mobile homes - Posted by kathleen Spaight

Posted by TeddyB_SC on March 15, 2006 at 13:04:19:

Jad:

I think a PM business is a great idea. I have been trying to start one for about 2 years. However, I’m not doing this for liability purposes, but for additional cashflow. I plan on building a PM business that stands on its own. This will create other options like eventually selling off the business or keeping it for the cashflow. Also, since my clients will be other landlords, there may be times when a “burned out” landlord is ready to sell and I hope I’ll be first in line.
I should be able to get my license this summer and go from there.

TeddyB_SC

mobile homes - Posted by kathleen Spaight

Posted by kathleen Spaight on March 13, 2006 at 20:13:48:

My husband and I purchased eight newly constructed mobile homes in 2003 at 80K in Byron GA. We live in Northern Virginia. The plan was to buy, rent and then sell right off to the renters-easy-BUT that did not happen-3 years later we are on our 4th property manager-had properties sit unrented for months-vandalized homes and low credit or NO credit renters who want to buy but do not have the funds. Not a bad neighborhood-the subdivision but the drive to it is through a rough section of town. WHAT TO DO???
At present, I have spent the best part of 2005 repairing and renting to better tenants with the help of an honest and attentive property management. The houses can not sell at 66K -what we owe because the value of the homes has gone down due to foreclosures in the same subdivision-our fellow investors are bailing out. I want to maintain our credit and want to weather the storm. Have you any ideas for marketing those homes- mortgage companies interested in giving credit to low credit first time buyers such as our tenants. I fear we may sink if we continue this struggle.

Thank you

Kathleen Spaight
571 435 1009

Re: mobile homes - Posted by Doug

Posted by Doug on March 16, 2006 at 24:22:20:

Kathleen,

Call me at 419-565-4302. I would like to discuss your problem with you.

Thanks, Doug

Re: mobile homes - Posted by Dickie McCraney

Posted by Dickie McCraney on March 15, 2006 at 24:42:47:

Send me a e-mail with Model, year, size, br-ba if you are interested in selling the units wholesale. Dickie(dickiemc@yahoo.com) (334-750-2273)

Re: mobile homes - Posted by Tony Colella

Posted by Tony Colella on March 14, 2006 at 09:06:36:

Kathleen, I am sorry to read of the frustrations you are facing with your mobile home deals. I do not have any magic answer unfortunately.

I am posting mostly to point out some of the mistakes you have made to others. Many have recently posted about investing in mobile home long distance etc. and your results bear witness to the concerns I have. I do hope you will not take my comments as personal insult but rather a means to help others avoid the frustrations you are now facing.

Mobile home tenants and buyers are usually in the market for low income housing for similar reasons. One is they are lower income. That in and of itself is not bad or a bad risk for us but it is the other factors that contribute to the risk.

Many continue to make very poor financial decisions the compound the reason they are low income and create more expense than their low income can support.

Property management companies I have spoken with are not equipped to handle these type of higher maintenance tenants who tend to have higher turnover, require more on site presence and court evictions if necessary. The lower rent does not compensate them well enough in most cases and quickly can become too high of an expense for the investor.

An onsite, park type manager, can help through free rent of home but if you only have a few homes (and they need to be in the same location) this can be too expensive. These managers typically are not people we want collecting money but rather handle the day to day questions and maintenance. In a mobile home park this works well. With a few units this may not.

This means WE must become the managers and trying to do this from a distance is insane (in my opinion). Showing homes, repairing homes, signing lease and walk through inspections become too frequent for us to drive that far. Admittedly I am a hands on investor and others will probably tell you that they have done distance investing successfully. In many of those cases however, I find the positive cash flow is very low and the risk too high for my tastes.

Ready, Fire, Aim. Not everyone finds this site or Lonnie’s book, “Deals On Wheels” before they begin investing in mobile homes. Those that do not are faced with making mistakes themselves instead of having the good fortune of having seen others make the mistakes for them. Lonnie’s book puts us in the driver’s seat of our investments. We may still decidet to adapt his system (though I recommend against that for most of us) but at least we do so with the understanding of the risks.

