Posted by Jason (AL) on June 30, 2008 at 15:06:50:
I agree.
Not sure I’d build my empire with buying MHs (with land) sub2 at this point in time.
But if I can get a few thousand down and a respectable
cash flow, I’d just let the loan run its course.
Humble Pie…warmed up… - Posted by Greg Meade
Posted by Greg Meade on June 30, 2008 at 06:41:29:
About 4 years ago there was a very spirited theread here about rentals vs Note Sales between myself and Tony Colella
I was convinced that putting a repo on land with a basis of 30K and selling on a 10% Note for 69K was the answer to all my probs. Monthly payments of 780 per month for 10 years. Give em a handful of deposit slips, have them mail me an annual insurance binder, and property tax rec we were good to go, right? Well no actually 2 years later I was getting pay off requests from Banks, these Buyers had sold the property…for 119K!!
Tony was convinced that rentals were the deal. Equity build, control, Section 8, ability to raise rents. I’ll never forget one smart ass comment I made…“At the end of a very long day Tony, you are still a landlord and putting up with the BS from tenants.” WOW!
Fast forward to 2008 and this morning I got a call from a tenant that is leaving town and wanted to pay their rent early. As I type I am looking at 8 100 bills and Itell you true, I don’t know where I’d be today without the 63 rentals I have acquired since that thread.
At the time, I figured why not add a rental here and there and see just how horibble being a landlord is…
I’m here to tell you it is not that tough. We train our tenants to be good tenants. If they need a toilet kit or a faucet, they call me for authorization and I cut a PO to Surplus shop. They pick items up, install,done deal.
My Notes are paying off, defaulting, I am putting them in rental portfolio. Am at 81% occupancy and these funds have become the most profitable portion of my portfolio.
I don’t rehash this to show how smart Tony is or how dumb I am (although there seems to be a correlation LOL) but to show new folks an important lesson. never discount a proven model. This model might not fit you NOW, but things can and do change. it is arrogant and stupid to diss a proven business model even if it is not a good fit for you now.
Part of the challenge facing all of us as investors is the ability to change or tweak models and mind sets to accomodate new realities.
Driving in this morning I kept thinking what i mess I would be in without the 41K rentals bring in each month… kinda humbling really.
Greg Meade
Re: Humble Pie…warmed up… - Posted by Gary
Posted by Gary on June 30, 2008 at 20:42:50:
We all must do what’s best for us on a deal by deal basis. Every person’s goals need to be adjusted often to fit one’s situation. Here’s what I’m doing.
Just sold a land/home I developed in 2001. Rent was $850 and grew to $885 at sale. Cash flow: $200-250. Equity:$35,000 +or-. In the process of spreading that around on several other small deals, 15 sites, 4 sites, and a 3 acre land/home. Whatever I do the plan is to maximize return over and above the $200 my $35,000 was earning. Several here posted I should keep and continue to rent, or lease option and rinse and repeat, and just how would I even know what it was worth. I have escaped future maintenance and possible tenant destruction.
I sell all homes in parks I own as I find suitable RTO or cash buyers. About 80% work out,never really tracked it though as renting 100+ homes is not an option. I do have several with rent paid by various social services. If they move the unit will be sold. These homes do not appreciate greatly with repairs and improvements to create a big payday to do other deals.
I am putting a stick built on the market later this week by calling some younger members of the local REIA. This home will be bought near ZERO down as it has an assumable loan and I’ll carry the balance on a second.
If I were half my age,30,I would be working until midnight fixing up messes others have made, but no more. Just give me land, because as Lonnie says, you can’t hurt the dirt. Gary
Re: Humble Pie…warmed up… - Posted by Ryan (NC)
Posted by Ryan (NC) on June 30, 2008 at 20:04:41:
Greg, much as you I swore I’d never be a landlord… WHO NEEDS ALL THAT CRAP!
That was about 3 years ago and I can still remember the phone call I had with Scott today… “Ryan, will you do what ever it takes to become financially free?” Sure I will… YOU WHAT ME TO WHAT??? THERE AIN’T NO WAY I’M GOING TO BE A LANDLORD… After about and hour lecture that I wish I could remember, I decided that it was better than what I was doing at the time… Fast forward 3 years and I have 39 rental units that are paying the bills including the lot rent on 5 LD’s that are now empty because of a problem with a power companies deposits which is outa my control…
I think every market goes through cycles were different investments are a better choice at different times, LD’s are pretty much a low risk no fail and work or don’t on a regular basis. Rentals are always an option and so long as the unit is bought right it is always a viable exit option if the #@%^ hits the fan.
I too love my rental units, even though my tenant’s sometimes drive me to head to the fishing hole…
Best wishes,
Ryan Needler
PS: can you elaborate a bit on the call in thing for repairs, I really like the idea of having the tenant install things like toilet flappers and misc items that require me to spend more for gas than parts!
