Today’s REI Classroom Lesson
Kevin Bupp talks to us today about a few of the benefits of purchasing a mom and pop owned mobile home park. If done right, it can be a win-win for both you and the seller.
REI Classroom Summary
Many times, mom and pop sellers don’t know the real value of the property and haven’t been maximizing the park’s potential.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Kevin: Hey, guys, Kevin Bupp here from themobilehomeparkacademy.com and The Real Estate Investing for Cash Flow podcast. Today, I’ll be the host of your REI Classroom tip and in today’s show, I’m going to discuss with you the benefits of buying mom-and-pop-owned mobile home parks.
Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program and your blueprint to investing success.
Kevin: There’s a huge, huge benefit of doing this because most mom and pops, and we’ve bought a lot of them, most mom and pops do not maximize the value of their properties. It’s very, very common that we find mobile home parks that have been owned by mom and pops. Maybe they’ve owned them for 15, 20, 25, 30 years and sometimes even longer than that to where rents have not been matched to the marketplace. We just bought a property recently where the rents had not been raised for 16 years. This is a very common scenario. This means that there’s a lot of value add opportunity for you when you’re buying a mobile home park from a mom and pop.
Some other benefits that go along with buying from a mom and pop are most mom and pops have little to no debt on their properties, especially if they’ve owned it for 15-plus years. Most of the time, they’ve paid it off so they’re free and clear. This makes these properties prime candidates for owner financing. In fact, five of the seven properties that we’ve bought in 2016 were owner financed. That means you don’t have to go through banks, you don’t have to go through getting qualified or anything like that. In fact, those five loans were all non-recourse loans meaning that there was no recourse us as borrowers. It’s quick. It’s easy. It’s painless, rather than jumping through hoops with a local bank.
It’s a win-win for both scenarios. In fact, it’s a win for us because it’s easy. We can work out really good, easy terms with the seller. It’s also a benefit for most mom and pops because if they have no debt in the property, they’ve probably owned it for a long time. That means they’ve got some large capital gains exposure if they do sell. By them owner financing allows them to mitigate their capital gains exposure. In addition to that, it allows them to continue with a cash flow source.
If they’ve owned this property for a long time, then they’re used to having that monthly income stream each and every month. More often than not, when we ask them what they’re going to do with their proceeds from the sale, they typically have no idea. They’re going to go put it in a CD or a savings account, which, obviously, as you know today is not going to do too much as an investment from an investment standpoint.
Owner financing that property allows them to basically get a really high return on an asset that they know better than anyone else that is secured. It’s secured by real estate. They get that income stream. They mitigate their capital gains exposure. It’s a huge win for them. It’s a huge win for us. It’s just one of the many benefits of buying a mom-and-pop-owned park.
A few of the other benefits is that a lot of mom and pop owners really have no idea what their park is worth. Sometimes this works against you because they think it’s worth more than what it really is, but oftentimes it can work for you, meaning that you can pick up a property for well below market value because they really haven’t kept their finger on the pulse of the marketplace. All right, guys, that’s all we have for today’s lesson. I want to thank you again for joining me today. Until we meet again next time, I want you to get out there, take massive action and make some cash flow happen.
Mike: Are you looking to change your life through real estate investing? If you’re interested in either getting started or taking your business to the next level, please check out FlipNerd’s private program at theinvestormachine.com. This is the most robust real estate investor coaching, networking and mastermind on the planet, and designed for your success.
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Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of flipnerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.
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