While the homes you purchased were not too expensive by stick built standards, they were more than most of us would consider paying (although there are acceptions for those who own the park or land). As you can see, financing is a double edged sword. You are now upside down in the loans (owe more than the collateral is worth) and have limited your exit strategies.

Long distance ownership also puts us in a difficult position legally since most evictions can be handled by us (this varies by state) we can do so without the cost of an attorney. Long distance owners would have to hire an attorney or incur the costs of travel to and from court to file the paperwork, return to attend court, return to attend the eviction etc.

Laws vary greatly by state and even by county on how we can repossess or evict mobile home folks. This can be very risky if we do not know our local laws.

Investors learn that the number one rule of investing is to make your money when you buy. As Terry Vaughan adds, “limit your exposure both legally and financially.” Having many money making exit strategies limits the risk when one goes bad.

There are no easy answers Kathleen but education on this topic and reading this site may shed some light on answers not yet apparent.

Best Wishes,

Tony

Re: mobile homes - Posted by Don Wilson (OK)

Posted by Don Wilson (OK) on March 13, 2006 at 21:21:07:

Kathleen:

Usually if the tenants can get a bank loan then they will buy stick built -vs- mobile homes. There are a couple of lenders, https://www.21stmortgage.com/web/century.nsf, http://www.mh-quote.com/finance/FinanceHome.asp

I think your best bet though is to read deals on wheels if you haven’t already done so. You might be able to find someone here that will purchase them wholesale from you to save your credit and eliminate your pain. Keep trying…

Don Wilson (OK)

Re: mobile homes (long) - Posted by osupsycho (OK)

Posted by osupsycho (OK) on March 14, 2006 at 11:59:32:

Tony,
You bring up some things that have been rolling around in my head for awhile. Specifically this part of your post:

"Property management companies I have spoken with are not equipped to handle these type of higher maintenance tenants who tend to have higher turnover, require more on site presence and court evictions if necessary. The lower rent does not compensate them well enough in most cases and quickly can become too high of an expense for the investor.

An onsite, park type manager, can help through free rent of home but if you only have a few homes (and they need to be in the same location) this can be too expensive. These managers typically are not people we want collecting money but rather handle the day to day questions and maintenance. In a mobile home park this works well. With a few units this may not.

This means WE must become the managers and trying to do this from a distance is insane (in my opinion). Showing homes, repairing homes, signing lease and walk through inspections become too frequent for us to drive that far. Admittedly I am a hands on investor and others will probably tell you that they have done distance investing successfully. In many of those cases however, I find the positive cash flow is very low and the risk too high for my tastes."

I tend to think long term and BIG so I want to talk a little about what you have said here. For me my long term plans are to have some parks and quite a few land/home deals (I think we should start calling these Tony/Scott deals :-). But my plans also call for me and my wife to travel a lot to all the places we want to. So with these thoughts in mind I have come to the realization that if I am manager of all of this stuff I will not be able to travel as freely as I want.

I believe this is what Robert Kiyosaki calls being self employed or just another JOB. I want to become a business owner in his definition, IE be able to walk away from the business for two months and when I come back everything is still running smoothly (or even better). Now I know this may be a lofty goal considering the business we are in but I don’t usually set my goals low so here is my plan:

I want to start a property management company that services all of my own properties. There are several advantages to this in my mind as this company will be a corporation and be able to bear the brunt of any lawsuits while holding very little of anything of value (just contracts to service these properties that can be cancelled at any time and some operating cash). This also allows another level of tax funneling which can allow for more (and better) deductions and timing issues with taxes (ie offsetting tax filing times to allow for when best to show income and deductions). But the main reason I thought this would be good is as I stated, I can walk away for awhile. My ultimate goal is to get it working well with a manager (and probably some assistants) that can cover everything that needs to be done on a day to day basis. My plan is for me to still be the only one doing property acquisitions but to have this manager handle the applications, evictions, showings, handling work crews, collections, etc. I will still have total oversight ability but will let the manager handle things regularly.

