Empire, hobby or side business?

Real Estate Investing Real Estate Gurus
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Empire, hobby or sideline business?

In reflecting back upon the many conversation I have held with investors from this niche, I find that most of us have taken a hobby and turned it into a sideline business. A few jumped in full-time and some grew to bigger and better things. Some took it on the nose when the economy turned in 2008, others hunkered down, downsized and others still, grew!

Most here know that I downsized, hunkered down and now am working for/with two mobile home park investors who are growing rapidly. I have spent the past few months working to institute management and policies for the maintenance, rehab, and infill of large properties. This has been a particularly interesting task for me, to see a business growing and implementing the manpower and systems to not only run one large property, but one that can be duplicated to operate many other properties in various locations.

I personally needed this new challenge to take me out into an investment environment that is quite honestly outside the size of my personal comfort zone. I have always been the small portfolio, mom and pop type investor. I still believe this model is relevant and best for me and I would argue best for many here. A model that I believe can be accomplished safely and in a reasonably short period of time, while providing income that could easily become a full time income or retirement income/career.

But this recent experience in the rapid growth of large investing has me rethinking the systems I employ in my business to fine tune it even more. To be able to operate my business in just 2 days or less of onsite work has proven to me that my old systems worked and with fine-tuning can become even more successful. But this is not the reason for my posting.

My reason for posting is I now wonder how many have gone on to create business models of their own out of the initial models taught here and elsewhere? Have you turned a hobby or sideline business into a commercial venture? Have you chosen to grow either in this business or others to a point where there is layers of personnel, layers of systems and the ability to expand and expand?

I am not suggesting that this is the route others or I should seek to take. I am just curious to hear your stories.

Tony

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By 2005 and early ’06 it was obvious that the commercial and the residential real estate market had reached an unsustainable trend that could only morph into a long- term, painful decline, though presidents, Fed chairmen, CEOs of large banks, and the talking heads of the propaganda industries refused to recognize then, and still do now, the reality of the situation. Artificially, instead of market- created interest rates, steadily increasing real estate evaluations were bound to end in disaster. By that time I had liquidated my R.E. holdings and sat on the sidelines. In 2007/08, I attended Steve Chase’s and Tony’s boot camp/seminar and concluded that niches in the the M.H. business had a future, although many manufacturers and dealers had to close their doors. Tony’s model of double- wides on land or on generously- sized lots appealed to me. I reasoned that as time progressed, the demand for affordable rentals must increase also. Further, it was a given that the general population would increase. I expected the economy to decline for a generation and that lower middle stratum families would be forced to join the upper lower class, who became my target tenants. (That is a family with a minimum combined income of $3000.) I also knew that I could offer a well- maintained home for around $700, while an older stick-built of similar size rents for $1200. I have not been disappointed and am continuing the rinse and repeat process. Since I don’t perform my own required work anymore and don’t like to have employees, I work with independent contractors. Recently, I was privileged to read Tony’s newest book prior to its publication and can unequivocally endorse the practicality, the feasibility of his model. The system’s effectiveness is not limited to any number of homes. Every land/home unit is independent of any other home; each is basically its own business with its own attributes. Parks may or may not disappear in the future because of lack of maintenance and/or draconian regulations alleging national security reasons, but the single family double wide home will remain popular with a substantial section of society.

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I was a MH retail industry veteran with a MHP as a sideline long before 2007 when I found an online forum for the MH business. I have greatly improved my operations at my MHP as a result of reading forum posts here and of course Lonnie’s books and other material that I learned about on the forums.

I have had the pleasure of meeting at MOM events some who seemed to have started after first reading the forums: Briton Post and the Long brothers come to mind. While I think the focus on helping newbies is admirable, I can’t help but notice the rarity of those who really seem to go forward, and the high success rate of those who do so. Also, it seems that among those who “take the plunge” most have been influenced by family or close friends who have been landlords.

