It's a whole new world

mobile home university
21

Well, to follow up on yesterday’s post, we had our meeting with the bank today and it went pretty well. Nice community bank that understands what times are like right now. We have some leads on our property and may be able to get out with our shirts.

Tony, you’re dead on about apathy. I have had to force myself to keep going and some days it just doesn’t help. It’s only going to get worse and until the time our local, state, and federal govt’s get out of the way and let us work, we will continue to struggle. With these thin margins all they can think about are ways to increase their take. Health care, red light cameras, fees for mud flowing into the creek, emissions tests, etc. It continues to add up and I’m not sure we’ll get relief anytime soon. Should be a very interesting year ahead.

Again, good luck this year to everyone. I’m watching it snow about a foot here in TN!

22

Thanks Gentlemen,

I appreciate the candor. There’s no time to sugar coat the situation. It’s just a waste of time.

I will start doing some Lonnie deals in our local parks and go from there. I live in Texas where it sounds like the climate is a bit more moderate.

Kindly,

23

Shawn,

I agree about tunnel vision being a strong concern. I have told this to many that I have discussed the “crisis” and changes with. I do not want to be so close to the trailers (trees) that I cannot see the park (forest) and opportunity.

I have been so deep into the mobile home game that I wonder if I am missing opportunity arround me for lack of looking elsewhere.

I have written that just because we invest outside of the traditional real estate model does not mean that we are outside the box. Sure we may have left the employment box and the stick built box but I question if I may have jumped into a tall mobile home box that I no longer can see outside of.

This by no means suggests that I wish to leave this niche or think it faulty. This niche supports my family and I now and is intended to do so well into our retirement.

I aslo agree Shawn that investors will use creativity in any environment to overcome the changes in law and economy and find the means to prosper. Creative investing may well get a makeover in its efforts to adjust. Many here will no doubt be a part of that making over. The rest will seek an answer to the question, “how did you do it?”

Tony Colella

24

Texas is one of the better demographic states. I just read an article of the top 10 places to invest in real estate and Texas had 2 of the cities listed.

Good Luck but remember we are here if you need help analyzing future deals.

25

Don’t mistake confusion for apathy. I think plenty of people are still in the game, but they’re perplexed and silent. Their biggest mistake is in standing still.

I have my own ideas about where things are headed, but I’m still not confident about how to proceed. Right now I’ve got 100% occupancy and haven’t lowered rents, but that could change any minute. I don’t know if I’m in this situation because I’m just in the right market, or if I’ve been able to subconsciously adjust what I’m doing because I keep in touch with other investors. I’m different from most on this forum because the bulk of my properties are stick-built multifamilies. I don’t know if that’s what makes the difference or not.

I am constantly on the lookout for new opportunities that may or may not involve real estate. Right now I’m looking into bad consumer paper (check into this, guys. It’s what we’ve been doing all along, but without the hassle of the real or personal property), I’m raising private money, I’m looking for owner-financing on portfolios of rentals from retiring landlords, and I’m looking at bigger apartment deals. I’ve been calling on seller ads in the local paper and am really energized by the exchange. Many land/homes are priced crazy low, and once my private money is in place I’ll start buying those with cash or owner financing, but only in the very best locations.

I am feeling the pinch, for sure. I invested in a partnership that went sideways last year and it has just about sunk me. I’m working like crazy to make sure I don’t lose any more ground by looking at new things and trying to look at old things in new ways.

Lin

26

I went to the bootcamp in June of 2008 and was ready to find a park. In the susequent months , I just felt that lower income people would be hurt the most in this depression and it seemed like a MHP would be a nightmare if you had to start going the eviction route. I also had and have a hard tiime buying into the inflation argument. How does the money reach the prople who will spend it and drive the price of goods up ? Instead it goes to bank’s bottom lines.

Where I’m at now is I have 8 “investment” homes in 5 different states and they are all big negative cash flows and are all in “recourse” states. So I can’t get loan modifications and if I give the bank the keys, they can come after my assets. I still have a pretty good amount of cash but no longer work. So I guess where I’m at is not having a good place to invest my money and every month I become poorer and poorer. What I am doing is trying to educate myself in all forms of real estate and hope the right partner and deal shows up.