I see this as being a solution to a few of the things you mention in that I don’t want the property management company to “make” a lot of money off of its business. As a matter of fact I would prefer they make just enough to keep going and not enough to make them a lawsuit target. This solves the first point that you bring up about most not being able to afford to deal with our usual tenants/buyers. Also because I will be the one setting it up and running it for the most part, it will be well versed in dealing with the people we usually deal with.

Obviously one would have to have enough properties to justify this business (so it won’t work for Kathleens situation), but since that is in my plans anyway I am not taking that into to much account. What I am not sure about is what point I need to be at to be able to sustain a business of this nature. I will have to work the numbers on it and obviously at first the property management company would just be me anyway (so it can be run cheaper).

I am not sure how this will work with long distances but think that once the management company is running along with a manager it would have to be better than having just me trying to be hands on only.

I have looked into this (passively… just kidding Steve and Ryan) and will continue to dig into it even more and would love your and others opinions and thoughts on this idea.

Thanks,
Jad

Re: commercial - Posted by Barry (GA)

Posted by Barry (GA) on March 17, 2006 at 09:27:54:

Jad,

I have thought about this also. Not that I am in any position right now and, frankly, I enjoy being involved with my properties. But I have wondered what the future might bring. Have you thought about eventually moving into commercial properties? Sell all those land/home deals and Lonnie notes and buy a commercial property? You could buy a park that is large enough to support management or apartment complex or retail center, etc. I do not know that I’ll ever even go in this dirrection but it is something to think about.

See this post by Ed Garcia-
http://www.creonline.com/wwwboard/messages/97339.html

Good investing,
Barry

Re: mobile homes (long) - Posted by Anne_LLC

Posted by Anne_LLC on March 16, 2006 at 11:41:32:

Jad,

I totally understand where you are coming from.

I am doing Lonnie deals because I became a burned-out landlord. I still have a few rentals, and the experience has been so very valuable, but I would never rent out a mobile home- only a house, and I love Lonnie deals because after the first month or so I’m totally out of the picture (except for cashing checks).

I have a close group of friends where all of us have as our goal a lot of cashflow and very little personal involvement. We have read and re-read Gerber’s book “The E-Myth Revisited”. It is very possible to do this and not buy yourself a job. You need systems in place.

I’ve frankly been surprised at how many people who make good money in real estate stay so hands-on. I think at some level they enjoy it- nothing wrong with that. But I want to be able to travel the world and still have money coming in.

Anything you can imagine, you can achieve. Now get to work!

:slight_smile:

Anne

Re: mobile homes (long) - Posted by Tony Colella

Posted by Tony Colella on March 14, 2006 at 16:20:59:

A few comments.

As we acquire more and more long term investments such as rental units, we do work more but at some point the excess cash flow allows us to do less and less. For several years I did everything. More and more I am able to hire handymen to help out.

I also find I work as hard as I want to. My life pace is still dictated by me for the most part. Don’t think that you won’t have time to travel. I am travelled more last year than I ever have AND spent more time on each trip.

A cell phone was all that it took for me to manage the occasional problem.

We are not quite the “S” that RK talks about as we can hire work done but at certain levels still prefer to do more ourselves. There is always the question of going to the next level(s) of owning a property management company and maintenance service. Personally I think most of us are further away from those realities than we think once the numbers are crunched.

We are not entirely “B” business owners but reading RK and you see how much he values real estate investing and cash flow. That is what we create and manage.

You also mentioned several times reducing your liability by owning a property management company. If you control all the entities and property, I suspect that there is little true protection if negligence occurs. Courts and attorneys can and do find their way through the web if the case warrants it.

I am not a tax guy by any stretch but I do believe that you loose a great deal of the tax advantages of rental properties if you are not actively involved. Think that was the tax law change that nailed the Doctor and Lawyers and began the S&L crisis but I could be wrong.

Managing managers is not worry free either. So what does that leave us with? For me, it means I keep acquiring property, managing as I need to, hire more and more out and grow the portfolio slowly but surely. I suspect that in time the decisions will necessitate themselves regarding management companies etc.

