ROF0371-John_Fedro_Interview
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00:00:31.000 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less.
00:00:44.000 | Today we continue on our real estate theme with Jon Fedro from mobilehomeinvesting.net.
00:00:50.000 | Jon, you're going to teach us how to get rich in no time, right?
00:00:52.000 | That is not what I promised, but I will teach you a lot of good stuff.
00:00:56.000 | So you work in this little real estate niche of mobile home investing. How did you wind up with this area of focus?
00:01:05.000 | You know, it is so weird how life turns out right now. I never lived in a mobile home, never grew up in a mobile home, didn't even know they existed.
00:01:14.000 | Well, I knew they existed, I suppose, before I purchased my first one, but I really failed.
00:01:18.000 | I didn't want mobile homes. I fighted that mobile home name like I'm the mobile home go-to guy in the area because that was embarrassing.
00:01:27.000 | Until I saw the money coming in and the need that we're filling, the demand that there really, really is.
00:01:34.000 | So yeah, it definitely took a while, but I fell into it. I failed from single-family homes is the very, very short version.
00:01:42.000 | How do you mean? Tell us the story of your growth as a real estate investor.
00:01:46.000 | Yeah, I picked up a book from my roommate's wall or his book collection of, it was Ron LeGrand, I believe, at the time.
00:01:54.000 | Ron LeGrand, like three seminar things, and I looked through all of them. It was just, you know, real estate deals, pie-in-the-sky numbers.
00:02:01.000 | I'm like, I can do this. This is amazing. So, you know, this was like the heat of the market in Florida back in the very early 2000s.
00:02:07.000 | So, I mean, anybody could make money just cleaning a window and reselling the home, but I couldn't.
00:02:12.000 | I was too, I mean, I wasn't too anything, but I was very young. I was insecure, unsecure of what I was doing.
00:02:18.000 | Drove a terrible car, didn't, yeah, just I lived with my parents.
00:02:23.000 | So, but I was, for me, I was a go-getter. I did have a lot of fire and I was knocking on doors.
00:02:30.000 | I was trying to help people. I was making a number of offers, doing the things that I really had learned in the book.
00:02:36.000 | I had a life savings of $3,000 at the time and that dwindled down over the course of, like I said, about three months.
00:02:42.000 | Just trying to knock on doors, bang on, you know, mail people. So, anyway, I didn't get any deals all that time.
00:02:49.000 | And then my first deal was this mobile home in a park for eight grand was the asking price.
00:02:54.000 | And I didn't even know it was a mobile home. I was so green that I didn't even ask that.
00:02:58.000 | And I just got a call and like from my bandit sign and I'm like, oh my God, $8,000 for this home. Are you kidding me?
00:03:04.000 | This is amazing. So, I went there and I saw it was a mobile home. I'm like, what is this? I don't know what I'm doing.
00:03:10.000 | And I was actually so nervous at the time because I could hear the desperation in this woman's voice, which was so weird to me.
00:03:17.000 | Because that's something I've never heard up until that point. So, I knew this was a very motivated seller.
00:03:22.000 | And I was so nervous right before I pulled up to the, in the driveway of the home, I had to pull to the side of the road in this mobile home park.
00:03:30.000 | I was going to say trailer park and that's a definite, that's a no, no. And I got sick. I threw up and I purged on the side of the road.
00:03:38.000 | Just because I was so just flooded with emotions and scared. And even right now I have goosebumps as I'm telling this story.
00:03:45.000 | And I remember pulling down that visor mirror and just looking at myself like, do I keep going? I'm already scared.
00:03:50.000 | Like this could be a good excuse just to put my tail between my legs and postpone the meeting.
00:03:55.000 | But I didn't. I went there. Who knows how my breath was smelling. But I got the deal, $3,000.
00:04:01.000 | I talked, negotiated for $3,000 with, remember I didn't have any money.
00:04:06.000 | So, well I was working two part-time jobs, but very paycheck to paycheck.
00:04:10.000 | So, $3,000 total price, payable as $300 down and $300 a month for nine more months.
00:04:18.000 | So, you know, zero interest. So, that opened my eyes. And this was a four bedroom, two bath, gorgeous double wide that I would have lived in at the time.
00:04:27.000 | And it was nice central heat and air, all the appliances. The first time I sold it on payments for about $27,000.
00:04:35.000 | The next time I sold it for the mid-30s. And then the third time I resold it.
00:04:40.000 | Because a lot of what I'm doing is purchasing them and then reselling them on payments.
00:04:45.000 | So, I did get the home back twice and then I finally resold it a third time for the very, very, very high 30s.
00:04:53.000 | And then that actually just paid off early last year.
00:04:57.000 | That was my first deal. And then the first year I had over 14 homes.
00:05:04.000 | And it was just kind of like, it went from just, it was really that thing of like just the light bulb effect.
00:05:10.000 | And after that first deal, the demand was there, the supply was there. Nobody was doing this.
00:05:16.000 | Financing sucks. Buyers with cash are few and far between.
00:05:20.000 | There was hardly any investors doing this kind of thing. You know, mobile homes, there still is.
00:05:25.000 | So, it was just kind of the perfect storm in hindsight. I mean, I would have never known that at the time.
00:05:30.000 | But in hindsight, just stayed active and saw the opportunity and really, really went with it.
00:05:36.000 | So, what does your real estate business look like now?
00:05:39.000 | It is still all mobile homes. Nothing, a lot's changed, but nothing's changed.
00:05:45.000 | So, it's still all mobile homes. I mean, I know, I'm pretty good with mobile homes.
00:05:49.000 | I know very little about a lot of real estate. You know, there's just so many things to know about real estate.
00:05:54.000 | But my business is the purchasing individual mobile homes in parks, just the rectangle with like out the land.