Good Luck To All

Steve

27

Steve

What would you have done different? Do you wish you would have invested in a MHP at this point? Or do you wish you had done nothing. Just curious if you dont mind sharing.

Rick Ewens

28

Steve

I’ve been investing in real estate since 1979 and I think as most above have posted everything has changed.

29

Rick,

I’ve certainly made some mistakes and I guess nothing would have been my best coasre of action. However I would feel better owning a MHP rather than being stuck with the investments homes. That said, I’m trying to stay positive and find some deals to make a few bucks.

30

Mike,

I agree that the right MPH bought with the right discount might be the way to go. I’m opening my mind up to them again and have began reviewing the materials from the 2008 MHP bootcamp I attended.

As far as getting out of the under water properties , I’ve started to do some research. Some say the banks will never go after the borrower to make up deficiencies from foreclosure. What scares me if that I have money in bank accounts and brokerage accounts that are pretty easy to access. I should probably contact attornies in Texas, Indiana , Ohio , Alabama and Mississipppi as each state has different laws. Trouble thus far is that what I read is pretty varied at this point. Some say it’s unheard of for the banks to pursue it and others say they will just attach a judgement to your assets.

That said, I do agree with you that I should just somehow get out. What’s amazing is that other than the rent , everything else has gone up. Taxes ,insurance, property management fees and nothing is ever a small problem. A washing machine motor will cost as much to replace as buying a new one. The only thing that is cheaper is the rent and when you have one that is vacant , you end up dropping it even further to get it rented. What a nighmare…

Steve

31

What would happen if you picked the worse case or upside down house and quit making the payments for a couple of months on that one as a test case? My understanding is that the banks don’t want that asset back and are working with borrowers to work out something that would be good for both. Maybe that would start a dialogue that would lead to a positive income on that house. It will hurt your credit score but may get you some relief. I’m hearing that owners are carrying more on mhp sales and in fact I would not buy anything where I had to get a bank loan anyway, in all likelihood. but that is just me. When I let a bunch of stuff go belly up in the 90’s I was back getting bank loans in 4 or 5 years but that was then.

Good luck

Mike

32

Mike ,

That is about the only way you have a chance to get an investment loan modified. I was thinking of doing something similar as I thought there was less of a chance that the bank would bother to sue for defaulting on say two of the properties compared to all eight. Especially considering Wells Fargo has six of the eight loans. The problem with that is it would probably take a couple years to get rid of them all and it would have a longer effect on my credit. Also the two worst are Go Zone properties (50% depreciation in 1st year) and I would have pretty big tax bills on them. Plus from what I understand , you get a 1099 for the amount of money you were under water.

However , I can’t think of anything that’s better than what you suggest. I really don’t care about any bank loans either. From what I hear ,it takes about 7 years for your credit to recover. I think the only thing that could get me out of my mess is 8-9 % inflation and a "heated up " economy. That would inflate the value and get the rent up. I just think that is not in the cards in for at least 5-6 years.

Thanks,

Steve

33

This is a fantastic post. Like Tony, I’ve tried to initiate a discussion like this recently on the other board. To save the effort of retyping all my thoughts, for those who are interested, the post is here:

http://www.creonline.com/mobilehomes/wwwboard4/messages/85740.html

This post generated only limited response, which was disappointing, because there is so much to learn both from mistakes, as well as what was done to correct them. Not to mention all the support those who are struggling could receive from communities such as this.

There are more than a couple regular contributors to these forums who have, in the past, been critical of those who were afraid to take the plunge into MH REI and specifically, to work themselves free from a job. In some cases, the “rah-rah” posts almost grew offensive to me as it made those with jobs seem like inferior human beings. As if they were cowards for not diving in 100% and leaving behind the safety net a job offers.