Who knows, before that becomes a problme it may be wise to sell off the property and owner carry. With multiple exits, we are in good shape.

Tony

I’ve thought about the same thing. - Posted by Neil (MS)

Posted by Neil (MS) on March 14, 2006 at 14:39:25:

Jad:
I have been thinking about precisely the same thing lately. I can see where I’m about to tie myself int more of a j-o-b than I might like if I manage to get a bit bigger. I’ve been thinking about exactly what you’re talking about: starting both a management and a maintenance/construction company (2 different organizations) with the eventual goal of turning control of them over to managers in the long run.

It just seems to make sense to me to build a structure for a more hands-off model from the beginning.

Neil

Re: commercial - Posted by osupsycho (OK)

Posted by osupsycho (OK) on March 17, 2006 at 15:15:45:

Actually Barry I have thought about Commercial property as more of an end game for me. I have a friend who is into triple net leases with big companies and there is some good money to be made there if you have a big amount of cash (or 1031 exchanges) with very little management. The returns suck compared to what we can get in mobiles but there is almost no hassle after it is set up and considering that it is based off of millions of dollars invested it makes for a nice monthly payout.

The property management company I am envisioning is more of a next step after Lonnie deals and Tony/Scott deals. Lots of possibilities…

I want to thank everyone for their responses and I will keep everyone updated on how things work out in this arena as I move forward.

Thanks,
Jad

Re: commercial - Posted by Tony Colella

Posted by Tony Colella on March 17, 2006 at 13:00:41:

yes

Re: mobile homes (long) - Posted by Daphne Lowe

Posted by Daphne Lowe on March 19, 2006 at 10:14:34:

In the Florida Keys, I?m surrounded by folks who are committed to spending their life enjoying life. Even here, I haven?t met many people who have walked away from success. The same drive and determination, love of the game, and non-financial motivation (and reward) that allowed them to achieve financial freedom is what keeps them at it, long after their bank account could sustain their lifestyle. People who are achievers gotta do something. They may take a 6 week vacation each summer and winter or spend every weekend at their vacation home or maybe even take sabbatical, but sooner or later, most of them wind up back in their game.

I think the allure of massive passive income and gaggles of idle time is mythical, like Bigfoot or the Loch Ness monster- lots of folks talk about it, some actually go out on searching expeditions, but no one seems to be able to produce documentable proof of its existence.

Daphne

I’m in love! :wink: - Posted by Michael(KCMO)

Posted by Michael(KCMO) on March 16, 2006 at 17:35:24:

“But I want to be able to travel the world and still have money coming in.”

My dream exactly, Anne!

To your/our success,
Michael(KCMO)

Re: mobile homes (long) - Posted by osupsycho (OK)

Posted by osupsycho (OK) on March 15, 2006 at 11:04:21:

Tony,

First off thank you for you comments as they were just what I was looking for. Secondly after I posted this I realized I left out some of my motivations for having this property management company that may change the viewpoint some.

A few years ago I took RKs advice and got a book call “Inc and grow rich” and loved every bit of it. If you haven’t read this book then I would highly suggest it (but it is hard to come by because I think it is out of print). This book reveals many benefits of having your own C corporation ranging from some mostly unknown tax free gifts that a company can give its employees (who will be you) to the legal protection that most of us already know. It also goes into some of the reasons to have different levels of companies and the benefits of this. One major advantage of the C corporation is that you can set your tax filing date whenever you want (I am sure you already knew this but wanted to add it for the others who may read this and don’t). This can allow you to play with when things hit the company and personal taxes as the dates can be different. This book made a believer out of me and the only question at this point is how I am going to have my C corporation.

But on to the points you make:

“There is always the question of going to the next level(s) of owning a property management company and maintenance service. Personally I think most of us are further away from those realities than we think once the numbers are crunched.”

