Learning

Mobile Home Investing: Not What You May Be Thinking

by Brandon · 0 comments

 

This is a post (the second in a three-part series) by John Fedro of MobileHomeInvesting.net. 

In my last post here at RealEstateInYourTwenties.com, I introduced myself, teased you with my simple cash-flow generating secret tool, then KAPOW!! – completely threw you a curve-ball by divulging my money-making strategy is investing in small, individual, easy-to-close mobile homes in and out of mobile home parks. I need to be brutally honest with you for the next minute…

Before we get into the meat of a cash-flow deal (next post) and talk about where all our money is made, you have to understand why sellers will sell you their unwanted mobile homes for such low prices; and conversely, why buyers will pay over retail prices for the same mobile homes. Much like any j.o.b. – you must understand your product, market, and all the players before you may truly thrive.

1. Understand Your Target Homes:

The mobile homes that will make you the most money are often times not the ones you would first believe. In a nutshell 3 bedrooms almost always outsell 2 bedrooms, and clean mobile homes always outsell mobile homes that need repairs. But what else… If you have been in real estate for any length of time you understand that it is not the cleanest or largest homes that make the most money but it is the more motivated sellers that you are truly after. The more motivated the seller, often times the more lucrative the deals end up becoming.

2. Understanding Your Buyers:

Approximately 80% of your end-buyers that call from your “Mobile Home For Sale” advertisements will not have the cash or approved credit to pay you all-cash for your mobile home. Another way to say this is that most mobile home buyers can make you a move-in payment and monthly payments for the sales price of the home. Understand that there is an ocean of buyers looking to buy a home with monthly payments instead of paying with all-cash.

What about buyers with all cash? These buyers are out there but in far less supply than buyers with some cash and great job history. Go where the demand is… payment buyers.

What about bank financing? Bank financing is very hard and restrictive to obtain especially concerning mobile homes on rented land such as inside a mobile home park.

There is a large segment of American society that are credit-conscious, hard-working and honest folks that would love to stop renting and finally own a mobile home of their own. If you choose to sell a home for all cash you are competing with all other sellers looking to sell their properties for all cash; driving home prices lower and lower. If you choose to accept monthly payments for your mobile home you can likely find tenant-buyers eager to pay over retail price for the value/opportunity to own a beautiful home.

3. Understanding Your Sellers:

My real estate investing business changed forever when I began to see my sellers for what they really are; fragile, scared, vulnerable, friendly, and selfish human beings. Let’s step outside the relationship that we typically have with mobile home and traditional real estate sellers and realize that each is a unique soul with his or her own set of skills, ambitions, loves, fears, and wants.

So what does all this mean for you: In a nutshell sellers are real people in real situations. Some sellers need to sell today, and others can wait weeks, months, or even years before becoming desperate to sell. Again some sellers are at the end of their ropes, while others have enough savings/income to ride out whatever situation is requiring/pushing them to sell. By being a mobile home investor in your area you may close deals and generate cash-flow by knowing your market and knowing what buyers will pay.

In my next post here at Realestateinyourtwenties.com you will discover an simple method to help ensure you underpay for every mobile home you purchase.

 

Impact a life daily,

John Fedro

John@mobilehomeinvesting.net

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

eBook Now Available!

by Brandon · 12 comments

Hey everyone!

After many days of writing and editing, my first eBook has arrived and I’m giving it away for free! Yep, just as a gift for hanging out at Real Estate In Your Twenties.

And yes, you can still get the eBook free if you are thirty, forty, or a hundred years old!

Simply add your name and email to the box below!

Also, let me know your thoughts about the book!

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

How to Quickly Analyze a Single Family Home for Investment

by Brandon · 10 comments

Looking for the “right” home to buy can take a lot of time and effort, especially when trying to comb through the hundreds or thousands of deals that are on the market today. It is important not to waste time and maximize your efforts (see my last post on the 80/20 principle).  The following is the quick mental math that I use to analyze a single family home quickly and decide if it’s even worth looking into.

