled with good food and many, many movies! As for "Black Friday," I sat it out this year. Even with the mad rush near Thanksgiving, I just did not want to deal with all of the choas!
In any case, I've been under the weather lately. And, I think it's best for me to get some rest and just take it easy. I just wanted to let everyone know that the blog will be on hiatus this week. It should be back up and running once I get better. Have a great week everyone!
p.s. For those of you who have had questions about the topic of private money, feel free to check out my pal Julie's article she wrote on the subject this week and also my pal Shae who will be hosting a free teleseminar on her experiences finding and working with private money lenders. Thanks for reading! :)
I just wanted to wish everyone here a "Happy Thanksgiving!" It's definitely been a madhouse on the road (as well as in the grocery stores!) And, not to mention the anticipated event afterwards - "Black Friday." Here we go again!
In any case, I also wanted to just give you all an update on this deal. Last I spoke of it, we were waiting on the park's approval. So, what's going on?
Well, basically the park has not heard back from the current landlord. And, this is the only thing holding us up. Before I even gave the park the "green light" on my end for these buyers, I attempted to contact the current landlord with no luck.
So, the week before last the park manager calls me up telling me she finally heard back from the current landlord. And, guess what? It turns out they are reluctant to confirm the buyers' payment history without a 30 day notice from the buyers. Now, the buyers did not want to give their 30 day notice until they knew for sure they would be approved. Very understandable.
Last week, the buyers dropped off their 30 day notice to the current landlord's office (as they are never in) and dropped off a copy to the park manager (per my advice). Afterwards, the park manager (and me as well) attempted to contact the current landlord with no luck. We both keep getting voicemail - no return phone calls.
Well, it's the end of the month and the buyers' lease is expiring. And, the buyers don't know what to do. They call me up for some advice. And, I tell them calmly "Let me give the park manager a call. We'll work this out."
Before even calling the park manager I already had a plan. Since I have a background in property management, I knew all the park needed to do was to confirm and verify the buyers' payment history. Usually, that is done (usually in writing) by the current and/or prior landlord.
Since the current landlord has been unresponsive, I knew another way to verify this information - get the buyers to submit copies of their lease, receipts, and bank records of all funds paid to their current landlord.
So, I called up the park manager and asked, "Would it help? Their ready to go and we're just waiting on this last piece of information." And, you know what the park manager said? She said, "That would be great. Anything they can provide to me would help. And, we'll get this through."
(Note: Since I have a very close relationship with the park managers, usually it's very easy for me to work with them when trying to go through the logistics of getting buyers approved. This is why it's so important to focus on building strong relationships).
In any case, so that's that. The buyers are getting the needed paperwork together to submit to the park manager. After that, we should be good to go.
So, one thing some here may wonder - why would a current landlord be reluctant to withhold information on a tenant? Well, the reason being is the economy - it's a tough market out there (especially for rentals). And, most of the buyers I work with are long term tenants. (In this case, 3 years). So, it's no wonder the current landlord was reluctant to verify their payment history.
(Note: With the economy the way it is, this will probably not be the last time I run into this issue. In fact, I had a difficult time with a similar situation on this deal).
Regarding any funds owed to the current landlord, I advised the buyers that's what their security deposit is for. (I guess having a background in property management helps!) They were concerned they would be charged another month by the current landlord.
But, I told them usually when doing move outs - the security deposit is supposed to cover any funds owed to the landlord. (That is why property managers usually collect at least 1 month's rent as a security deposit). If nothing is owed, then they are to receive the deposit back.
(Note: Of course, if there is any damage to the unit and/or other charges due - they would be charged additional funds to the tenants).
When screening and working with buyers, above all else - the quality I look for is honesty. If the people I'm working with are honest and upfront, then usually I don't have many issues with them.
(Note: Of course, I need to go through my usual process of verifying and confirming all information. But, even if there are people who tell me they can come up with a lot of money to put down - if they are not honest and I feel I cannot trust them, I WILL NOT work with them. That's just me).
In any case, I just wanted to give everyone all an update. Hope you all have a good and Happy Thanksgiving!
p.s. For those who are in the holiday spirit, check out my pal Steph's Thanksgiving contest. She's holding a contest to see what motivates others, it's really neat! :)
(Note: I think it's important to know the terminology and words used when learning any new business including mobile home investing. I came up with 'Terminology Tuesday' as a way to go over the terminology used in the mobile home business. It's important to know the terminology when talking to people in the business so you're all on the same page).
Regarding insurance deductibles on mobile homes, you really need to go with what you feel comfortable with. The way I work things is that the insurance is rolled in with the monthly payment.
In my experience, my insurance company offers me 3 choices when it comes to insurance deductibles on mobile homes - $250, $500 and $1000 deductibles respectively. The higher the deductible, the less the insurance premium. On the other hand, the lower the deductible - the higher the insurance premium. All in all, you just need to weigh what you feel comfortable with.
