Buy a Mobile Home Park with Seller Financing

Lately, we’ve discussed various ways of obtaining financing to buy a mobile home park without using a bank for the loan. Nothing against banks, but the new down payment requirements, even if you can afford them, are not a good use of your cash. The real profit potential in the Jason Hartman style of investing requires that we put as little of our own money into the deal as possible. Today’s 20 to 25 percent demanded by the traditional financing industry is simply too much if you can avoid it.

One way to get around the ludicrously high money down requirement is to obtain seller financing. Here’s the scenario. A good rule of thumb tells us that around 30% of all mobile home parks are owned free and clear. Many are mom and pop businesses that have been run by the family for decades. This is the kind of opportunity you need. With this scenario, a seller knows that the park is a positive cash flow machine. It’s profitable and will continue to be as long as the buyer isn’t an idiot. By the way, to get the seller financing you so desperately crave, you’re going to have to convince the seller you are, in fact, NOT an idiot. Hopefully that won’t be too hard.

Why would a seller want to take on the perceived risk of financing the purchase? Let’s look at it his from his point of view. To sell the park outright incurs a huge capital gains tax, which most sane Americans prefer to avoid. Thanks to depreciation and other business deductions, the seller is used to paying very little in taxes. His primary goal is to let go of the responsibility of managing the property. Financing the purchase for you allows him or her to keep the monthly cash flow they’ve become accustomed to (your mortgage payment).

These are the points you need to make when approaching a seller about the possibility of financing the mobile home park for you. The bottom line is twofold:

1. You take the responsibility of the park off his or her shoulders.

2. They get a nice income stream at minimal tax risk and a fair interest rate.

The great thing about seller financing is the terms can be anything the two of you agree on. No pesky bank rules and regulations to worry about. You should be aware the seller can still ask for 25 percent down, but maybe he won’t. Maybe you could offer to pay a bit higher interest rate in return for a smaller down payment.

The ultimate task to make this strategy successful is for you to convince the owner you’ll make each and every payment AND continue to operate the park profitably. (Top image: Flickr | Tax Credits)

The Commercial Investing Center Team


CI 34 – High Occupancy Rates with Military Tenants

Jason Hartman hosts a two-part show where we start with some reflections on the recent “Meet The Masters of Income Property Investing” event at The Hyatt Regency in Irvine, California. Investment Counselors, Ari and Sara join Jason as they discuss the following:

1)   Establish 5 year plan for where you would like to be in 2016

2)   26-27% real unemployment rate

3)   Decline of standard of living for America (ask tenants)

4)   Which entry point are you?

a. Beginning Investor – Optimize rapid growth that can be re-invested for long term compounding
b. Growing Investor – Optimize for stable long term (inflation protected)
c. The short path to retirement – Optimize for low risk and high stability
5) Prime age for spending is 46 years old

6) Gen X is 40 million

7) Gen Y is 80 million people (early 20’s now)

8) New investors should seek returns in the 20-25% range

9) The big problem now is that people are running out of money before they die

10) Social Security will not work (look at Greece). People are living longer too now.

11) Young Investor

a. Huge impact on higher returns early in your investing career (bell curve)
b. New Investors also have the opportunity to cherry pick high return small deals to start their career
12) Investing $1,000 annually (9k) from age 21-30 and letting it compound, or $1,000 per year after 30 years old (35k). Early investor will win.

13) Invest while young and seek safer investments when older.

14) The growing investor

a. Stability matters
b. Inflation creates volatility by disconnecting the nominal (name only) value or real value of assets
c. Income properties are best positioned to create inflation protected, stable growth
15) Investors need to leverage and make debt work for them (redistribute wealth)

CI 33 – Getting Rid Of A Bad Property and Lawyers Are Liars

Jason explores some ways to get out of a bad property then he interviews author/attorney Mark Kohler about his book “Lawyers Are Liars: The Truth About Protecting Our Assets.” Mark is an attorney, CPA and entrepreneur who has owned numerous businesses since high school, through college and even as a professional. Mark’s principal career has been as a partner in the law firm Kyler, Kohler, Ostermiller, & Sorensen, LLP. He specializes in the areas of business, estate and tax planning. Mark owns several commercial real estate projects and loves the people, transactions, and everything to do with real estate. You will be pleasantly surprised at how exciting and interesting a discussion regarding tax and legal planning can be. Jason and Mark will distill complex legal and tax strategies to common layperson terms, adding interesting stories and anecdotes.