First, I only look for homes in areas that I am financially comfortable with. So, if I am not comfortable with the average sale prices, rent prices, days on market, etc of a given area – I learn that first. I live in a fairly small community, so it is fairly easy where I live.  If you live in a large area, like a major city, you should be focused on a small area that you can fully wrap your mind around. Never invest where you don’t know the market.

Second, I determine how much it is going to cost me to rehab the place. This is a VERY loose number, and generally just use $10,000 for a small paint/carpet turn,  $20,000 for a medium turn, and $30,000 for a major remodel. This includes labor, material, closing costs, and holding costs.

Third, I look at the purchase price and add the repairs. So, if I found a house for $65,000, and it needed $10,000 in repairs, I use the number $75,000.

Fourth, I then take that final number and knock off two “zeros”. This gives me a good estimate of my monthly mortgage payment with taxes and insurance. So $750 becomes $750 per month. I know this is a bit high, but I like to be conservative.

Fifth, I add a few hundred for vacancies, repairs, etc. So I might say this property is going to cost me on average $1000 per month.

Finally, I just need to know what the average rent will be. If the average rent, on the low side, will give me $200 per month in cashflow, this is probably a deal worth looking into. If not, I’ll move on. Additionally, if the total cost I would have invested in the  the property is $20,000 less than it’s value, then I will also move forward.

I believe any property needs to have both positive cashflow and good equity. There are too many good deals today to buy something that doesn’t have both.

That’s pretty much my quick and easy strategy to sort through all the listings to find a gem. I do this whole process in about thirty seconds per home, and it has worked great for me. Obviously, if I decide to pursue it in more detail I will learn exactly how much repairs are going to cost, what the mortgage will be, and more. This is simply a very quick way to sort out 90% of the deals and only focus on the ones that might be good.

 

image credit: NNECAPA

 

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

The 80/20 Principle in Real Estate Investing

by Brandon · 6 comments

What does the name “Pareto” mean to you?

Probably very little. However, the principle made famous by an Italian economist over 100 years ago has a huge impact on your investing techniques and wealth building ambitions.

“Pareto’s Principle,” also known as “the 80/20 Principle,” states that for many areas of life, 80% of the effects come from 20% of the causes. For example, Pareto noticed that 80% of the land was owned by 20% of the population and 80% of the peas in his garden were produced from 20% of the plants. You can see examples like this throughout nearly every field of study in our world, especially in business.  Often times, the ratio is even more staggering.

So what does this mean for a real estate investor?

Pareto’s Principle is useful in encouraging focus on productivity and results-driven business. As a real estate investor, this principle helps to find what areas of our business are really earning income and which areas are simply wasting time. Many of the activities that an investor performs on a daily basis are probably wasted time. By focusing on the 20% of the actions that are providing the most results, we can free up significant amounts of time to do the kind of things we want to do. This is key is beginning to “hack” real estate.

Several years ago I realized that most of my efforts were spent doing small maintenance jobs that seemed to take all day. By hiring a resident manager to take over the maintenance, I was able to gain 80% more time in my life – time that I now spend looking for deals, spending time with my wife, and blogging at RealEstateInYourTwenties.com.

Let’s look at a few more specific examples.

  • If you are trying to find leads for motivated homeowners looking to sell, what sort of action is getting you the most results? Are you spending most of your time putting up bandit signs when a simple Craigslist ad is driving most of your business?
  • If you are remodeling a home, what upgrades are actually contributing the most to the future value of that home?
  • If you are managing a small apartment building, what advertising methods are getting you the most calls?
  • Is 80% of your wealth being built by simple investing? Why are you wasting time with wholesaling deals?

What to do with Pareto?

Now that you have begun to think in these terms, its time to begin focusing on improving those areas of your business. If Craigslist is driving most of your leads – then focus your efforts on making your Craigslist ads even better. If new carpet will cause the most significant increase in value or speed of sale -get great looking carpet! Improve the things that matter and watch your investments take off.