I am fortunate that my wife works, and my REI business is not necessary for me to provide for my family…it’s more of an early retirement vehicle. If I had followed the advice of many of my peers in the last few years, I would be bankrupt right now. I don’t say that to make myself appear smart… rather, it was my fear of taking on a big park or some other leveraged asset that ended up protecting me. I guess there is no one-size-fits-all answer in good times, or bad.

I’ll close with the statement that sales are ridiculously slow for me right now, and I don’t know how to fix that other than to address my lack of marketing. Because the old business model, as I knew it, is broken.

Jeff

34

Steve,

I believe the IRS no longer considers the difference between your loan balance and the sale price on upside down properties as ordinary income.

Do a search for “HR3648 Mortgage Forgiveness Debt Relief Act of 2007”.

Keith

35

Anxiety, worry, fretting, etc. bring me neither peace nor money.

I am on a steady track of buying few homes, selling off the 70’s homes for cash, hammering my T/Bs for their payments and paying down debt.

That sounds like a lot, but truth is I’ve only put in about 20 hrs. since Christmas. I am pie in the sky, Polyanna. As I’ve relaxed these two months, things have continued to turn more positive for me. Sold two homes for cash in the past 2 days (had to spend some of those hrs to go get the money). Actually spent an hour cleaning a home today. I’m considering painting it if the spirit moves me enough. Have a buyer looking to buy it as is, so maybe not on the painting.

Also have a cash buyer looking to buy one of my more expensive homes.

Many people seem to be getting the “no-free-lunch anymore” picture and are sick of living with family, in-laws, friends, etc. They are ready to get their own place. We’ve had applications falling out of the sky for the past week and a half.

Steve

36

Steve,

I may have a solution for you. Don’t try to get a loan modification. Just sell your home short. The lender will issue you a 1099 for the forgiven debt and you will have to recognize the income. Here’s the catch, I am certain that you have passive losses from those 8 homes over the years. Remember the rule, passive losses are netted against passive income. That 1099 (debt forgiveness income) income is considered passive because it was generated from rental activity. Bottom line, the debt foregiveness can be netted against previous losses thereby reducing the income tax effect.

Let me know if this helps. Kindly

37

Greg,

Thanks for your comments. I like your idea of the dog park- or that’s what I call the fenced-in area where dogs can run around without a leash. Someday I might have that in my park (then again, I also dream of making it a botanical garden, so I’m aware that my plans are pie-in-the-sky).

One thing we are looking in to is a water feature. By this I mean a flat surface that has holes in it where water sprays up and then drains away, reusing a large proportion of the water. No liability as you’d need with a pool, but a safe place where kids can run around and cool off in the summer. Maybe just turn it on a few times during the weekend and weeknights. We don’t allow anything deeper than a wading pool and it gets very very hot here in the summer. This kind of a feature would make our park stand out from the other parks and apartments available for the same cost.

My pet-friendly rentals in North Dakota worked really well in that market because nobody allowed pets but me. I had my pick of applications. In an area that has more pet-friendly housing, like rural GA, it’s less of a draw, and I’ve had more problems with people who just let their animals out, or get too many, so I’m divided on that issue.

To address the screening issues: I’m now eliminating applicants who have teenaged kids (or kids of any age, actually) who do not go to school. I have quite a few families whose kids just… don’t go to school. One family had a 15 year old son who hadn’t been to school in 2 years. The 17 year old daughter had also just left school a few years earlier. No attempt to get a GED, or to home-school, they just sat home all day and created problems for me. I was shocked to discover how common that is in this part of GA.

I’m enjoying the tax refund season, it’s been great to me so far.

take care, Anne

38

TreGeorge ,

I would have pretty big tax implications as I have only owned these homes for three years. Two are Go Zone to boot. I was also able to show 750 hours and had no W-2 income , so I qualified as a real estate professional and took the write offs. So I guess I would have to give back the tax savings which is fair. The ordinary income on the 1099 income might make me want to try to hang on for awile. Pretty tough choice and I probably need a good accountant to advise me. Thank you for your imput.

SteveTreGeorge wrote:

Steve,

I may have a solution for you. Don’t try to get a loan

modification. Just sell your home short. The lender will

issue you a 1099 for the forgiven debt and you will have to

recognize the income. Here’s the catch, I am certain that you

have passive losses from those 8 homes over the years.