00:06:01.000 | Or it's buying that rectangle, you know, that mobile home with the land, with like a small piece of, you know,
00:06:07.000 | there's a city lot, a quarter of an acre. Or maybe it's in the country and there's an acre or two or three acres.
00:06:13.000 | Or now, actually, early last year, I purchased my first mobile home park.
00:06:18.000 | The entire community of homes and land. So, that's it. And I'm also helping people.
00:06:24.000 | I write a blog, you know, to just kind of show some of the things that I've done, the mistakes I've made.
00:06:30.000 | A lot of the mistakes I've made.
00:06:32.000 | So, you kind of fell into it. But you've obviously since then, I would assume, that since then,
00:06:39.000 | you have made an intentional decision to continue in this particular market. Why?
00:06:46.000 | Not just keep going with it, but really, I guess brand is, for lack of a better word, but yes, brand myself as, you know,
00:06:56.000 | in my areas, in my territories, as that mobile home go-to guy.
00:07:02.000 | I mean, if mobile homes weren't able to be the vehicle to get me where I wanted, you know,
00:07:07.000 | if they didn't make as, if they weren't as lucrative as they are, if they weren't as plentiful,
00:07:12.000 | this is not something that I would do. I mean, I'm not, you know, just, this isn't a hobby for me.
00:07:18.000 | You know, this is definitely a business, something that absolutely makes a good deal of value and income.
00:07:23.000 | So, that's the big reason, you know, I stayed in it because it was lucrative,
00:07:28.000 | ended up helping just a ton of people and got so much value inside of me.
00:07:33.000 | You know, that kind of the proverbial, like, with real estate investing, we show up as investors
00:07:38.000 | and we're just that, you know, we're the knight that comes in and saves the day.
00:07:42.000 | And, you know, the sellers are just crying with joy. And that never happened to me.
00:07:46.000 | And I do purchase some single family homes, you know, here and there,
00:07:50.000 | because some of my marketing is ambiguous. But with mobile home people, buyers and sellers,
00:07:57.000 | it's amazing to hear the gratitude and how happy the sellers are when we can purchase their homes,
00:08:04.000 | how happy a lot of the buyers are when they're purchasing these homes and they're owning a home,
00:08:10.000 | and they would have owned it no other way, and we make everything affordable for them.
00:08:14.000 | So, yeah, bottom line is the reason why I kept doing this, to get back to your question,
00:08:19.000 | was because it was lucrative. And then I did brand myself and I very much, you know, internalized that.
00:08:25.000 | Like, after six months, after I really started seeing, you know, some of the people that I started investing with,
00:08:30.000 | you know, that we started going to the same real estate clubs, like, I was busy and they weren't.
00:08:34.000 | And they were following, you know, the same, "I gotta get some homes, I gotta flip something, I gotta, you know, buy a new..."
00:08:40.000 | Like, just all the kind of cliche, like, normal things that we know of when we first get into it,
00:08:44.000 | wholesaling and things like that. And then eventually, after six months, I stood up at the real estate event
00:08:50.000 | and I let people know, like, this is what I'm, you know, "John Fedger, mobile home guy, here's my number, mobile homes."
00:08:56.000 | And then that was a huge source of leads. People were actually coming up to me like, "Oh my goodness, I'm so glad you said that.
00:09:01.000 | I got these leads, I don't know what to do with them. I throw them away because mobile homes are stupid."
00:09:05.000 | And so it's like, "Hey, send them over to me."
00:09:08.000 | Well, it definitely points out a major business lesson there, that differentiation is incredibly valuable.
00:09:14.000 | Differentiation makes you referable. And that can be a huge benefit.
00:09:19.000 | So, I'm a potential real estate investor. I'm thinking, "Okay, I need to make a plan, make a strategy,
00:09:28.000 | make the business case to me of why I should consider following in your footsteps."
00:09:34.000 | Oh, that's good. Well, I would say first that it's so, you know, anybody can do a deal.
00:09:40.000 | I mean, it's easy to do a skinny deal or just buying and selling a mobile home inside of a, you know, park.
00:09:47.000 | When we're talking about buying and selling mobile homes inside of a community, like a pre-existing park,
00:09:52.000 | that's very akin, well, it's not very akin, it's similar to buying and selling an automobile to some extent.
00:09:59.000 | And I mean that because it just happens so darn quickly. Mobile homes attached to land, just like single-family homes,
00:10:06.000 | you need typically a 30-day process. There's title work involved. There's some, well, possibly underwriting involved.
00:10:14.000 | But with a mobile home in a park, there's none of that, hardly any.
00:10:18.000 | So we're buying and selling these very quickly. There's not that many people doing this in the area.
00:10:24.000 | And, or there's most likely in your area, not many people doing this.
00:10:29.000 | Spoken because I'm working with people around the country.
00:10:32.000 | But for the fact of doing this business, you know, for the people listening, don't just do R.M. in my mind.
00:10:40.000 | You're going to be setting yourself up to get the deals that I would want anybody to do.
00:10:44.000 | And it's so easy to do a skinny deal.
00:10:47.000 | And the deals that I would want anybody to do, Joshua, and for the folks listening,
00:10:51.000 | is like that litmus test of, hey, should I do a deal? Is this a good deal? Like a quote-unquote good deal.
00:10:57.000 | And whenever we sell a mobile home, if you're selling it for cash, you know, buying it for cash, selling it for cash,
00:11:02.000 | we want to minimum double your money very quickly.
00:11:06.000 | But if you're selling it on payments, there's kind of a test of what you want to do.
00:11:10.000 | You want to make sure that when you sell that home, you're making all your money back in the first year.
00:11:15.000 | So, you know, you purchased the home and you have acquisition.
00:11:18.000 | You purchased the home for this price. You have this many repairs in it.
00:11:21.000 | You want to get this much labor, this much holding cost.
00:11:24.000 | You want to get all that back in your first year.