I am not suggesting you quit all your other activities if they are not bringing you the most leads or income.   Often times, things that don’t seem to produce much income actually help in other ways. The important thing is to know what your efforts are producing – and prioritize based on that. Don’t waste time if you don’t need to.  The key is being aware of how you are spending your time.

It’s all about finding what works and maximizing those causes to explode your results. Your time is precious, and by looking for ways to increase your efficiency you can free up your time to do the kind of things you want to do. Only then are you truly living life on your terms, the goal of any real estate hacker.

P.S. If you want to learn more about the 80/20 Principle – check out Tim Ferriss’ book “The Four Hour Workweek”. While not a real estate book, the principles taught are invaluable to a real estate investor looking for more time to live to the fullest.

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

Using Facebook to Super-Charge Your Real Estate Investing

by Brandon · 5 comments

Do you use Facebook to market your rentals? How about to attract private money for your investments? If not, check out the post I’ve written over at BiggerPockets.com! I was their featured blogger today! This was the first of many to come!

Unless you’ve been living under a rock for the last five years, you know Facebook. You probably can’t go two hours without checking your wall, “liking” your friend’s comment, and laughing at a video of a golden retriever playing the piano … (continue reading on BiggerPockets.com)

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

Five Huge Mistakes I’ve Made Investing In Real Estate

by Brandon · 7 comments

I once asked Seth Godin (marketing genius and internet blogger) via email what he would change if he could go back and do it again.  His response:

If I went back and changed something,

then things would be different and I wouldn’t be me.

But I like being me. So I’ll take this life

He makes a valid point. If we were to go back, it would change who we are. However, what about if we could help someone else learn from our mistakes?

People don’t like to dwell on mistakes.  Our pride likes to say “I’m awesome” but the reality is we make mistakes all the time.  While I’m sure it will hurt my image as an “expert,”  I am going to talk about the mistakes I’ve made because I want to save others from making the same ones. This article is designed to help you learn from those mistakes and hopefully avoid them yourself! Without further ado, my five biggest mistakes I’ve had in my investment career:

  1. Not Saving Enough – I have been lucky, but stupid. When I started investing in real estate, I had no money. I bought my first property with close to nothing down and was fortunate enough to sell it and made a decent profit. While I am completely in support of investing with no money down, I believe any investor needs to have at least some money in savings because the road to real estate riches is a bumpy one.
  2. Using Credit Cards – Building off number one, because I didn’t have solid financial resources, I often turned to credit cards to finance various things. I wish I had never used them.  When I first started, I bought into the “credit cards are a tool” mentality, which caused me to quickly max out several cards during rehabs. This is fine when the market is great and the proceeds from the flip can pay off the card, but when the market turned and I turned those rehabs into rentals, the credit cards didn’t get fully paid off. I have spent the past four years tackling them now.  As Dave Ramsey likes to say, debt is slavery.
  3. Renting To Family – I’d heard it said a thousand times but still fell into this trap. Do not rent to family. Ever.  I’m sure you can think of many reasons that this could turn out bad – and they are all true. As a landlord, you will always be seen as a “greedy” S.O.B. by your tenants, so it is best not to have one of those tenants be in your family.
  4. Renting to Friends- Similar to number four above, renting to friends is a mistake. I have rented to friends and it has turned out great, but the few times it has turned out bad it turned out REAL bad.  It simply isn’t worth it.
  5. Not Learning From A Mentor – Most of my mistakes could have been solved by simply listening to someone who had been there before. If I could go back, I’d have joined my local real estate investment club immediately, followed around the good investors until they were sick of me, worked for free on a flipping crew to see how it was done, and become a real estate expert before ever spending a dollar on investments.

That said, I know that if I were to go back and change things, I would not be where I am today and I like where I am. However, I believe strongly in the importance of learning from mistakes as to avoid future ones and help others avoid the same.

Are there things you wish you had known? What would you change if you could go back? What can you teach others from your mistakes?

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

12