Some lawyers, and others who are not lawyers, use fear tactics to sell the unsuspecting public various asset protection structures or strategies that are outright lies. Until now, no other professional has been willing to call out the frauds and cheats in this powerful industry where self-professed experts and do-it-yourself hacks wreak havoc on the innocent just wanting to protect their assets. This episode we will expose the liars. Undoubtedly, this book will become a desktop resource for not only the average middle income American wanting to protect his or her assets, but attorneys, estate planners and financial professionals guiding their clients through this complex area of the law. Learn the best kept secrets in asset protection planning, learn the truth about Nevada corporations, off-shore planning, land trusts and all of the so called silver bullet strategies! Mark and many other great speakers will be presenting at “The Masters Weekend: A Gathering of Experts”.

CI 32 – How To Save On Life’s Largest Expense with Diane Kennedy, CPA

Most of us spend lots of time shopping around for the best deal on the things we buy while spending more money on taxes than anything else. Why not “shop around” to save money on life’s single largest expense? Join Jason as he talks with famed CPA, Diane Kennedy, about the tax strategies of wealthy real estate investors and business people. Diane Kennedy, a preeminent tax strategist, is the founder of USTaxAid Services, a leading tax firm that works with clients throughout the U.S. and founder of TaxLoopholes, an award-winning online tax education site. Diane is the author of The Wall Street Journal and Business Week bestsellers, Loopholes of the Rich and Real Estate Loopholes, and co-author of The Insider’s Guide To Real Estate Investing Loopholes, The Insider’s Guide to Making Money in Real Estate, The Insider’s Guide to Tax Free Real Estate Investing and Tax Loopholes for eBay® Sellers.

CIS 31 – An Action Plan for Mobile Home Wealth

Join Jason Hartman as he interviews Stu Silver, The Mobile Home Man, regarding his mobile home and mobile home park investing strategies.  Learn the do’s and don’ts about investing, how to protect yourself from being taken advantage of, to know when you’re getting a good deal, and even how to inspect your mobile home to make sure you don’t find any unwanted surprises.  Stu says there are over eight million mobile home parks in the United States and you can get a good deal on a mobile home, or even possibly get one for free.  Stu’s first rule of investing is, “Protect yourself at all times!”  For more details, listen at www.commercialinvestingcenter.com.

Stu Silver has been investing in real estate for 30 years and has specialized in mobile homes for the last 18 years.  He is known as The Mobile Home Man or Uncle Zally, and has authored three books (under the penname Zalman Velvel), Mobile Home Wealth, Mobile Home Wealth Part 2, and How to Get a Good Deal on a Mobile Home or Even Get One For Free!. He also features his Mobile Home Wealth Systems on CD’s and does live Mobile Home and Real Estate Training.  Additionally, Stu writes a mobile home blog called “Kangaroo Kronicles.”  He holds the CCIM designation and is a licensed real estate broker, mortgage broker, auctioneer, mobile home dealer, and former real estate appraiser.  He has trained more than 5,000 people in real estate investing in his 3-day bootcamps and live on the internet.

CI 30 – “The Longevity Project” with Howard S Friedman

Do you want to know the secrets of living longer?  Join Jason Hartman on this episode of Holistic Survival as he interviews Leslie Martin, Ph.D. and Howard Friedman, Ph.D., authors of “The Longevity Project.”  Find out who lives longest and why.  The answers may surprise you! Visit: http://CommercialInvestingCenter.com.

HOWARD S. FRIEDMAN is Distinguished Professor at the University of California in Riverside. LESLIE R. MARTIN is Professor of Psychology at La Sierra University, and Research Psychologist at UC Riverside. They met when Leslie began graduate study in 1991 at UC Riverside, where she became a key and continuing associate in Howard’s then-launching lifespan longevity studies. Here are some facts about their work, their interests, and their qualifications.