00:11:27.000 | You want to make $300 minimum cash flow per door.
00:11:32.000 | And when you're selling these, you want to hold them, if you're selling them on some sort of structured payments,
00:11:37.000 | you want to sell them for at least five years worth of payments.
00:11:40.000 | So five years worth of $300 payments minimum.
00:11:44.000 | So that's in my mind, that's what I'm getting up for.
00:11:47.000 | That's a good deal. If it's not going to do that at the moment, it's not worth our time in my mind.
00:11:52.000 | So that I think is the first thing to like, let's talk about and let's have everybody understand, you know,
00:11:58.000 | just because you talk to seller down from $20,000 down to $10,000 doesn't make it a good deal.
00:12:03.000 | So it's a good deal if you can make your money back quickly, you can make significant profit,
00:12:07.000 | and you can sell it for the next five years minimum with payments, if you're selling on payments.
00:12:13.000 | And then the case for going ahead and you know, once you understand what the deal is,
00:12:18.000 | these homes, like you said before, not that many people want them.
00:12:24.000 | The, or well, other investors are willing to kind of give them away.
00:12:27.000 | So working with affordable housing, working with housing that nobody else, that very other few other people want,
00:12:34.000 | has been amazing. The folks that I'm working with in my business as well,
00:12:39.000 | we are doing, we're having to fight a lot less, I feel, than a lot of other our competition.
00:12:46.000 | We have the luxury, like the luxury in this business of mobile home investing to be patient,
00:12:52.000 | to help sellers, to make offers and not step on any other, not step on any other competition,
00:12:59.000 | you know, to not have five other investors fighting for one mobile home.
00:13:03.000 | And then once you do do one deal, the way that, well, and I guess this is,
00:13:09.000 | you can run your business any way, or any way that you want to.
00:13:12.000 | The way that I work with folks is that, you know, anyone listening to this, try not to just do one deal.
00:13:18.000 | Really brand yourself in the area. Everyone you talk to, let them know how you can help them.
00:13:23.000 | Let them know how you can help them with mobile homes, because it's not a big,
00:13:28.000 | it's not a big world out there with mobile homes.
00:13:30.000 | Like mobile home people in your area, no other mobile home people.
00:13:34.000 | And there's not many of us investors helping them.
00:13:37.000 | So I'm not sure, I think I kind of went off on a tangent, Josh.
00:13:40.000 | I do hope that that answered a little bit of the question.
00:13:42.000 | It does. Follow-up question. What are the driving factors in the deal?
00:13:50.000 | Let me give you a little bit of preamble so you can understand what I'm driving at.
00:13:55.000 | I'm comfortable with the idea of looking at real estate, thinking about the supply and demand.
00:14:02.000 | Single-family houses, my area, I see economic growth, people going to need affordable housing,
00:14:07.000 | this type of housing is attractive, blah, blah, blah.
00:14:10.000 | There's underlying factors that are going to be driving the rents versus the values, mortgage rates,
00:14:16.000 | accessibility of credit, et cetera.
00:14:18.000 | I can understand single-family houses.
00:14:21.000 | I can understand the dynamics behind commercial real estate depending on the type of real estate.
00:14:26.000 | If we're talking class A office space, now our demand is going to be driven by these various business trends.
00:14:31.000 | If we're talking about warehousing, these are the trends we're going to look at.
00:14:35.000 | What are the driving factors though with regard to mobile home investing?
00:14:40.000 | Because for the first statement you said of selling it in cash, obviously cash is less lucrative than –
00:14:46.000 | let's just stick with cash.
00:14:49.000 | Selling it for cash and someone saying double your money, what's driving the numbers of the deal?
00:14:56.000 | What are the forces that are acting upon the mobile home marketplace?
00:15:01.000 | Great question.
00:15:03.000 | So that is a – I feel like to answer that question, in some respects you need to understand the sellers,
00:15:10.000 | you need to understand the buyers because the sellers and buyers are drastically different.
00:15:16.000 | In many cases, that's obviously a very blanket statement,
00:15:19.000 | but they're very different than single-family home buyers and sellers.
00:15:23.000 | So when we're buying a mobile home, let's say in a park, let's say for – you're buying it on payments or cash or who knows.
00:15:31.000 | But when you're selling it, every seller of a mobile home, they want basically two things.
00:15:38.000 | They want the most money they can get in the shortest period of time.
00:15:41.000 | In most areas, in most markets around the country except for the really hot spot markets like really –
00:15:47.000 | people are just going into these areas and spending money on anything.
00:15:51.000 | They're just – because there's so much lack of housing.
00:15:54.000 | So in most areas of the country besides those really, really hot spot like targeted areas,
00:15:59.000 | there are more sellers of mobile homes than there are cash buyers.
00:16:04.000 | And mobile home sellers, they typically do not want to take payments.
00:16:09.000 | I'd say maybe the Hispanic demographic might take payments a little bit more.
00:16:12.000 | But they typically don't want to take payments with average civilians that want to come in and buy their home.
00:16:18.000 | The people that want to come in and buy their homes, it's tough to go to a bank and say I want to get a loan on a used mobile home in a park.
00:16:25.000 | And they don't typically have that cash, 10,000, 20,000, 30,000, even 6,000 or 7,000 cash to go ahead and own any of these homes.
00:16:34.000 | So the buyers are – with cash are kind of few and far between.
00:16:39.000 | Financing stinks. There's not a lot of us investors doing this.
00:16:43.000 | Now I say that because for the seller, most – I'm not going to say most.
00:16:49.000 | Many sellers that we talk to are sort of paycheck to paycheck folks.
00:16:53.000 | And that's not good or bad. It's just sort of indicative of sellers that there's a timeline.
00:16:58.000 | Like they need to leave in the next two months.
00:17:02.000 | They haven't paid this month's lot rent. They're being evicted.
