Posted by rw on March 05, 2001 at 14:25:36:
Matthew,
Wow! That sure is a lot of questions. I’ll answer a few of them for you and then I think you should go check out some of the articles on this web site. Perhaps go to the Creonline product list and pick out a couple of starter books or tapes on real estate.
On the manufactured home issue. Here’s the scoop. First of all what is your goal? Do you need cash flow? Do you just want to flip one?
It always helps to know what the student is trying to accomplish and how much knowledge you have. This way I can give you better guidance, instead of just some shotgun approach with general information.
Here’s a quick tip. There are 3 types of property you can buy. Low income, Middle Income, and Upper Income. doesn’t matter whether it’s manufactured, apartments, mobiles, or multi-units,they are going to be either in a low, middle or upper income area. Define that first.
With the lower income and cosmetically distressed, you can genereally buy cheaper, rents are genereally not significantly lower, so you have a better chance at getting positive cash flow. However, these are also genereally a bit more management intense. Upside, more cash. With the nicer properties, in good shape, ususally you will have a higher price,similar rents,thus a lower to no cash flow. However, these will ususally appreciate in value better.
The problem is,that when you are starting out,you usually ‘need’ the cash flow. Remember with those your goal is not appreciation, It’s cash. Once you have some bucks, then you can move up into the nicer stuff, as you can genereally put more equity in,and or leverage better prices with the use of cash and credit.
So, depending on your wants, desires and education,there is a starting place for everyone.
Manufactured homes also fit the profile. Is it a low income manufactured, nice area, ??
Here’s the drill. Take the rents, deduct all the expenses (tax, insurance, water, sewer, vacancy ratio and mortgage payment). Is there any positive cash flow?
My formula requires a 30% return on the cash (borrowd or not Ie: take the down payemtn, divide it into the net. I would look for at least 30%,including any pro-rated rents.), or I would not make the deal,as a beginner.
Hope I’ve shed some positive light.
Russ Whitney