When I first started out, I chose the middle of the road - $500 deductible and continued with this figure for many years. Now, there were some who advised me to take the higher $1000 deductible to make for a lower premium.
The argument was that usually if anything ever happened to the home - it was rare. And, if anything ever did happen - the insurance is really there if there is a major catastrophe done to the home (i.e. roof needs to be replaced by tree damage) or if the home burns down. Above all else, the insurance is not there to cover the small stuff - it would be best to get a contractor involved for the smaller items (not the insurance company).
After years of going with the $500 deductible figure, my experience was that nothing major had occurred. And, if something major were to occur - I would be prepared for the worst (such as a fire) and let the insurance take care of it. If anything smaller happened, it would be up to the homeowner to take care of it and get a contractor involved.
So, now my comfort level has changed - I usually go with the $1000 deductible for insurance coverage on mobile homes. And, I'm ok with it. But, again - that's just me. When choosing an insurance deductible, I highly recommend being comfortable with whatever figure you choose.
(Note: For those out there, I do recommend using your own insurance company when doing "Lonnie" deals. For me personally, I don't leave it up to the buyer to choose and obtain their own insurance coverage - there's just too much risk involved. Plus, in most parks getting insurance on the home is a requirement before any buyer can occupy the home).
Regarding the insurance coverage amount, usually the insurance company will determine that. Sometimes the insurance company may ask you how much coverage you are requesting. But, usually insurance companies will only cover and determine coverage based on the replacement value of the home. Again, go with what you feel comfortable with.
(Note: Always remember to do a smoke detector verification check before requesting to place insurance coverage on a mobile home. As a requirement, most insurance companies require this before coverage can be placed).
I hope this "Terminology Tuesday" post has been helpful and has given you some useful information to use.
Happy investing!
p.s. Feel free to leave comments on any post either here and/or my Facebook Page. Comments are always welcome, thanks for reading!
(Note: I think it's important to know the terminology and words used when learning any new business including mobile home investing. I came up with 'Terminology Tuesday' as a way to go over the terminology used in the mobile home business. It's important to know the terminology when talking to people in the business so you're all on the same page).
When both purchasing and selling mobile homes, it's best to make sure all of the smoke detectors are working in the home. In fact, it's usually a requirement from the insurance company that all smoke detectors have been checked and verified before coverage can be placed.
(Note: Before I purchase a mobile home, I make sure the smoke detectors are working on closing day. On closing day, this is when I instruct my insurance company to start coverage).
In general, there are 2 main types of smoke detectors - battery powered and electrical. Usually, electrical type smoke detectors will come pre-installed with the home. However, these types of smoke detectors will only work when there is power. If for some reason there's a loss of power in the home, then electrical type smoke detectors will no longer function.
Many times (but not all) homeowners do not realize the danger in having only electrical type smoke detectors in their homes. Without power, these type of smoke detectors will not work. Should there ever be an electrical outage, this could be dangerous if a fire occurs.
This is why I go out and make sure there are also battery operated type smoke detectors (with a fresh battery of course!) inside homes with only electrical type smoke detectors. For me personally, I'd rather be safe than sorry.
Is this an added cost? Yes. But, to me - it's the cost of doing business. I'd rather have peace of mind and be able to sleep at night that the home is well equipped to detect a possible fire than not. But, that's just me.
As a general rule of thumb, there should be smoke detectors in the kitchen (sometimes 2), hallways near the bedrooms, and living room areas. Before purchasing a mobile home, I always verify the types of smoke detectors in the home as well as whether they are original or added on.
On the other hand, you also want to be aware if there have been any smoke detectors removed or detached from the home. Personally, I've run into a few situations where the smoke detectors were removed as some homeowners just did not feel it necessary as they had to keep changing out the batteries.
(Note: This is definitely not a good reason to remove a smoke detector. It amazes me what some people will do just to avoid doing a little work!)
Before purchasing (as well as selling) a mobile home, I highly recommend you make sure you check and verify all smoke detectors are properly working. If the home comes with the electrical type of smoke detectors, be sure there are battery type smoke detectors installed as well. Check the batteries - make sure they are new and in working order.
(Note: In Lonnie's book, there is a Smoke Detector Verification Form included in the forms section. I highly recommend including this in your paperwork when working with buyers).
To give you an idea of how smoke alarms work as well as how to do a smoke detector verification check, here's a short video:
So many times there have been folks who have told me they have tried so hard to find mobile home deals. Though, they are unable to find any. So, I decided to create this video. Hope it helps, enjoy!
(Note: By the way, has anyone ever had "minced meat pie?" I'm a bit afraid to try it. As a kid, I grew up on fast food - I hardly ever had a home cooked meal. So, meeting country folks and learning about their home cooked meals is a very new yet interesting concept to me! :)
p.s. Feel free to leave comments on any post either here and/or my Facebook Page. Comments are always welcome, thanks for reading!