00:17:05.000 | They have no cash for their first, last insecurity on the next place.
00:17:08.000 | Right. So it's just a breeding ground where there's not a lot of buyers that can pull the trigger.
00:17:15.000 | And then sellers that have this like kind of guillotine above their head that's eventually going to kind of come down.
00:17:21.000 | So the market in a lot of areas when we're talking about cash, if your plan as an investor is, OK, I want to do everything in cash,
00:17:31.000 | buy homes for cash and sell homes for cash, buying them, you're not going to have a problem.
00:17:35.000 | Selling them – like we're not magicians, Josh.
00:17:38.000 | We're not going to fool people or hypnotize our buyers into thinking, hey, I got this mobile home.
00:17:43.000 | It's worth like double what it's really worth.
00:17:46.000 | So if you can provide a value, if you can buy a home and then put some sweat equity into it, do some repairs to it,
00:17:53.000 | then you can legitimately raise the price.
00:17:55.000 | Maybe as an investor, our job – and I say maybe, but it's not maybe – our job as an investor is to find deals, is to shake the tree.
00:18:04.000 | Not just find the easy ones, but find the people that need to sell or they're motivated or they're embarrassed about their situation.
00:18:10.000 | So I'd say part of being an investor is finding these deals and then capitalizing on it when you do find it.
00:18:17.000 | But not much of my business, I would say 20 percent – in fact, most of the people I work with, about 20 percent or less of their business is reselling for cash.
00:18:28.000 | So sticking on this cash theme, there's not a lot of buyers out there for cash.
00:18:33.000 | And the ones that do, they want a deal.
00:18:35.000 | They know my money is valuable.
00:18:37.000 | So I hope – so the market dynamics when we're talking for cash, very, very different than ones with payments.
00:18:45.000 | So what I hear the primary value that you bring as an investor to the marketplace is liquidity because you're coming in as a buyer.
00:18:54.000 | So you said maybe 20 percent of deals are selling for cash.
00:18:59.000 | So 80 percent of your selling of your units is owner financing.
00:19:05.000 | You're financing the buyer, right?
00:19:07.000 | That's what you just said?
00:19:08.000 | That's correct.
00:19:09.000 | So in that situation, what you're doing, a major service – I mean the biggest one that stands out to me is you're providing liquidity.
00:19:16.000 | You're coming in.
00:19:17.000 | Somebody needs to sell.
00:19:18.000 | They're trying to move.
00:19:20.000 | They want to get on to the next place.
00:19:22.000 | They need money.
00:19:23.000 | They lost their job.
00:19:24.000 | They're trying to move back across the state.
00:19:26.000 | I mean when we're talking about lower income, sometimes it's a more transient population.
00:19:31.000 | They need money to get to the next place for first, last and security so they can rent an apartment in downtown where they can get a job.
00:19:36.000 | So they need to sell.
00:19:37.000 | So you come in.
00:19:38.000 | You're providing a ready market of cash at a price that solves their problem and then you're providing the financing on the flip.
00:19:47.000 | You're improving the property, fixing things that need to be fixed, renting usable housing and then providing some of the financing for the person on the backside who is – who needs the financing.
00:20:00.000 | You just go down to the bank.
00:20:01.000 | They're an immigrant.
00:20:02.000 | They have an unsteady job and you're providing the financing.
00:20:05.000 | That's a huge benefit.
00:20:06.000 | Is that the major – is that an accurate understanding of what you're saying?
00:20:09.000 | That is accurate, yes.
00:20:11.000 | As long as they have the ability to repay their good folks, then yes, we do provide financing.
00:20:16.000 | And then I will say maybe 30 to 40 percent of the deals that we acquire, we're purchasing them from the seller on payments.
00:20:26.000 | So we're giving the seller payments versus an all-cash price.
00:20:31.000 | So how much do the values – I wouldn't even know where to start with valuing a mobile home because it would be such a different marketplace than something like standard three-bedroom, two-bath, single-family houses.
00:20:46.000 | How much do the values wander around and how much are those – and what are the driving factors behind those values?
00:20:52.000 | If there are comps that – like if your strategy is purchasing however you're going to purchase and then selling it for either cash or FHA or conventional financing, which is perfectly – which can be done, a mobile in a park, a mobile on land.
00:21:11.000 | There's certainly financing out there.
00:21:13.000 | But if that's what you want to do, then – I'm not sure if you can edit this, Josh.
00:21:20.000 | Can you go back and ask that question again?
00:21:22.000 | Sure.
00:21:23.000 | Okay.
00:21:24.000 | What then drives the values of a property in terms of what are the driving influences underlying the value of the mobile home marketplace?
00:21:35.000 | That's a good question.
00:21:40.000 | I want to make sure I give you a good answer.
00:21:42.000 | So before I answer, I just want to think about that.
00:21:45.000 | You're referring to when we sell a home.
00:21:50.000 | Could you give me a little bit more context?
00:21:53.000 | I want to make sure I don't go off on a tangent.
00:21:55.000 | Yeah.
00:21:56.000 | I guess what I'm thinking is – let me give you a little background.
00:22:00.000 | Let me give you a little background to this question before we start.
00:22:03.000 | What I'm trying to understand is what's going to drive that marketplace.
00:22:07.000 | I've never considered being a mobile home investor until doing this interview.
00:22:13.000 | But I am working on being a real estate investor.
00:22:16.000 | And so I've been going out and I've never lived in a mobile home.
00:22:20.000 | I remember one friend of mine who did live in a mobile home but I don't spend a lot of time in mobile home parks.
00:22:26.000 | I looked at in my area when I was trying to find what's the best deal on housing.
00:22:31.000 | I went and I drove a couple of local mobile home parks that I could find to see if that would work well for my wife and I to live in.