Their scientific research on health and longevity has been published in over 150 influential and often-cited scientific articles and chapters in leading books and scientific journals. In addition, Professor Friedman has authored or edited ten academic books about health and one prior trade book, The Self-Healing Personality. His textbook on Personality is now in its 5th edition. He served as Editor-in-chief of the Encyclopedia of Mental Health, which received recognition as a “Best Reference Source of 1998” from Library Journal. His edited book, Foundations of Health Psychology was named a CHOICE Magazine Outstanding Academic Title. Professor Martin’s books include Health Behavior Change And Treatment Adherence, and a textbook in health psychology.  Leslie and Howard have spent 20 years collaborating on the research described in The Longevity Project.  The study tracks the loves and lives of 1,500 Americans from childhood to death.

Putting the research findings into practice, Leslie is passionate about adventure travel that stretches her past achievements. She climbed Kilimanjaro (to the summit), and she recently completed the Marathon des Sables. This ultra-marathon is a 151-mile self-sustaining endurance race across the Moroccan Sahara, in which runners must carry all food and clothing for the entire marathon (in their backpacks). (See picture.) Always interested in a challenge, in her early 30’s Leslie became a champion for her age group in high-jumping. When she is not in the lab or writing about health, she is planning which mountains she will next climb.
Less extreme in his physical adventures, Howard prefers swimming, hiking, and cultural travel. In addition to his research and teaching, he writes every day, including a “My Turn” column published in Newsweek, and a new blog.

Dr. Friedman is the recipient of two major career awards for his health psychology research. In 1999, he received the Outstanding Contributions to Health Psychology Award from the American Psychological Association; and in 2008, he was honored with the James McKeen Cattell Fellow Award from the Association for Psychological Science (APS), an international award and the most prestigious in his field of applied research. See: http://www.psychologicalscience.org/awards/cattell/citations/friedman.cfm

A graduate of Yale University (magna cum laude with Honors in psychology), Dr. Friedman was awarded a National Science Foundation graduate fellowship for his doctoral study at Harvard University. He is a thrice-elected Fellow of the American Psychological Association (in Personality and Social Psychology, Health Psychology, and in Media Psychology) and an elected Fellow of the American Association for the Advancement of Science (AAAS) and the Society of Behavioral Medicine.

Dr. Martin graduated summa cum laude from the California State University and received her Ph.D. from the University of California in Riverside. She has received the Distinguished Researcher Award, and the Anderson Award for Excellence in Teaching, both at La Sierra University. Former department chair, Dr. Martin has also received awards for outstanding advising and for service learning. In addition to her research on pathways to health and longevity, she studies physician-patient communication and its relationship to medical outcomes and has lectured widely on these topics.

CI 29 – Mobile Home Millions

Jason welcomes his friend and mobile home investing guru, Corey, to this episode of The Commercial Investing Show. Visit: http://CommercialInvestingCenter.com. Adding another entry to our favorite success stories, Corey started his real estate investing career in 1993 by selling his jet ski to raise enough money for a down payment on his first deal. Since then, he went on to build a sizable portfolio of real estate, including apartments, single family homes, self-storage facilities and mobile home parks. Over the past several years he has focused primarily on mobile home parks and self-storage facilities. Corey regularly shares his expert knowledge and enthusiasm for the industry at real estate clubs, national seminars and universities about investing in his favorite avenues of real estate investing: mobile homes, mobile home parks and self-storage units.

Step-by-Step Guide to Commercial Property Investing

If you’ve been a residential investor for any length of time, there’s a good chance the idea to move up into commercial property investing has crossed your mind a time or two. Depending upon the property you choose, it might turn out to be a good or bad decision. One thing is certain, the possibility for exponentially increased profits exists, as does the chance of financial collapse. Real estate expert Dave Lindahl is fond of saying, “It’s no harder to manage 50 units than to manage 5 units.” If that’s the case, then what are you waiting for?

A cohesive plan might be a good idea. Here’s what to consider before making the move to commercial property.

1. Don’t be afraid to think big. The hassle of finding a mortgage is the same for a one unit building as it is for a 10 unit building. So is the task of repair, maintenance, and advertising. If this is the case, why not at least explore how you might be able to move up into larger apartment buildings?

2. Don’t get in a hurry. Larger, multiple unit commercial deals take longer to go through than single family residential. So does renovation, repair, and filling it up with tenants. This isn’t necessarily a bad thing but should be taken into account when you begin the process. Don’t make the mistake of needing positive cash flow from your commercial investment the month after you buy it.