This right here may be the end of my whole idea but looking at it so far I don’t see it that way. I mean on a basic level we could have this “company” and do nothing more than we already do. No extra employess or other items just have another entity that we do our management through. Hold the properties or notes in an LLC and then “outsource” the management issues to the property management corporation. This is basically just a distinction on paper but that distinction has some advantages. It would be used as a conduit for funneling what we already do on a regular basis into a the new C corporation. It would mean more paperwork and a little more money (to set up and maintain the corp at the least) but I feel that the tax and liability benefits would outweigh these added issues. The advantage is another layer that someone would have to fight through with a lawsuit and again the tax advantages of the corp that I mentioned above. Once this was already setup and running at a low cost you could evaluate bringing in someone to run the show other than you. That is the point where it gets tricky. Adding an employee (that wasn’t you or your partner) would bring all new trust and money issues. The key to this (as in most any business) is finding the right person and training them correctly. This touches on your “managing managers” comment and is absolutely correct. I suppose it harkens to eeveryones ability to let go and just do the managing. For me I don’t think it will be an issue (as I have done a lot of managing in my JOB and actually have a masters degree in management) but I’m not there with my lonnie deals yet so I guess I will have to find out on my own.

“We are not entirely “B” business owners but reading RK and you see how much he values real estate investing and cash flow. That is what we create and manage.”

Actually that sounds more like the I side of RKs quadrant to me. He seems very adament about his definition of a B (business owner) and at this time one of my goals is to meet his definition in the future. To truly be able to walk away and not have any contact with the business for several months and it will be fine. Not sure I will be able to do this (can any of us truly disconnect for that long?) but want the business to be able to handle it if the occasion arises.

“You also mentioned several times reducing your liability by owning a property management company. If you control all the entities and property, I suspect that there is little true protection if negligence occurs. Courts and attorneys can and do find their way through the web if the case warrants it.”

My points on reducing liability are mainly for more of the frivolous type of lawsuits. By having the entity that deals with the public the most (the property management company) be a smaller target money wise. If it doesn’t look like a target then you are much safer. But if you are out there dealing with people and your entity shows all kinds of property and cashflow… just looks real enticing to the wrong crowd. This is something that I learned from Ernest Tews materials and really believe in. Not that I have a real worry about this but more of an icing on the cake type deal. I wouldn’t go to all the work of the property management company just for this though. If there is truly negligence as you mention then there is no reason to be worrying about any entity or grouping of entities to save you. If you have done something truly wrong then don’t shirk it or try and hide behind your entities.

“I am not a tax guy by any stretch but I do believe that you loose a great deal of the tax advantages of rental properties if you are not actively involved. Think that was the tax law change that nailed the Doctor and Lawyers and began the S&L crisis but I could be wrong.”

This is a very good question that I am going to have to research and get back on. This is exactly the kind of little sticking point that I wanted to see about this idea. So know to find out if it is a problem and if it can be overcome.

“So what does that leave us with? For me, it means I keep acquiring property, managing as I need to, hire more and more out and grow the portfolio slowly but surely. I suspect that in time the decisions will necessitate themselves regarding management companies etc.”

I covered this mostly above but again the idea I present can be very basic or much larger however you want it.

“Who knows, before that becomes a problem it may be wise to sell off the property and owner carry. With multiple exits, we are in good shape.”

Well I am not looking at this as a problem but instead as another opportunity. The property management company in my mind would be something that provides another level of liability protection, another level of tax advantages, the ability to put things on auto pilot (somewhat), as well as some other minor advantages. One of those would be that if the company is run correctly and doing well I suspect that other people will want to use it for their management issues as well. It is entirely possible that you could have the property management company be something that turns into a money making venture on its own by servicing other peoples properties. This would be completely up to us but is something that should be explored if the desire is there. Another advantage is if you are flashy enough maybe you could get your own TV show on cable ala “Flip this House”… OK just kidding on that one :slight_smile:

The last thing I want to say is that I am laying a lot of things out there that are just ideas and thoughts and would need to be explored by anyone that has interest (in other words don’t take anything I say as gospel). I have gotten many good ideas out of the archives and other readings and can only hope that this will help someone else someday.

Thanks,
Jad

Re: I’m in love! :wink: - Posted by Anne_LLC

Posted by Anne_LLC on March 17, 2006 at 11:00:12:

Thanks! To your success as well, Michael.

Anne