00:22:39.000 | But when I ran the numbers, I didn't find any compelling financial thing that got me to say, "Hey, this would be what we should do."
00:22:46.000 | I've been researching and studying the local neighborhoods here in my area and looking for – to understand the different markets.
00:22:55.000 | I found a few mobile home parks that I didn't even know existed.
00:22:58.000 | I've driven through them and said, "Wow, OK. Now I didn't even know this was here.
00:23:02.000 | I just drove past it on the road and here's this huge mobile home park."
00:23:05.000 | But I've never considered going into it and investing.
00:23:07.000 | And my biggest nervousness would be that I don't understand the market.
00:23:11.000 | I don't understand what's going on in the market.
00:23:14.000 | I don't understand what the driving factors are behind the values.
00:23:17.000 | I'm much less comfortable going into it and saying, "Yeah, this is a deal. Here's how I know it's a deal.
00:23:24.000 | Here's how I can expect the price to move."
00:23:26.000 | That's the preamble to this question.
00:23:29.000 | What are the driving factors that are going to drive the values or the supply and demand of these units if I were to go in and start buying mobile homes?
00:23:37.000 | OK.
00:23:38.000 | Because you originally – does this question also have to do sort of of how are these valued or how do I – just the value.
00:23:49.000 | Is there like a 70% ARV minus repairs?
00:23:52.000 | Is there some sort of formula?
00:23:54.000 | Sure. Absolutely.
00:23:55.000 | Is that akin to what you're – to kind of what you're asking?
00:23:58.000 | Well, more I'm asking the marketplace, meaning that how do I know if there's going to be a demand for this unit?
00:24:06.000 | How do I know if I'm getting a good deal?
00:24:08.000 | Oh, OK. Oh, OK. Perfect. OK. Thank you.
00:24:12.000 | It's funny because it's like when you say a certain thing or just people in general, you can say one thing and it just clicks.
00:24:19.000 | So, OK. Yeah. That makes perfect sense.
00:24:22.000 | So understanding your market, like clarity is by far one of the biggest keys to my – to my god, any kind of getting started in any new real estate, especially with mobile homes because it's so easy.
00:24:34.000 | I know I've said this a few times, but it's so easy to do a skinny deal.
00:24:37.000 | It's so easy to do a bad deal.
00:24:39.000 | You think you're doing right and it's not.
00:24:41.000 | So the driving factors to know before you pull a trigger, we have to know what these homes are going to sell for.
00:24:48.000 | We have to know what they're going to sell for cash.
00:24:50.000 | We have to know what – if we sell them for payments, what our buyers are going to pay for them.
00:24:56.000 | We also have to know the park application requirements.
00:24:58.000 | Also, what is for sale in that area, in the park nearby?
00:25:03.000 | What's for – what's being sold on payments?
00:25:05.000 | What's being rented if you can rent in this community?
00:25:08.000 | What's being sold for cash?
00:25:11.000 | And then is there a lot of homes selling for cash?
00:25:14.000 | In most parks, there won't be.
00:25:16.000 | In some parks, few parks, there will be comparable sales of five homes this current year were sold in under 30 days to a cash buyer or to cash buyers for $50,000, $40,000.
00:25:33.000 | So in some parks, there's actually comps.
00:25:35.000 | And if your exit strategy was selling all cash, that might be valuable to you if it was a newer home maybe or even if it was an older home just depending on the inventory.
00:25:45.000 | So homes on land versus homes in parks, I mean they are apples to oranges.
00:25:50.000 | But homes in parks, we're looking at everything from the park manager to the park itself to the lot fees to the safety to the application process and a lot – and the repairs of course.
00:26:02.000 | And then knowing buyers.
00:26:04.000 | What do your buyers want?
00:26:05.000 | Do they want a handyman special?
00:26:07.000 | Do they want a home that's ready and fixed up to the nines?
00:26:10.000 | Do they want to buy something, two-bedroom versus three-bedroom?
00:26:13.000 | How much will they pay?
00:26:14.000 | And that kind of loops me back to what I was saying before.
00:26:17.000 | We have to know what buyers will pay before we can purchase a home because remember one of the kind of litmus test things I told you would depend on a good deal is if we can recoup all of our invested capital in a year or less.
00:26:34.000 | So we have to know what we can make in a year worth of down payments and payments, what we can make in that first year to then say, "Okay.
00:26:43.000 | Well, this is how much I can offer for a home in a park because I want to be recouped in my first year."
00:26:48.000 | And then make profit from that point on.
00:26:51.000 | Did that help a little bit?
00:26:53.000 | Did that make sense?
00:26:54.000 | So where do you live, John?
00:26:55.000 | What part of the country?
00:26:56.000 | Well, a lot of my business was started right there in Florida and now I'm currently in Texas.
00:27:03.000 | What part of Florida?
00:27:04.000 | The Tampa Bay area.
00:27:05.000 | Okay.
00:27:06.000 | So I live in West Palm Beach.
00:27:07.000 | Here's the question.
00:27:08.000 | Why do people in the places that you own mobile homes, why do your tenants or why do your buyers choose to live in mobile homes?
00:27:17.000 | Good question.
00:27:19.000 | So I've noticed around 2009, 2010, maybe 2011, I had most of my people – well, let me actually go back even further.
00:27:33.000 | Before that time, before the 2008 crash, the folks I sold to, most of them lived in a mobile home.
00:27:39.000 | They knew about mobile homes.
00:27:41.000 | They grew up in a mobile home.
00:27:42.000 | They lived in a mobile home before.
00:27:44.000 | They understood it.
00:27:45.000 | They fixed them.
00:27:46.000 | They just knew what was going on.
00:27:47.000 | It was affordable to them and they were used to it.
00:27:49.000 | After 2008, for about three years, I noticed people that were jaded towards single-family homes, maybe they had a foreclosure, maybe not.