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[QUOTE=shawnsisco;883984]I was a MH retail industry veteran with a MHP as a sideline long before 2007 when I found an online forum for the MH business. I have greatly improved my operations at my MHP as a result of reading forum posts here and of course Lonnie’s books and other material that I learned about on the forums.

I have had the pleasure of meeting at MOM events some who seemed to have started after first reading the forums: Briton Post and the Long brothers come to mind. While I think the focus on helping newbies is admirable, I can’t help but notice the rarity of those who really seem to go forward, and the high success rate of those who do so. Also, it seems that among those who “take the plunge” most have been influenced by family or close friends who have been landlords.[/QUOTE]

Shawn,

Most of this forum’s posts have been tailored to new and beginning mobile home investors because quite honestly that was what most of us were when we started posting back in the late 1990’s. Over the years the posts tended to be of similar nature about lonnie deals. As I grew from lonnie deals to land/home deals and small park deals I began focusing my responses to those topics.

Later as the hands-on investor I posted more about the physical repairs of properties.

I agree that there is little in the way of posts about folks going on to other or larger investments. We all know folks that have done so but as they focused on those investments they stopped posting, which I can understand. It does hurt those who are trying to make that transition however and to some degree this is the premise of this particular post/string.

Tony

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I started this enterprise (LDs) as a side business. When I faced a sudden cut in my job, it became my main business. Fortunately, it sustained me for several years but I discovered it wasn’t really large enough for me to live off and grow at the same time. One of the main problems was, of course, me.

I learned that I am way more comfortable and better at evaluating deals when I’m not depending on the income for my livelihood. So, I’m back to viewing this as a lucrative side business for now.

Steve

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[QUOTE=Dr B(OH);884107]I started this enterprise (LDs) as a side business. When I faced a sudden cut in my job, it became my main business. Fortunately, it sustained me for several years but I discovered it wasn’t really large enough for me to live off and grow at the same time. Steve[/QUOTE]

Steve is highlighting a good point. To support yourself from your investments you need a fair amount of income. If you could leave that income alone and re-invest it the asset base could grow a lot more quickly. This is why Buffett was really against taking money out for lifestyle in the early years. He knew that a dollar spent now was worth many thousands, tens of thousands or even a million if that capital was not lost to his investing program.

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I believe that Tony’s query referred to one’s present business model in the M.H. industry.
As an aside, what facet of the M.H. business are you involved in, and where in the U.S or Canada do practice your enterprise?

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Tony- I suppose I fit this category.

I started out in this niche in 2003/2004. My first transaction was a Lonnie deal, although I did not know it at that time. At that point in time it was really mostly a hobby. I should also mention that it was truly all I could afford at that time and it was a very “big” deal to me. (My life’s savings). From that first “deal” to today, I like many others have evolved dramatically. Failed and succeeded at various points along the way. I have been "full time since 2006/2007.

I enjoyed the support and knowledge shared by many on several of these forums. Albeit mostly a lurker, and not very vocal for the most part (that’s just my nature I suppose). I now have 10 MHP’s in 3 States with more than 1750 sites, also 342 M/H’s/Notes related to these Parks. Also still have 77 apartments units, and 7 SFH’s, which I have not divested out of yet. I don’t mention any of these stats to boast, in fact most of the time I feel like I’m still trying to figure things out.

I was inspired to respond to your thread as I feel it’s important to illustrate what some have chosen to do, and what is still very possible for those who have such desire. I can attest to the fact that it is anything but easy, and that I now have an organization with staff and overhead substantially higher than many may want, certainly more than I imagined in 2003. I can sincerely understand how some would not want to choose the path I have, yet I have no regrets. In fact, I plan to add another 1000 spaces this year.

I am grateful for all those who participate in these forums, for those who’ve taken time to help me build my businesses. I feel both an obligation and a desire to give back in a similar fashion, and yet most of my time is devoted to “managing” my businesses. I have found a way to structure my organization over the last year or so that has freed up much more time than I’ve had in the last 6 years or so. I’m now looking for balance in life and perhaps I’ll be able to participate in this way more frequently.

All the best to you all.