Re: Humble Pie…warmed up… - Posted by tmh
Posted by tmh on June 30, 2008 at 19:44:24:
This is very intersting. My partner and I bought a park about 8 m0nths ago. It was almost 100% rentals. We thought that was the wrong way to go. However when we thought it over we came to a new conclusion. It is hard to pass up receiving $550 a month in rent for a unit that costs us $5-6000. The trick is to find excellent tenants. I also feel a mix of rental and owner occupied units is the best… I feel it creates a more stable park enviroment. Perhaps 60/40 or 50/50. We also would be hard pressed to keep our heads above water without the rentals.
Re: Humble Pie…warmed up… - Posted by Gary
Posted by Gary on June 30, 2008 at 19:16:22:
We all must do what’s best for us on a deal by deal basis. Every person’s goals need to be adjusted often to fit one’s situation. Here’s what I’m doing.
Just sold a land/home I developed in 2001. Rent was $850 and grew to $885 at sale. Cash flow: $200-250. Equity:$35,000 +or-. In the process of spreading that around on several other small deals, 15 sites, 4 sites, and a 3 acre land/home. Whatever I do the plan is to maximize return over and above the $200 my $35,000 was earning. Several here posted I should keep and continue to rent, or lease option and rinse and repeat, and just how would I even know what it was worth. I have escaped future maintenance and possible tenant destruction.
I sell all homes in parks I own as I find suitable RTO or cash buyers. About 80% work out,never really tracked it though as renting 100+ homes is not an option. I do have several with rent paid by various social services. If they move the unit will be sold. These homes do not appreciate greatly with repairs and improvements to create a big payday to do other deals.
I am putting a stick built on the market later this week by calling some younger members of the local REIA. This home will be bought near ZERO down as it has an assumable loan and I’ll carry the balance on a second.
If I were half my age,30,I would be working until midnight fixing up messes others have made, but no more. Just give me land, because as Lonnie says, you can’t hurt the dirt. Gary
Re: So Lonnie was wrong after all - Posted by John Taylor
Posted by John Taylor on June 30, 2008 at 15:31:51:
I have been following this board for a few months, surprised you recommend rentals as DOW recommends you sell the mh and carry the paper.
Didn’t Lonnie get into mobile home business as a burnt out landlord?
All property, single family homes, commercial property as well as mobile homes increased in value the previous 8 years due to easy money available.
The mobile homes that were paid off and now worth $119K
will probably drop in value and be worth less than the note for $69K as originally sold due to lack of financing.
I really doubt there will be much equity buildup in the Lh deals as the equity will quickly evaporate, every heard of the housing bubble 2008?
JT
Humility pays pretty well huh? - Posted by Shawn Sisco
Posted by Shawn Sisco on June 30, 2008 at 15:29:49:
Greg this brings up a topic: thoughts on having both rental homes and homeowner homes in the same park. I believe Tony is 100% rental - do you blend in your parks?
Personally, I have not ever had a disaster with the blending, but, I do have homeowners that aren’t overjoyed about it either…how can you know how many sales referals didn’t come in? I have read other industry publications that would have you believe rental homes will surely ruin a homeowner community. Any thoughts?
I’ll have a slice! - Posted by Jason (AL)
Posted by Jason (AL) on June 30, 2008 at 14:04:17:
WOW,
Cool of you to make your “progressive ah-ha” moment
public here with us.
Congrats.
$41k per month?!
Nice.
Is this gross?
Are you mainly doing land bank-type deals exclusively
now, Greg?
I’ve always bought sub2 and have been hesitant to rely
on banks for my financing.
Guess I could purchase these deals sub2, but would need
a substantial discount to make the formulas work.
I have Tony & Scott’s book, and I HIGHLY recommend it
to folks.
Now if only I could find a mobile home in Alabama 
Thanks Greg.
Ryan… - Posted by Greg Meade
Posted by Greg Meade on July 01, 2008 at 11:28:55:
about 70% of my tenant base is in the construction trades. The rest are retired. I have only 5 houses where there is NOT a person that can do simople repairs.
By and large, the three most common repairs/ maintenance jobs are toilet kits, Ac filters and well pressure boxes.
For toilet/ faucet repairs we get the com[plaint, issue a PO to Surplus Shop, have the tenat take in the old parts and pick up new parts. All know water shut off locations (they are posted inside utility closet along with emergency numbers) and have had very little probs. We buy pressure switches by the case (about 9 dollars per) and when thety come to the office to get, they get instructions and a moth ball. Moth ball is to keep fire ants out of the box. A/C filters are changed each month and we are sneaky about this.