00:27:58.000 | But they were coming to me and saying, "Oh, my gosh.
00:28:01.000 | I can purchase this home for 30 to 40 bucks a square foot versus the home I just came from," which was three or four times that.
00:28:11.000 | I'm selling at a pretty good upper-end retail price on payments.
00:28:18.000 | I'm happy, obviously.
00:28:20.000 | Then these people moving into these homes are happy.
00:28:22.000 | They're saving so much money.
00:28:24.000 | So I did notice that for about a three-year period after 2008.
00:28:29.000 | Then after that, since then, I've noticed that the folks I'm selling to more currently now and for the past few years, they've been the same people as before.
00:28:38.000 | They've grown up in a mobile home or they lived in one before, but it's what they can afford.
00:28:43.000 | Flexible with the move-in fee, flexible with the down payment or the monthly payments.
00:28:49.000 | I want to make sure we put good people in all of these homes.
00:28:52.000 | They have the ability to repay.
00:28:53.000 | We're not going to get them back.
00:28:55.000 | So that is the most -- I'd say that's the bottom or that's like the reason.
00:29:00.000 | It's affordable housing.
00:29:01.000 | I think if people had a choice if they want to move into a mobile home or a single-family home, I think most people that would choose a mobile home,
00:29:07.000 | would rather live in a single family.
00:29:10.000 | I don't think anybody listening is debating that, but it's just affordable housing and it's nice housing.
00:29:16.000 | I mean it's not slum lordy.
00:29:18.000 | There's a lot of that out there, I'm sure, but what we're talking about is not.
00:29:23.000 | These are roof walls, central heat and air, appliances, decent carpet, paint, smells good, nice people, good neighbors, good park, decent park probably.
00:29:33.000 | I guess I'll have to go out and spend some time in the parks nearby me trying to understand the economics of it.
00:29:40.000 | My only experience with mobile homes was looking at one park that was near my office as a place that I thought about renting.
00:29:49.000 | And when I just went in there because I thought maybe I could save some money,
00:29:54.000 | I'm unencumbered by any kind of stigma that other people have.
00:30:00.000 | I don't really care about what people think about where I live.
00:30:04.000 | So it wasn't a problem for me, but I just wasn't impressed with the finances of it.
00:30:10.000 | I didn't find that there was a major benefit.
00:30:15.000 | I didn't find it was substantially cheaper as far as the rental costs than other options.
00:30:20.000 | Now maybe I should have taken it through and run it all the way out,
00:30:25.000 | but the park that I was looking at was a nice one, but the lot rent, just to rent the lot, it was I think $500 or $600, $700 a month.
00:30:34.000 | Now again, there was a nice park in Palm Beach Gardens, but the lot rent was so high that I just ran the numbers.
00:30:40.000 | I was like, "I don't understand why people would live here when there's lots of other places to rent that are more cost effective."
00:30:49.000 | Parks are on a case-by-case basis. There's ones that have the mom and pop owners haven't raised rents in 20 years.
00:30:57.000 | Then there's other parks where they know what the market is and they go above it.
00:31:03.000 | They know that the people in their communities, let's face it, it costs $2,000 to $10,000 or more to move a mobile home and then reset it up somewhere else.
00:31:13.000 | A lot, well not a lot, mobile home park owners know that and some of these park owners, they try to gouge, get as much money as they can.
00:31:21.000 | So in some parks, it is very inflated, the price, and it's tough to make $300 on a two-bedroom or a three-bedroom.
00:31:29.000 | Now I'm glad to say that that's a minority of parks.
00:31:32.000 | Most parks want to do right by their people. They want to provide, they want to get paid and make a profit,
00:31:39.000 | but most parks are average lot rent. The one you might have went through might have been a little bit higher or might have been a five-star park.
00:31:47.000 | Maybe it had a golf course or tennis courts or some other amenities.
00:31:50.000 | Yeah, it was very nice and I'll go and look at the other one that I've been to recently that's much more basic.
00:31:57.000 | It's much more of, "Okay, this is working class housing," and I'll dig into the numbers there.
00:32:03.000 | So I need to check that out.
00:32:05.000 | How do you deal with the major fear I think that people have that the value of mobile homes goes down?
00:32:12.000 | It's so funny to me. I'm sorry. I don't mean to laugh, but you're doing this for 14 years and I forget the basic questions, the basic fears that are on people's minds.
00:32:28.000 | I remember thinking these. I remember right in Hurricane Alley, which is Florida, I remember thinking, "What am I doing? Why would I buy these?
00:32:37.000 | They're just going to be gone in a year. They're going to blow away."
00:32:40.000 | Obviously, that's a fallacy. The homes that we're purchasing are 20 years old, 30 years old, 10 years old.
00:32:47.000 | They've been there. They've lasted. They might go somewhere, but it's not likely that they're going to be blown away.
00:32:53.000 | And then as far as – no, that wasn't what you were asking, but it kind of equally – although this isn't a fallacy.
00:33:00.000 | Mobile homes do depreciate, that's for sure.
00:33:02.000 | When we're purchasing these mobile homes, anybody that purchases a mobile home in a park, on land, or any piece of property,
00:33:11.000 | don't buy a mobile home thinking you're going to make money or hoping you're going to make money.
00:33:15.000 | Buy it knowing that you're going to make money.
00:33:18.000 | Mobile homes absolutely do depreciate, but the value when you're purchasing them, you can purchase them from a seller that wants to get out,
00:33:27.000 | they need to get out, they're willing to sell, they've tried to sell, the market has spoken,
00:33:32.000 | and you're the one coming there to make them an offer, whether it's cash or payments.
00:33:37.000 | But you're purchasing that – if you're doing your numbers correctly, you have a lot of value in there.
00:33:44.000 | You have a lot of potential profit to be made.
00:33:47.000 | When we're selling – hope that wasn't too loud.