Ben Braband

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Ben,

Thanks for sharing. A great story. I am sure there was a lot of hard work over the years. The results are impressive.

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Ben, Thanks for your post and also pointing out that your path isn’t for everyone. You have made wonderful and terrific strides in the past 9 yrs. However, having seen your presentation in Rolla, MO, of a recent huge deal, I doubt many could stomach the tremendous risks you are willing to take.

That being said, I complement you on your confidence in taking those risks and coming out a winner. I’d love for some of that confidence to rub off on some of us.

Steve

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Thanks John and Steve-

@Steve-No question…I have taken greater risks than some would, perhaps more than would’ve been advisable for me or most folks. I have been fortunate that things fell my way, and I have learned much. That said, the discussion about risk is very relevant to this entire thread. In fact, I’d suggest the risk, or perceived risk, is in large part at the heart of one’s decision related to Empire, hobby, or side business.

To me, one of the best things an individual can do , as early on as possible, is to understand and define their (personal) risk tolerance. This will help shape strategy, deal size, structure, asset class, perhaps even help some decide that they should not participate at all. The sooner these boundaries can be established the faster success, in whatever appropriate direction, can occur. (IMHO)

To often focus can not be established or maintained appropriately because the individual has not properly created, or established, their personal investment criteria (formed via risk tolerances and perceptions, in part). The void of which allows for misdirection, no direction, and or many times misuse of precious time and capital.

I no longer have the same tolerance for risk as I did earlier on. I also have a better handle on the true risk in each scenario. As opposed to; proper or improper perceived risk conclusions. I think this may only come thru experience, and or, the school of hard knocks. As in most things perseverance, and persistence are what prevail over the long haul. I think it takes a measure of courage to begin anything new which this is, or was, to us all at one point. I also think a relative amount of fear, conservatism, or that voice in your head that causes you to take a second look at things can be very valuable as well.

These are great tools, the trick is to not let them lead to inaction or paralysis when an opportunity that fits your risk profile presents itself. (I know this is not you Steve, you pull the trigger when it makes sense for you). I’m just speaking generally as I have seen these attributes become detrimental to some. They should be used as a compass to help guide one’s progress in a positive direction and on a suitable path relative to one’s personal situation.

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More great comments Ben.

To expand a bit on the risk aspect of the thread…

Risk can take on different forms. Some risks you want to avoid, some risks you want to manage and some you want to mitigate after the impact.

Avoid - Buying in a bad location is a real estate example. There is nothing you can do to improve the situation.

Manage - Having competent people doing the right job goes a long way. Knowing what you are doing is another example of how you can manage risk. As an example, a complicated power tool in the hands of a novice is a disaster waiting to happen. A skilled practitioner who has hours of experience will be fine with the same tool. If you have never bought a house before, I suggest the first deal be pretty vanilla as you do not know what you do not know.

Mitigation - Some things you just can not avoid. You are better off finding a way to deal with the impact. You cannot predict when a fire might strike. Even if you do everything perfectly, lightening or a mistake by someone else can cause a fire. Having insurance to deal with the result is a way to mitigate the impact. While it still happened and there is an impact, it would be a lot worse if you did not have insurance.

I find education is one of the best ways to reduce the risks in all three categories above. Maybe education comes from books or a forum, maybe it comes to chatting with other investors once a week at the coffee shop, maybe you buy a book or take a course or maybe you learn as you go along. The key is to continue learning and to survive to fight another day.

Consider stress testing your business, sideline, hobby or empire. Play a bit of a what if game. Assume interest rates went to 15% and figure out where you stand. Assume a project is 6 months late finishing. Assume you have 305 vacancies when normal is closer to 5%. I am not asking you to predict the future or how like any of the above is. I am asking what you would need to do if the above happened. The credit crunch was not predictable in any absolute sense yet we need to survive and thrive through it. Stuff happens all the time. The flood that happens once in 500 years can happen more than once in 500 year. Are you likely to be wiped out?

Consider taking some money off the table and do remember to get on with the other aspects of your life rather than worry about the risks you can not predict.