(Note: I think it's important to know the terminology and words used when learning any new business including mobile home investing. I came up with 'Terminology Tuesday' as a way to go over the terminology used in the mobile home business. It's important to know the terminology when talking to people in the business so you're all on the same page).
Since there have been many folks who have asked about the holding costs involved when buying and holding properties, I've decided to touch upon a small little rule I have learned as a prior landlord - the 50% rule.
So, what is the 50% rule? Here's a video from a fellow BiggerPockets member that explains it in more detail:
As a prior landlord, I can tell you - the 50% rule is true for most cases when buying and holding properties. To be honest, a lot of folks who buy and hold properties forego a lot of small expenses when determining their overall net profit - it's really important to factor in everything to see a realistic picture.
So, what does this have to do with mobile home investing? Well, a lot of folks have asked me this question, "When you mention 'cash flow' in your case studies, is that what you really net? Or, are there other expenses taken from that amount?"
The answer to that question is yes. Yes, I do net that amount of cash flow. And, no there are no other expenses taken from that amount. I receive the same amount every month - rain or shine.
And, this is the difference between ownership (aka being a landlord) and control (aka being the bank). To me personally, it's not about ownership - it's about control.
As a prior landlord, I found it extremely difficult to keep up with the costs of ownership (i.e. maintenance costs, rising tax assessment values which in turn raise property taxes, increases in insurance, etc). Every year, it seemed that costs would increase. And, these increases would eat into the cash flow I received.
Even more, on top of that I still had to deal with the debt service (aka what I owe the bank). So, who got paid the same amount every month no matter what? It wasn't me - it was the bank.
So, the difference with doing "Lonnie" deals is the fact that there is more control and less to maintain. With mobile homes (as personal property), they are seen as depreciating assets in the eyes of the government. Think about it kind of like a car - their values go down year after year. Well, it's the same as with a mobile home.
Now, many of you may be thinking "Well, that's not good." And, it has been one of those points challenged to me. In fact, I have a good friend who questions why I even bother buying depreciating assets. In her eyes, if the value goes down year after year - then what's the point?
Well, for me personally it's not about appreciation - it's about cash flow. And, so what if the value goes down year after year. Each month, I am receiving the same amount of cash flow no matter what. But, this is what's important to me - cash flow will feed me, appreciation will not.
Though, my friend (who is extremely smart with an MBA from an Ivy league school) begs to differ. Her thought is to buy for appreciation because she tells me - that's where the real money is at.
Furthermore, she thinks the effort and amount of time involved put into this business should reflect the dollars earned. To her, my cash flow earned is really not that much as her earning 100k flipping a home (that she needs to wait 5-10 years to appreciate). But to her, it's worth it.
(Note: Did I mention? This is a friend who has tried to get me to invest for appreciation - she tells me I am missing the boat on a lot of potential properties that will appreciate in the future if I don't buy now).
In fact, she even challenges me in saying that she will become a millionaire because if she buys 10 homes and they appreciate 5-10 years from now and she receives 100k from each of them - she will be rich. So far, she is halfway to her goal. Though, all her homes are negative cash flow.
(Note: I have no desire to make a million dollars in one lump sum. I invest for cash flow, not appreciation).
Every month, my good friend has to shell out money to cover her expenses. But, in her mind - it's ok. She tells me she will make it all back - just watch and see. And, that in this game - she is the turtle and I am the hare. She reminds me the turtle is the one that wins in the end.
Now, in school - I wasn't really good at math. But, it seems to me that having multiple negative cash flow properties isn't really for me. And, having properties that cash flow every month is better. But, that's just me.
The reason why I enjoy doing "Lonnie" deals and investing in mobile homes is because the expenses tend to decrease, not increase. Every year as the value of the mobile home goes down, the taxes go down with it. And, since there is essentially no debt service to pay (since they are bought with cash) - the rest is pure cash flow. In essence, I get paid today - not tomorrow.
For those out there who have been contemplating the mobile home biz, this has just been my experience. Different things work for different people. And, I can honestly say - mobile home investing has worked for me.
Happy investing!
(Note: If you've been thinking about mobile home investing but still are not sure, this article may help).
p.s. Feel free to leave comments on any post either here and/or my Facebook Page. Comments are always welcome, thanks for reading!
Entrepreneur. Dreamer. Thinker. Doer.
I started out investing in real estate like most people in single family homes. In the beginning, I found deals for other investors. After awhile, I started doing deals myself. Though, I found myself always working and was burned out from being a landlord. So, I dove into the wacky world of mobile home investing and here I am. It's much more fun. This blog is here to take you along on my journey and share with you my adventures investing in mobile homes. Contact Info Contact me
If you have questions about mobile home/real estate investing or want me to check something out (i.e. article, website, blog, video, etc), feel free to send it in. (Questions about mobile home/real estate investing can either be sent in or by asking through my Facebook Page). Please do not send in any file attachments - it's best if you send me a link to anything you send in. If I find it interesting/relevant, I will post it up. Thanks!
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