00:33:51.000 | When we're selling the homes, it's on the opposite side of that spectrum,
00:33:56.000 | where we're not selling to somebody that just – where they kind of can get a home or they can go to a bank.
00:34:04.000 | We're selling to folks that want a property, that want to live here for the next five, six, seven years,
00:34:10.000 | that are tired of renting for the last 20 years.
00:34:13.000 | They finally want to own something.
00:34:15.000 | So we're selling to those folks, usually on payments, sometimes for cash.
00:34:19.000 | But mobile homes do depreciate.
00:34:21.000 | Even on land, the homes depreciate, the land sort of appreciates.
00:34:25.000 | And you can end up – I guess if there's comparables around you,
00:34:29.000 | you can absolutely buy a home conventionally at one price and resell it conventionally and make a big profit in between.
00:34:35.000 | So the whole argument of mobile homes depreciating is not the question that you want to be asking.
00:34:40.000 | It's is there a value there?
00:34:42.000 | Can I create a value from the point when I buy it to the point when I sell it?
00:34:47.000 | And obviously that's on a case-by-case basis, of course.
00:34:52.000 | But I think that's the real question that people should be asking, not so much the depreciation,
00:34:56.000 | because that's not even a question.
00:34:58.000 | It's like, yeah, they do depreciate.
00:35:00.000 | Everything depreciates.
00:35:01.000 | And if you doubt me, even stick-built houses on a foundation, they depreciate.
00:35:06.000 | If you doubt me, you have two houses that are next to each other, identical.
00:35:12.000 | They're the same price.
00:35:13.000 | One of them is 30 years old and one of them is brand new.
00:35:16.000 | Which do you choose?
00:35:19.000 | You choose the one that's brand new.
00:35:20.000 | Even if there were a difference in price and you're paying more, you pay for the brand new.
00:35:23.000 | So the only reason that a house wouldn't depreciate, land can depreciate.
00:35:28.000 | The only reason a house wouldn't depreciate is if it's been maintained and improved
00:35:33.000 | and if the underlying market dynamics are increasing the demand.
00:35:37.000 | Otherwise, things wear out.
00:35:39.000 | There's a reason you get a depreciation expense for real estate ownership because your house is depreciating in value,
00:35:45.000 | no matter what's going on.
00:35:49.000 | But I ask it because a lot of people have that question that they've been taught.
00:35:54.000 | Well, you wouldn't want to own a mobile home because it depreciates,
00:35:57.000 | but you would want to own a house because it appreciates.
00:36:00.000 | It goes up in value.
00:36:02.000 | I agree with you.
00:36:03.000 | Run your numbers and ask yourself the actual question on an actual deal.
00:36:07.000 | I guess we can say I think that we can all agree if you're going to buy a mobile home in a park,
00:36:17.000 | and this is something that's really sad.
00:36:19.000 | I get this at least once a month where it's a seller who purchased a home.
00:36:23.000 | They might have purchased it new or they just paid retail.
00:36:26.000 | They paid cash for their home five years ago.
00:36:30.000 | And now -- or not even five years ago, two years ago or less.
00:36:34.000 | And now they want to turn around and resell it for cash,
00:36:37.000 | and they can't even get a fraction of what they paid for.
00:36:40.000 | So, yeah, mobile homes do depreciate.
00:36:42.000 | If you're going to hold on to it for a long time, you want to probably -- there's just so many --
00:36:50.000 | I think I'm kind of going off on a little bit of a tangent here,
00:36:52.000 | but I see it regularly where people fall into that.
00:36:55.000 | I mean there's the general public, and that's probably where a lot of these horror stories come from
00:36:59.000 | is, you know, I bought a mobile home for this price,
00:37:02.000 | and I couldn't even get half my money back in like two years when I went and sold it.
00:37:05.000 | And because that seller sold it for cash, which, again, there's not many cash buyers out there,
00:37:10.000 | and everyone's competing against those same ones.
00:37:13.000 | So there's -- all around the country I think that there's a lot of bad tastes in a lot of people's mouths
00:37:20.000 | just from being maybe just uneducated or just unclear on the real world, like behind-the-scenes mobile homes
00:37:28.000 | because they are valuable.
00:37:29.000 | Will they last another 10, 20, 30 years if they're taken care of?
00:37:33.000 | Absolutely.
00:37:34.000 | But do people have the cash to pay and do they depreciate?
00:37:38.000 | Yes.
00:37:40.000 | I'd like to ask you a question because you have an interesting entry on your website about titling property
00:37:46.000 | into land trusts and personal property trusts with a special emphasis on mobile homes.
00:37:52.000 | Tell me about land trusts, personal property trusts, and how and why you use these entities.
00:37:59.000 | Oh, my goodness.
00:38:00.000 | Well, that's something that when I started, I was always using them.
00:38:07.000 | My mentor at the time in Tampa didn't know too much about mobile homes,
00:38:12.000 | but I had a mentor and I was bugging that mentor almost every day.
00:38:18.000 | And land trusts are very popular and so are personal property trusts.
00:38:24.000 | So with the help of an attorney, with the help of some other preexisting documents,
00:38:28.000 | went ahead and started purchasing these mobile homes in parks, on real land, in personal property trusts.
00:38:37.000 | And that was just the way that I got started and it's sort of just been conditioned over time.
00:38:43.000 | Now, we do use those for anonymity purposes, for probate,
00:38:49.000 | and just because that's kind of what we've been doing for so long.
00:38:53.000 | But it's nice to keep names off of public record as well for a few different reasons.
00:38:59.000 | Not any reason that we would be taking advantage of folks,
00:39:03.000 | but we certainly don't want to be a big whale when folks are Googling your name to see how much property you own.
00:39:10.000 | And if you're going to be reselling these properties, then you wouldn't even be owning the home anyway.