3. Apartments aren’t the only game in town. When a residential investor looks to move up in the world, his first inclination is often to find an apartment building. It’s natural because it is the type of investment he is familiar with, but don’t overlook the possibilities of office space, strip malls, industrial, mobile home parks, and self storage facilities – though, at present, the Commercial Investing Center is not impressed with the majority of choices outside of the last two options and maybe an apartment building.

4. Don’t fear the learning curve. Many residential investors have developed a system, over the course of doing several deals, that works well for them. Don’t be surprised if it doesn’t translate well to a commercial deal. Commercial properties are a beast of a different sort and the odds are high you’re going to have to develop a different system. Don’t hate the idea. Accept that there will be a learning curve and go with the flow.

The preceding isn’t all you need to know about commercial investing but it might be enough to save you from disaster. Just remember it’s all about the deal and you should never, ever pursue one that seems iffy.

The Commercial Investing Center Team

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(Flickr / lordsutch)

3 Inherent Risks in Buying Commercial Real Estate

The temptation for the business owner is there. He’s the proud owner of a thriving enterprise but hates the idea of scratching out a monthly check to the building’s landlord. Wouldn’t it be better to own the real estate instead? Well, if you’re talking about a self-storage facility or a mobile home park, we’d be more inclined to agree with you. When it comes to the larger commercial real estate market in general, we’re not so quick to recommend an investor pull the trigger right now.

Of course, the major caveat is always whether or not the deal makes financial sense the day you sign on the dotted line. Until that criteria is met, you shouldn’t be thinking about buying anything. At the Commercial Investing Center, we love a great deal as much as the next guy, but there are three risks we see all too often when it comes to buying commercial real estate. Let’s look at each in turn.

1. The Incredible Location Backfire: In commercial real estate even more than residential, we see the “hot” area suddenly turn cold faster than you can imagine. Business locations are trendy and that which trends upward can turn around and trend downward even faster. Sometimes developers run out of cash and those pie-in-the-sky projections of a shopper’s paradise never quite materialize, so there you are owning a plum property in the middle of nowhere. They built it but no one ever came. Why is commercial real estate so much more erratic than residential? We’ve thought about that one long and hard and the best answer we can come up with is the concept of “universal demand.” Put simply, we all need a place to live but nobody needs to go shopping at your store.

2. Liquidity: The idea of liquidity can cut both ways when it comes to buying commercial real estate. A business that ties up too much liquidity through the process of buying real estate could end up shorting itself of critical cash flow and reserves. On the other hand, a struggling business that owns real estate at least has something of value to liquidate and raise cash from the sale. The problem is that you can’t always unload a piece of property when you need to. There are these things called slumps that tend to happen every now and then, and Murphy’s Law dictates that the time you need to need to sell property in the worst way will be the time that nobody’s buying. There’s no logical reason that this should be the case – but it almost always is.

3. Skating on Thin Ice: There are a couple of variables that can throw your commercial real estate venture into complete disarray. The first is when a tenant (s) stops paying rent, throwing your cash flow into chaos. That’s why a reliable tenant is worth their weight gold and unreliables a serious pain in the neck. While it’s usually easier to evict a commercial tenant than a residential tenant, it stills plays havoc with your monthly budget. The other variable that can upset the apple cart all at once is major repairs or maintenance, which can run into the hundreds of thousands of dollars if you have the misfortune to lose a major system like heating or air conditioning in a shopping center. Or plumbing. Or any of a dozen different minor or major catastrophes that must be fixed quickly.

Consider also the fact that buying commercial real estate very likely involves the services of an entire professional team that you’re going to have to create. It’s not as simple as a residential buy where you can tend to most matters yourself. When it comes to buying a multi-million dollar property, you’ll need at least an accountant, lawyer, commercial broker, and mortgage broker. You’re playing with the big boys now and can’t afford to make the kind of financial mistake that sinks your investing business for good.

We’re not trying to scare you out of ever investing in commercial real estate, but only to make sure you realize exactly what you’re getting into. Yes, the potential for incredible profit is there, as is the chance to go completely bust. In recent years, we’ve seen better opportunity in self-storage facilities and mobile home parks, which combine a relatively low investment (when compared to commercial property) but a higher rate of return than most residential deals. If you don’t believe us, do your research. Jason Hartman interviewed self-storage investing guru, Scott Meyers, about the profit potential in owning and operating this type of property investment. There are worse ways to spend 39 minutes and 22 seconds of your life.

The Commercial Investing Center Team

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(Flickr / Hub)