Remember the rule, passive losses are netted against passive

income. That 1099 (debt forgiveness income) income is

considered passive because it was generated from rental

activity. Bottom line, the debt foregiveness can be netted

against previous losses thereby reducing the income tax effect.

Let me know if this helps. Kindly

39

I have not posted here in a long time, and have not updated the blog either. This thread interests me, though, and I think I have something to add.

Like Lin, we had a partnership go sideways last year. Quite honestly, as we have told several of our friends, it took the “fire out of our bellies” so-to-speak. This has caused us to do a major reassessment of our current lifestyle. It also caused us to make the conscious decision to discontinue blogging - it is hard not to talk badly about someone who has acted badly toward us. (And to be clear for those who have been speculating, Steve Case is NOT that person.) We know there have been considerable rumors within the community; some people have asked us directly, some we chose to tell the entire sordid story, those that don’t really know us have no reason to know the gory details.

Arrow Woods, our original project is moving along as projected, and we are totally overwhelmed with the amount of business we have done just in 2010. In fact, our normal “dormant period” was not dormant this past year. Perhaps we are fortunate to be in the exact market we are in. We pretty much are selling what we have, sometimes before it is ready. We have only 20 more homes to bring in to fill the park and every home except the one current incoming is either filled or has hold money. (Meaning they are moving in and signing contracts on the 15th.) All our companies have shown a profit for 2009 for the first time.

In the meantime, we came to the realization that we are getting older! We have the desire to slow down and go home. I have already gone home, in fact, making the move back to Florida in December. Jim is spending 75% of his time at the park, buying and refurbing homes. I am in Florida 75% of the time and have gotten my license to sell real estate. We are spending every other week together (or that is the plan, anyway.) Our overall plan is to have every lot filled by mid-2011, at which time we will only be making periodic trips to Troy to ensure that our manager is handling things as we require. We are looking forward to more cruising, doing some explorations around our own country, and who knows what else. If the current market still exists here in Florida we are likely to buy more SFH as rentals here. (Some of the deals I see on MLS make me hungry.) Too bad our current Florida rentals are not in a positive cash flow position!

The truth is that in the current Alabama market we could have more homes filled if we had the homes. We have not moved to the rental market; we still are doing exclusively leases and options and have several families in their homes for over two years now. We just filed our first eviction since last March. It will probably take until March to get these people out and resell that home. We are, in fact, intending to raise lot rent by $10 per month in July. Our new tenants, as of January 1 are already paying this increase.

We were surprised with one thing that happened. We brought in two brand-new 2007 14 x 70 models and sold them almost immediately. We didn’t know if they would move because they were smaller than the normal 16 x 80 models we bring in. (We found that doublewides are a little too much money for our clientele; 16 x 80 is our “bread and butter” home.) Why did they sell so fast? Because they had never been lived in! In fact, one of our CURRENT residents moved from the 16 x 80 to the 14 x 70 for exactly that reason, coming up with the new option deposit! Her home was turn-around ready. (And yes, she is also paying the new lot rent.)

We are also looking at a 5-year call on the mortgage in July 2011 and have been talking with banks about what they can do for us. It is possible that we will actually get a new, long-term (15 year) mortgage this year with a 5-year fixed rate that is below the 8% floor of our current variable rate mortgage. The local bank is interested, just trying to time it for themselves to keep within new regulations.

So, bottom line, after a period of “woe is me” due to the bad partnership, we are pretty optimistic about our future. One thing we know for sure, though, is that we have no intention of working as hard as we have worked since beginning in mobile home parks once we have the project completed. As far as partnerships, it is all in the paperwork, folks. A canned LLC agreement does NOT protect you.

40

Great to hear from you Ellen. I am glad to hear you and Jim are working the plan and all is well. Last time I saw you was lunch in Augusta. Times have changed since then. You 2 remind me of the saying about the narrow banked river being more powerful than the broad banked one.

Best to you

Rick