00:39:16.000 | But I'd say for lack of a better way, it's been out of habit.
00:39:21.000 | And then the fact that they do allow for that sort of veil of anonymity, that's why we use them.
00:39:29.000 | So habit and anonymity.
00:39:31.000 | So the idea here is you establish an entity.
00:39:34.000 | This is a trust, so it exists as a document.
00:39:37.000 | And the trust is the entity that owns and transacts the deal.
00:39:42.000 | And because it's listed on the public records as 123 Maple Street Land Trust, and that's the owner of the property,
00:39:52.000 | it's not necessarily connected to Joshua Sheets.
00:39:55.000 | So anonymity is great.
00:39:58.000 | However, question, how much cost does this add to a transaction for you?
00:40:04.000 | It adds zero cost.
00:40:07.000 | Why?
00:40:08.000 | The documents are there.
00:40:10.000 | You just use a boilerplate document every time.
00:40:13.000 | One, correct.
00:40:14.000 | Got one that works, that's state specific, and now around the country that's state specific.
00:40:19.000 | Correct.
00:40:20.000 | And then those are filled in.
00:40:21.000 | Now, if there's something that needs to be different, then that will be different.
00:40:24.000 | But no, 90% of the time there's zero cost or more than 90%.
00:40:28.000 | What about the cost of a separate taxation entity?
00:40:32.000 | Are these structured as a flow-through entity, or do they file tax returns?
00:40:36.000 | They are flow-through.
00:40:38.000 | So you don't have to file any additional paperwork with a land trust?
00:40:43.000 | With these particular ones.
00:40:45.000 | Interesting.
00:40:46.000 | Any recommended resources on the topic that you've found to be helpful, specifically on real estate ownership and titling?
00:40:54.000 | With regards to trusts?
00:40:56.000 | Yes.
00:40:57.000 | Mark Warda in the states, I'm sure you've – or maybe not.
00:41:01.000 | Mark Warda is a big name.
00:41:04.000 | M-A-R-K-W-A-R-D-A, I believe.
00:41:07.000 | He writes a lot of good trust stuff.
00:41:09.000 | Also the NOLO, N-O-L-O dot com.
00:41:12.000 | That's a good sort of legal reference, a legal aid reference that folks can use.
00:41:18.000 | But definitely get yourself – you have an attorney on your side in the beginning.
00:41:24.000 | Last question, John – or second to last question.
00:41:27.000 | Do you – obviously you're pretty deeply invested in the mobile home business.
00:41:34.000 | But what's your least favorite aspect of this investment strategy that you've chosen for yourself?
00:41:40.000 | The least favorite was the three years that it took me – and I'm a slow learner, apparently, with this.
00:41:49.000 | I learn things fast sometimes. But it took me three years to properly screen people.
00:41:56.000 | The first three years of my business, I had a 100 percent default rate.
00:42:00.000 | I put people in that didn't need to be in.
00:42:02.000 | They had no right being in my homes.
00:42:04.000 | They were unemployed.
00:42:05.000 | They were homeless, living in a church.
00:42:07.000 | I would fall on my heart so many times and it would end up burning me.
00:42:11.000 | I can't remember a time when it didn't burn me.
00:42:14.000 | So screening people, the people that we're selling to, if you advertise a home with owner financing –
00:42:20.000 | and nowadays there's mortgage loan originators to help.
00:42:23.000 | There's closing attorneys.
00:42:25.000 | We have to make sure that people have the ability to repay.
00:42:28.000 | But back years ago, you didn't have to do a lot of that.
00:42:31.000 | So it was on me to pre-screen people.
00:42:33.000 | And I just did not pre-screen people correctly.
00:42:36.000 | So you can do everything correctly – the acquisition price, the negotiation, the repairs, the holding costs you manage.
00:42:42.000 | But then you resell the home to somebody that rents it.
00:42:46.000 | You rent it or you resell it on payments.
00:42:49.000 | And you put the wrong person in there that just causes you a headache.
00:42:52.000 | I mean – and more than a headache, obviously.
00:42:54.000 | Anxiety, headaches.
00:42:55.000 | They're the wrong person.
00:42:56.000 | They were never the right person.
00:42:58.000 | So I would say that.
00:42:59.000 | And I guess that kind of boils down to the people.
00:43:02.000 | But I don't want to say the mobile home people, buyers, are any different because I think that there's flaky people.
00:43:07.000 | And there's malicious people and there's bad apples in every group.
00:43:11.000 | Very wealthy people, people that more need affordable housing and everyone in between.
00:43:16.000 | So more so I would say just with real estate or – for me, it was like pre-screening people.
00:43:22.000 | I followed my heart too much.
00:43:24.000 | I listened to what people said instead of really understanding who they are and knowing that somebody – you don't have a crystal ball.
00:43:32.000 | So somebody's past is typically going to equal their future.
00:43:35.000 | I mean people can change, of course.
00:43:37.000 | But looking at somebody's past is a good indication of their future.
00:43:40.000 | So that was a big eye-opener for me that took way too long.
00:43:45.000 | Tell us about your website, courses, podcast, any action that you'd like my audience to take after this interview.
00:43:51.000 | Sure.
00:43:52.000 | If you're interested, I hope there's a lot of free actionable items, videos, case studies on the YouTube channel that I have on my website, mobilehomeinvesting.net.
00:44:02.000 | You can reach out there and it's been going on for I think since like six or seven or eight years now.
00:44:07.000 | So there's a lot of content there.
00:44:08.000 | So check it out.
00:44:09.000 | And if you have any questions, don't hesitate to reach out.
00:44:12.000 | John, thanks for coming on.
00:44:13.000 | Thank you so much.
00:44:15.000 | I really appreciate it.
00:44:16.000 | I hope it was valuable for listeners and everyone.
00:44:18.000 | Thank you for having me.
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