We sign and date in indelible marker each filter going out each month and rent is NOT accepted without a dirty filter each month. We have 5 different sizes and go thru several cases each month. One tenent in the Park changes every 2 weeks. We are OK with this…nothing and I mean nothing will prolong the life of a A/C unit like frequent filter changes. We get filters for about 3 bucks each, faucets for 16 and pressure switces for under 10.
Our tenants like the speedy resolution and these items only need a screwdrivwer and pliers to install
Call mea cheapskate, I love this system. We have them check for leaks after any repair…in three years we have had 2 major probs…from the same 74 year old tenant…we do hers now.
Greg
Just found out… - Posted by Jason (AL)
Posted by Jason (AL) on June 30, 2008 at 20:36:27:
You’ve purchased more than 1 park
in your ventures.
Congrats.
The magic one can find in the archives…
How did you finance/purchase your 1st one, Ryan?
I tried finding it, but didn’t see anything.
Thanks.
Re: Humble Pie…warmed up… - Posted by Jason (AL)
Posted by Jason (AL) on June 30, 2008 at 20:16:39:
Ryan,
Are the all/the majority of you rentals in parks?
Me thinks that I read, a while back, that you purchased
a park.
JT, I think Lonnie had rental property… - Posted by Greg Meade
Posted by Greg Meade on June 30, 2008 at 18:10:44:
until just a few years ago. At a meeting 2 years ago, I heard him say he had recently sold 20+ lots in a pet subdivision in VA. Sold the home rented the land for many profitable years.
The “sell on Note” is a wonderful tool.I have made a TON of money on it…it is just not viable to ME right NOW in this AREA.
JT I am glad I posted this this morning. Your post shows the need to explain that neither Tony or I was wrong in the original thread war. We both had valid and defensible businesss models that worked well (at the time).
My total point was being thankful (and humble enough to admit)I did not put 100% of my time, and resorces into a single investment vehicle…I meant what I stated earlier…I would be in REAL trouble without rentals.
Shawn, I like owning the homes…more control, higher rent.
Jason, I wish it was net! We have 22% expenses and 19% vacancy…we Have to increase occupancy!
Thanks to all that posted,
Greg
You missed the boat - Posted by Tony Colella
Posted by Tony Colella on June 30, 2008 at 17:44:00:
JT view this from the end and work your way to the beginning.
Lonnie did burn out as a landlord…20 years after he began.
He made much of his wealth from landlording and allowing his efforts, time, appreciation, demand etc. to build over those 20 years and when he sold he had money he needed to keep busy. Thus the birth of the Lonnie deal.
Investors who banked on appreciation over the last 8 years as you described are not investors, they are by definition… speculators. They bought with the intent/hope that the properties would rise in value so they could sell and make money.
An investors buys based upon cash flow. Appreciation is for the most part the gravy now and later a source of wealth. We have to let our efforts and time work for us and we have to buy properties that cash flow. If we pay retail and hope for appreciation, the properties never seem to cash flow. We have to buy wholesale.
Is there equity build up when you pay retail? Not likely in land/home properties. I agree with you there. If you only pay retail, you won’t be an investor for long. I agree that $119k land/home property in my area is probably truly worth $69k and if I were to buy it, I would have to buy it for less than the $69k or walk and wait for another property or for another day.
Lonnie deals are a great way to keep money working but for those of us still in the 20 years of wealth creation, landlording is the best method for folks like Greg and I and as you can now see, is exactly as Lonnie taught by his example.
Tony
Re: I’ll have a slice! - Posted by Sailor
Posted by Sailor on June 30, 2008 at 14:30:39:
Jason, if you are buying MHs sub2 you are probably paying much higher interest rates than if you got your own financing. However, I do understand that bank financing on MHs is getting really difficult.
Fortunately, Tony & Scott taught the secrets of successful bank financing @ the 1st Boot Camp ( & the 2nd & the 3rd!) I attended.
Right now I am also back to doing REOs & pre-foreclosures similar to what I did in the 80’s w/SFRs. The deals are pretty darn good & banks have finally learned to not be so arrogant (actually, I was thinking of another word) about doing these deals.
Tye
Re: Ryan… - Posted by Ryan (NC)
Posted by Ryan (NC) on July 01, 2008 at 21:44:58:
what Lin said, there are some gems in there Greg! Thanks for sharing.
Best wishes,
Ryan Needler
A post for the “implementation notebook” - Posted by Lin (NC)
Posted by Lin (NC) on July 01, 2008 at 16:07:16:
Wow, Greg! Some gems in here!! Thanks for sharing.
Lin
Re: Humble Pie…warmed up… - Posted by Ryan (NC)
Posted by Ryan (NC) on June 30, 2008 at 20:37:26:
We have several L/h properties but yes most of these are in our parks, we’ve acquired a total of 5 small parks like Scott and Tony talk about over the last few years… There has been ups and downs but most everything has been good for us. =)
Best wishes,
Ryan Needler